Category: News

Michał Sadrak, Obligacje.pl | 12 January 2017

A majority of organisations and interested entities are critical of the bill prepared by the Ministry of Justice which seeks, among others, to further restrict non-interest costs. The public consultation also covered bonds unfortunately, however, they were contemplated in the context of potential problems with their redemption.

The original version of the document published on government websites contained information from correspondence to officials of the Ministry of Justice, which should not have been included in the document. At the request of relevant parties and after the document had been taken down from the website legislacja.rcl.gov.pl, we also removed from this communication some quotes taken from the document. The quoted person said during a telephone conversion with Obligacje.pl that the correspondence the fragments of which had been published on legislacja.gov.pl had been placed in a specific context and with a view to calming the situation and not aggravating it.

In general, institutions which decided to express their views during consultation agreed that the market required regulation in terms of unfair practices. At the same time, most of organisations and companies which will be affected if the bill passes stressed that the proposed limit was too strict and too little time had passed from the introduction of the previous limit in order to accurately determine the effects of the previous regulations.

Those who oppose the Usury Act argue, using more or less blunt language, that the entrance into force of the regulations in their current form would increase financial exclusion and cause growth of grey area (which opinion is shared by the National Bank of Poland). It is also argued that unemployment will grow, budget revenue will be reduced and GDP will further suffer on account of decrease in consumption.

Almost 30 entities, which included lending companies, commercial chambers, employers’ federations, law firms, associations (e.g. of notaries public, judges), state credit union or even the Polish Bank Association, participated in the consultation. What is more, seven institutions expressed their opinion during the consultation, including the Polish Financial Supervisory Authority, the National Bank of Poland or the Office of Competition and Consumer Protection. Of course not all positions were equally critical, some of them focused on technical aspects of the bill only.
The issue of debt securities was addressed not only as a source of financing of lending companies. The Chamber of Brokerage Houses suggests that corporate bonds be excluded from the act so that the non-interest costs can be freely shaped. The Chamber of Brokerage Houses reminds that the act on bonds currently in force excludes the application of the provisions on maximum interest to debt interest rates. The Chamber also looked at the issue of security. After the passing of the bill, securities with a value of 150% of the face value of issue would disappear from the market which, in the Chamber’s opinion, could be “catastrophic for the entire debt financing market”.

As part of the public consultation, the issue of bonds, in terms of both costs and securities, was discussed by BSWW Legal & Tax the opinion of which was published on Obligacje.pl in the middle of December.

BSWW Legal & Tax advises Rank Progress on the sale of Galeria Świdnicka for EUR 26.7m

A subsidiary of Rank Progress concluded with Calioppe Investments a preliminary sale agreement regarding Galeria Świdnicka. The deal is estimated at EUR 26.7m.

BSWW Legal & Tax has represented Rank Progress at the stage of preparing and concluding the transaction.

Legal services involved, i.a., preparing, negotiating and closing the preliminary sale agreement and advice in terms of copyrights and trademarks.

The team advising Rank Progress was led by Michał Wielhorski, advocate, managing partner at BSWW Legal & Tax, with support from Mateusz Prokopiuk, Marcelina Daszkiewicz and Izabela Żmijewska.

“It is not the first project of this type handled by us for Rank Progress in 2016. We are glad that once more the leader in the construction of large-format buildings trusted us and appreciated out knowledge, experience and skills in terms of major real estate transactions,” said Michał Wielhorski.

Bartosz Miszkurka and Dariusz Zboch from Solivan represented the buyer during the negotiations and conclusion of the preliminary sale agreement.

Galeria Świdnicka is located in Świdnica in the place where an electrotechnical facility formerly stood. In terms of its design, the investment is consistent with the industrial city district where it is located. Red clinker bricks pay a tribute to Lower Silesia tradition and soft lines balance out the austerity of the project.

The investment covers a total area of 24,000 m2, floor space of 15,600 m2 and 400 parking places for customers.

Major tenants of Galeria Świdnicka include: Apart, CCC, Cropptown, Diverse, Esotiq & Henderson, House, Sinsay, Mohito, Monnari, Orsay, Reserved, Giacomo Conti, Wojas, Big Star, Empik, Intermarche, Kolporter, Media Expert, Pepco, JYSK, Rossman, ITAKA.

