New obligations of listed companies

By enforcing the Market Abuse Regulation (hereinafter referred to as “MAR”) and the updated Transparency Directive, the European Union changes information obligations of listed companies. During the following months, issuers from the Warsaw Stock Exchange will have to adjust their policy to the new regulations. Representatives of the companies are not afraid of changes, however they turn attention to the discretionary character and high amounts of penalties.

Legislation work on the draft act on amendments to the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading and Public Companies, and some other acts is underway. The purpose of the work is to adjust Polish legal regulations to the MAR. The Government intends to pass the draft act in the second quarter of 2015.

The draft act provides for among others:

1. a change in the definition of a home country, a change in the procedure of selecting and communicating a home country by an issuer;
2. shareholder notification on exceeding the limit of the total number of votes;
3. penalties and administrative measures for the violation of regulations set out in the Directive 2004/109/EC;
4. an amendment to the regulation of the Minister of Finance of 19 February 2009 on current and periodical information concerning the date of the publication of half-year financial statements by issuers and an obligation to publish periodical financial information.

Administrative sanctions will be tightened. In the case of the majority of information obligations, a maximum financial penalty was increased from PLN 1 million to PLN 10 million or to an amount equivalent to 5% of total yearly income recognised in the last audited financial statements for the financial year if it exceeds PLN 10 million.

If the regulations on shareholder notification obligations are violated, on the basis of the draft act, the Polish Financial Supervision Authority (KNF) will be able to impose a penalty: on natural persons up to PLN 2 million and on other entities up to PLN 10 million or an amount equivalent to 5% of total yearly income recognised in the last audited financial statements for the financial year if it exceeds PLN 10 million.

As regards to the violation of regulations on information obligations of listed companies and shareholder notification obligations, the draft act also provides for a financial penalty equal to the double amount of benefits earned or loss avoided if it is possible to identify the benefits earned or loss avoided as a result of the violation.

The draft act provides for a bigger maximum financial penalty to be imposed on a director of a public company for the violation of the regulations on information obligations and notification obligations with regard to significant stake of voting rights from PLN 100,000 to PLN 2 million. At the same time, the draft act provides for a financial penalty of up to PLN 100,000 which may be imposed on a member of a supervisory board or another supervisory authority of a public company if the information obligations are violated in connection with non-performance or inadequate performance of duties by that member.

The act will also provide for criteria for financial penalties for the violation of the regulations on information obligations and shareholder notification to be applied by the Polish Financial Supervision Authority.