Maksym Jabłkiewicz for www.infor.pl

The act of 29 November 2016 introduced new regulations concerning income tax threshold and, what follows, modified the rules of calculating advance payments towards PIT.

Let us remind you that as of 2017 the sum reducing the tax will be:
• PLN 1,188 – for annual income up to PLN 6,600,
• PLN 1,188 less the amount calculated as follows: PLN 631.98 x (annual income – PLN 6,600)/PLN 4,4000, for annual income higher than PLN 6,600 but lower than PLN 11,000,
• PLN 556.02 – for annual income higher than PLN 11,000 but lower than PLN 85,528,
• PLN 556,02 less the amount calculated as follows: PLN 556,02 x (annual income – PLN 85,528)/PLN 41,472, for the tax base higher than PLN 85,528 but no higher than PLN 127,000.

Therefore, the change will also affect the rules of calculating the advance payments towards PIT by taxpayers settling income generated on the basis of employment relationship. In another words, for employees who earn annually no more than PLN 85,528, advance payments towards the tax withheld by taxpayers will be reduced by 1/12 of the sum reducing the tax, i.e., PLN 46.33 (PLN 556,02 annually). In order to apply such reduction of monthly advance payments, an employee, as it has been the case so far, will be bound to provide a taxpayer (employer) with a statement for the purposes of calculating monthly advance payments towards personal income tax (form PIT-2).

If, however, an employee’s income for a fiscal year exceeds PLN 85,528, a taxpayer will be bound to calculate advance payment towards tax without taking into account the sum reducing the tax (PLN 46.33) as of the month when the above referred to sum was exceeded. An employee can also submit a statement to a taxpayer indicating that in a given year his or her income will exceed PLN 85,528. Then a taxpayer will be bound to withhold advance payments without taking into account the sum reducing the tax – starting from the month following the month when such a statement was submitted.
One should remember that if the annual tax settlement of an employee shows that his or her income exceeded PLN 85,528, such employee will be bound to reimburse tax authorities for the relevant part of the sum reducing the tax when filing annual tax returns.

Example
An employee earned an annual income of PLN 95,500. In the annual settlement, the sum reducing the tax will be calculated as follows:
PLN 556.02 x (PLN 95,500 – PLN 85,528)/PLN 41,472 = PLN 133.70;
The sum reducing the tax: PLN 556.02 – PLN 133.70 = PLN 422.32.
However, if employee’s income exceed in the annual settlement a sum of PLN 127,000, the sum reducing the tax will need to be reimbursed (if advance payments were fully or partially reduced by it by a taxpayer).

Example
In a year an employee earned PLN 200,000. Let’s assume that for the first 5 months of the fiscal year a taxpayer deducted from his or her advance payments a sum reducing the tax equal to PLN 231.65 (PLN 46.33 x 5). In the end, in the annual settlement such employee will not be entitled to reduce tax by PLN 231.65 (it will need to be remitted to the tax office).

Following the legislative process carried out by the Ministry of Justice in connection with the bill on the amendment of the Criminal Code and certain other acts, published with justification on 7 December 2016, and following the fact that as part of the legislative process regarding the bill it has been referred by the Ministry of Justice for review, and the review is pending, BSWW Legal & Tax has submitted two opinions concerning the bill. The opinions concern the text and the consequences of the planned changes which to some extent seem to literally contradict the justification of the amendment. The first of the opinions discusses the bill from the perspective of financial institutions market, in particular, corporate bonds and corporate loans, the second one pertains to the market of loans.

Puls Biznesu: article published on 2016-12-22 in issue no. 244/2016, p. 7.
Kamil Kosiński

Company debentures may become more risky and expensive as a result of changes which are to curb… usury.

In July 2015, a new act on bonds entered into force. It was supposed to stimulate the market by introducing new types of debt instruments and improving the security of small investors. However, half a year has passed and already voices can be heard saying that a step back is taken by lawmakers in terms of the security of bondholders. The controversy is caused by the bill on the amendment of the Criminal Law and certain other acts. The bill contains many usury laws, including… an amendment of the Civil Code. A new article is to be introduced into the Civil Code, Article 387 (1), which would regulate all costs related to granting a loan, including also the costs involved in bond purchases.
“The proposed amendment to the Civil Code, if applied literally, is universal. It should be understood as applying not only to consumer loans, but also to any other forms of financing, both among consumers as well as professionals,” says Piotr Smołuch, a partner at Bieniak Smołuch Wielhorski Wojnar i Wspólnicy.

Security value
In accordance with the act on bonds, bond interest rate can be fixed freely. The bill does not change that. One of three paragraphs of the planned Article 387 (1) pertains, however, to securing claims “related to rendering pecuniary considerations”. It assumes that security for a loan will not be higher than the value of such loan increased by maximum interest for the period for which it was granted plus six months. Currently, maximum interest rate is 10 percent. It can be assumed that in 2017 they will not change seen as they are based on the reference rate of the National Bank of Poland. If the proposed provisions were already in force, in the case of a 10-year loan the security would reach 205 percent of the loan. In the case of a 3-year loan – only 135 percent. This is the issue with the planned changes.
“Usually, the security reaches about 120-150 percent of value of the bond issue. But there are also securities with higher value,” says Krzysztof Dziubiński, management board member at DM Navigator.
“The issuers with whom we cooperate provide a security of no less than 150 percent of the value of the issue. It is a standard because the market is now big enough for some standards to take shape,” states Michał Jarosławski, director of offering and advisory department of Vestor DM.

Not all bonds are secured. Many buyers of debentures experienced first-hand that security is often good on paper, but when it comes to its enforcement, it proves to be illusory. This, however, does not change the fact that in the case of a relatively short redemption date (up to 4 years) the provisions of law may reduce bondholders’ security.
“Some financial institutions have an internal policy concerning subscribing for bonds with about 150 percent security. And in the case of issue by smaller businesses, this seems to be the market standard. Large companies with good financial position will probably have no problem with handling this, but for small and medium companies the proposed change may mean that they will not be able to use financing through bonds,” explains Piotr Smołuch.

Contrary to his opinion, however, big issuers may also struggle. The prospectus of Ghelamco Invest approved in January 2016 provides for a bond issue with a value of PLN 350m. The company issued eight series of 4-year bonds with a value of PLN 280m which are also available to individual investors. Ghelamco Group is one of developer giants. However, Ghelamco Invest does not conduct any real activity. The entire credibility of the company is based on the guarantee granted by another entity from the group – Granbero Holdings. For the purposes of the bond issue, Granbero granted to Ghelamco a guarantee for PLN 630m. Given the 4-year redemption date of the securities and the value of the issue specified in the prospectus, it is possible that the maximum security could be only PLN 508m. This means that either investors would have to accept higher risk exposure or Ghelamco would have to materially change the structure of the offer. White & Case M. Studniarek i Wspólnicy, the law firm cooperating with Ghelamco, refused to comment on the amendment.

There should be no doubts
There are, however, those who do not agree with the restrictive interpretation of the issue of loan security in the proposed amendment to the Civil Code.
“I do not support the thesis that it will apply to bonds. Bond interest rate is exempt from the provisions of law on maximum interest a part of which is the paragraph on the security value in question. Inadequate editing of the provision, however, can lead to doubts. A court or the Polish Financial Supervision Authority may be of different opinion,” comments Wojciech Chabasiewicz, partner at Chabasiewicz Kowalska i Partnerzy in Cracow which worked on the bond issue programmes of Kruk (debt servicing) and PCC Rokita (chemical company).
Similar position was taken by dr hab. Paweł Wajda of Baker & McKenzie Krzyżowski i Wspólnicy. He does, however, recognize that there is a risk of a raise in the costs of financing through debentures.
“As a result of the reduction of overcollateralization on the basis of the proposed bill, bonds may appear less attractive to investors who will require higher interest on such bonds. But frankly it is just to be on the safe side,” thinks Paweł Wajda.

The changes introduced in the CCC concern a new type of a commercial power of attorney (prokura), minority shareholders of a limited liability companies and their rights in terms of convening shareholders’ meetings, revising meeting agenda by shareholders, mandatory elements of share certificates and dividend payout in public companies.

On 1 January 2017, an act amending certain other acts entered into force in order to improve the legal environment with which business owners have to cope (Journal of Laws of 2016, item 2255). The amending act is an element of a whole package of improvements planned by the lawmakers which are to facilitate running a business in Poland. The scope of the amendment also includes the Commercial Companies Code.
Commercial power of attorney

The changes introduced to the Commercial Companies Code include among others regulations adjusting the previously applicable provisions to the new type of commercial power of attorney provided for in the Civil Code, so-called irregular commercial power of attorney to joint representation (prokura łączna niewłaściwa) which empowers the holder of such a power of attorney to act also or only jointly with a member of a governing body or a partner entitled to represent a partnership.

The rights of minority shareholders
The amended CCC also facilitates for minority shareholders of limited liability company to exercise the rights to convene shareholders’ meetings and add items to agenda.
Article 236 § 1 of the CCC in the new wording states that shareholders requesting that a shareholders’ meeting be convened can at the same time request that specified issues be placed on the agenda of such meeting.
The change rules out the previously possible interpretation of the provision whereby a management board could comply with the shareholder’s request and convene a meeting without accepting the agenda proposed by the shareholders.
What is more § 11 has been added to Article 236 of the CCC whereby a threshold of the stake in a company share capital entitling one to request that certain items be placed on the agenda of a shareholders’ meeting (before 1 January 2017 the stake of shareholders requesting the revision of an agenda was 1/10 of the share capital, the amendment lowers this threshold to 1/20). The provisions of § 11 allow for the articles of association of a company to provide for shareholders representing less than 1/20 of a share capital to have a right to revise agenda of a shareholders’ meeting. It is, therefore, inadmissible to establish a threshold from which an agenda may be revised which would exceed 1/20.
As a result of the amendment in question there is a risk that the provisions in articles of association which are based on the previous provisions of the CCC concerning the 1/10 sake in a share capital entitling to revise an agenda will be found invalid.
The change may also affect practice regarding transactions (joint venture agreements, M&A transactions) where the lower threshold of the stake in a share capital vesting significant rights with shareholders will need to be taken into consideration.
Moreover, the changes introduce a 3-week deadline for filing a written request by shareholders and oblige the management board to introduce changes in the agenda and notify the changes in line with the procedure prescribed for convening shareholders’ meetings.
Another right introduced by the above said act with a view to improving the protection of minority shareholders of limited liability companies is the right of the shareholders who requested the convention of a meeting (under the authority of a court) to apply to a register court for exemption form the obligation to cover the costs imposed under a resolution of a shareholders’ meeting (new wording of Article 237 § 2 of the CCC). Before the act in question became binding the costs of convening and holding a meeting convened by authorized shareholders under the authority of a court were incurred by the convening shareholders without any possibility of exemption from such costs, unless a resolution was passed on the covering of such costs by the company. Under the current provisions of law, if a resolution was passed on the covering of the costs by the shareholders, the shareholders bound to cover the costs of a meeting (the shareholders convening the meeting) may apply to a registration court to be exempt from covering such costs. It is not clear if in the current legal conditions the right to apply for exemption from costs of convening and holding a shareholders‘ meeting is to be enjoyed by shareholders also when a resolution on the covering of the costs was not passed (on the literal level, the amended provision of law only points to exemption from the obligation to cover the costs imposed under a resolution of a shareholders’ meeting, however, the second sentence of Article 237 § 2 of the Commercial Companies Code leads one to assume that shareholders incur such costs regardless of whether or not any resolution was passed).

Share certificates
Changes also concern the requirements regarding obligatory elements of share certificates.
The obligation to affix the company seal on share certificates was given up.
Prior to the amendments, the lack of a company seal resulted in invalidity of a share certificate (new wording of Article 328 § 2 of the CCC). The change is supposed to reduce the formality of the process of share certificate issue and mitigate the requirements for share certificate validity. The lawmakers rightly assumed that affixing a seal to a document does not raise its reliability nowadays in the face of the general availability of any kinds of seals.

Dividends in public companies
Modifications were also introduced in the regulations regarding dividend payouts in public companies.
In accordance with amended Article 348 § 4 of the CCC, the day of dividend payout may fall on a day no earlier than five days and no later than three months of the passing of a resolution. Before 1 January 2017, the date of dividend payout in public companies was regulated only in good practices of companies listed on the WSE or NewConnect.
Thereby lawmakers gave up the non-binding regulation which was based on the principle “comply or explain” in favour of regulations of statutory rank.

The day of conversion of a natural person
The amendments to the CCC also adjust the provision concerning the day of conversion of a natural person into a single-shareholder capital company to the amendment of the act on freedom of economic activity.

The disclosure of a conflict of interest of a management board member and a company
The amending act introduces also, apart from the already binding obligation to refrain from dealing with matters involving a conflict of interest between a company and a management board member, his or her spouse, relatives up to second degree of affinity or consanguinity, and persons with whom he or she is personally related, the obligation of a management board member to disclose such conflict of interest. In remains unclear, however, on what grounds, how and to what extent a management board member should do so. The amendment also fails to specify to whom such information should be disclosed. It seems, however, that the remaining management board members are authorised to accept such statement of a conflict of interest which was also indicated in the justification of the bill.

By introducing new laws the lawmakers intended to clarify the regulations on the fuel and natural gas market, however, as a result of the recently introduced regulations, some electric companies may lose their licenses.

Another amendment of the Energy Law and a number of new acts, including above all those regarding the energy market, in particular, liquid fuels market (acts on biocomponents and liquid biofuels, acts on the system of monitoring and controlling fuel quality and act on stocks) entered into force on 2 September 2016.

The new regulations were supposed to impose an order on regulations concerning fuel and natural gas market and improve transparency on the energy market, reads the justification of the amendment. The alterations to the Energy Law include the adding of a definition of liquid fuels (Article 3 point 3b of the Energy Law) and a provision introducing delegation of legislative powers in terms of issuing a regulation on liquid fuels the production, storage or handling, transmission and distribution and foreign trading of which requires a license and the import of which requires registration (Article 32 clause 5 of the Energy Law).

On 15 December 2016, the Minister of Energy issued the abovementioned resolution. It was published the same day and, under § 3 of the resolution, it entered into force the following day that is 16 December 2016.
In consequence of the entry into force of the resolution is such a short period of time, some electric companies may lose licenses held by them. Under Article 16 clause 4, Article 16a clause 1 and Article 19 clause 1 of the above amendment, by 16 January 2017:
1) energy companies which produce, store, transmit or distribute and trade in liquid fuels, also trade in such fuels abroad, based on licenses issued before the entry into force of the above resolution, have the obligation to apply for a change of the held licenses in order to adjust their terms to the definition of liquid fuels;
2) entities which, before the resolution entered into force, produced, stored or handled, transmitted or distributed and traded in liquid fuels, also traded in such fuels abroad, and which in the wake of the amendment and the resolution are obliged to obtain license or change the scope of a license already held are obliged to file an application for the grant or change of such license
3) foreign enterprises which, before the change entered into force, produced or traded in liquid fuels abroad, have the obligation to file an application for a change of held liquid fuel license in order to adjust their operations to the terms specified in Article 33 clause 1b point 1 and 3 of the Energy Law.

However, in accordance with the announcement of the President of the Energy Regulatory Office (URE), an application for a change of a license will not be just a formality and a simple update of a license. The President of the Energy Regulatory Office intends to revaluate if a given electric company has the infrastructure and resources necessary to run a licensed business (the President goes on to say that an application should “contain a set of documents and information enabling full verification of the formal, legal, organisational, technical and financial capabilities of a company to deal with specified liquid fuels”). Information provided on the website of the Energy Regulatory Office leads to believe that the scope of the required documents is so extensive that in some cases collecting them may take much more time.

A failure to file the said application within the prescribed deadline, i.e., by 16 January 2017, will result in the expiry of a license. What is more, electric companies which will file the application, will have only one chance to fill it in correctly,; if an application filed by them fails to meet the requirements of the President of the Energy Regulatory Office their licenses will also expire.

Business owners which will continue to sell fuel in spite of failing to meet their obligations risk being charged with a fine (up to PLN 5 m) and even imprisoned for a period from 6 months to 5 years (Article 57g of the Energy Law).

The amendment in question obligates energy companies to also meet a number of other requirements which have the purpose of adjusting their operations to the new regulations, including the obligation to file an application to be registered within the same deadline as the licence applications, unless such registration is not required in the case of given type of operations. However, due to the scope of the required documents, the exceptionally short deadline for their submission, limited options of correcting applications once they have been filed and the consequences of failing to comply with the amendment, the selected and outlined above provisions of law require particular attention.

On 1 January 2017, a few very important changes in the field of labour law have entered into force. The modifications cater for both sides of employment relationship – the employer and the employee. The text below discusses the recent key solutions.

Minimum salaries not that low any more
As of 1 January 2017, the minimum salary under an employment contract is PLN 2,000 (last year it was PLN 1850). What is more, the law sanctioning the payment of 80% of the minimum salary over the first year of employment was repealed. From 1 January 2017, all employees, regardless of the term of their employment, should be rewarded with the prescribed minimum salary. The change materially profits employees. The question remains what will be its impact on employers (especially small ones which take first steps on the market). Middle-level employees, who earn PLN 2,500-3,000, may also be disgruntled seen as their circumstances remain unimproved by the new regulations (they may even make it more difficult for them to fight for a raise and level them with less qualified junior workers). The raise of the minimum salary sends ripples through other aspects of employment, for instance, it will affect the value of: night shift differential, severance pay for termination of employment for reasons unrelated to employees, sum exempt from deductions.

Contracts of mandate increasingly similar to employment contracts
A minimum hourly wage was introduced as well as an obligation to register work hours in the case of contracts of mandate. In 2017, the minimum hourly wage for persons employed under mandate contracts (Article 734 of the Civil Code) and service contracts (Article 750 of the Civil Code) is PLN 13 gross (indexed annually). The modification in question does not apply to agency contracts and specific work contracts (although it was said that those contracts as well would face revolution in the near future). The new regulations also do not concern contracts under which it is the mandatee or service provider who decide about the venue and time of the performance of a mandate or a service and the mandatee and service provider are paid a commission. Only natural persons are entitled to minimum wage. Interestingly enough, if more than one person commits to perform a mandate or a service together, each of such persons is entitled to the minimum hourly wage. The obligations outlined above apply as well to mandate contracts and service contracts which have been concluded before 1 January and are still binding.

Reasonable deadline for appealing against a notice of termination
As of 1 January 2017, the deadlines by which the employee can appeal against notice of termination or termination of employment without notice are extended and standardised to 21 days (under the previous regulations the employee had 7 days or, in the case of dismissal on disciplinary grounds, 14 days). Seen as labour law proceedings are growing increasingly longer, the previous 7-day deadline for filing an appeal against termination of employment with a labour court seemed unreasonable. Moreover, different treatment of an employee who was dismissed on disciplinary grounds and an employee who was served a notice of termination was groundless and baffling. The new regulations apply to deadlines which have not expired before the entry into force of the act in question. This change is very welcome but now the lawmakers are face with a much more challenging task – improving the judicial system so that in case of an improper termination of a contract by the employer, the employee has a guarantee of being swiftly reinstated in his or her post instead of fighting a lengthy battle before a court.

Smaller employer – less red tape
From 1 January 2017, the number of employees requiring the employer to introduce work rules or remuneration rules is increased from 20 to 50. If a company has no less than 20 and less than 50 employees, the obligation to introduce the rules would arise only in the case of filing a relevant application by a company union. It should be noted, however, that rules applicable to companies with at least 20 and less than 50 employees remain binding and their revocation will require in most cases a notice of termination amending the contract of employment to be served or agreements with employees to be concluded.
One employment certificate for all terms of employment
This year has also brought positive changes to employers in terms of the obligation to issue employment certificates in the case of continuation of the employee’s employment. If the employee is reemployed within 7 days of the termination or expiry of the previous contract, the employer will be obliged to provide the employee with an employment certificate only at the employee’s request made in writing or sent electronically. If the employee fails to submit such request, the obligation to issue an employment certificate will not arise until the employment ends. One should, however, pay extra attention to the transitional provision, i.e., Article 22 of the amending act, which can be read by clicking on the links below.

The texts of amending acts are available under the following links in the Journal of Laws:
http://www.dziennikustaw.gov.pl/DU/2016/2255
http://www.dziennikustaw.gov.pl/DU/2016/1265/1