Forget snakes and ladders and move right to the delisting game
You may remember one of my previous articles in which I proposed a game on how to introduce securities to public trading. Today, I would like to present its counterpart: how to delist a company and withdraw its shares from the public market.
As with other games, we have to go through certain levels to reach the goal of delisting. Our game is no simple shoot-'em-up adventure. This requires that you maintain a good sense of humor if you run into some problems. Do you have your analytical skills set ready? Then let's play!
Let's assume that you are a shareholder in a publicly traded company listed on the Warsaw Stock Exchange (WSE) and that you want to take the company private. There are some actions that must precede the withdrawal of shares from public trading in accordance with the existing regulations on public trading in securities. We'll call these actions "levels" in our game. Let's briefly walk through each of them.
l Level I - PUBLIC TENDER OFFER
Our game begins with the announcement of a public tender offer regarding a subscription for the sale of all of a company's shares. The tender offer is announced by the shareholder through the intermediary of a qualified brokerage house. The notification of the announcement of the tender offer is filed simultaneously with the WSE and the Securities Commission (KPWiG). Upon receipt of this notification, the WSE immediately announces the tender offer and suspends trading in the company's shares at the next stock exchange session (the suspension lasts one session).
Following the delivery of this notification to the WSE and Securities Commission, the broker must provide to the Polish Press Agency (PAP) the text of the announcement and information regarding the establishment of a collateral backing payment, its type and value. The broker must publish the text of the announcement of the tender offer in at least one national daily newspaper.
l Level II - CONVENING OF A GENERAL SHAREHOLDERS' MEETING
In accordance with the provisions of the Act on Public Trading in Securities, the Securities Commission will not issue a decision on withdrawing a company's shares from public trading unless a shareholder files an application requesting that the management board convene a general shareholders' meeting that includes on its agenda consideration of a resolution regarding withdrawal of shares from public trading.
The request must be filed in accordance with the usual procedures set forth in the Commercial Code for convening general meetings at the initiative of shareholders who hold at least 10% of the share capital. The act stipulates only that the request be filed after the tender offer is made. In accordance with the provisions of the Commercial Code, the period between the management board's announcement of the convening of a general shareholders' meeting in the official journal (Monitor S±dowy i Gospodarczy) and the date scheduled for the meeting may not be less than three weeks.
l Level III - SETTLEMENT OF THE TRANSACTIONS
While waiting for the general shareholders' meeting, we may begin buying the shares. Usually, the conclusion and settlement of transactions within the tender offer takes place after the process of accepting subscriptions for sale of a company's shares has been completed. The transaction is conducted on the WSE. When the transaction has been settled by the National Depository of Securities and the shares have been entered in your securities account, they become your property.
l Level IV - RESOLUTION OF THE GENERAL SHAREHOLDERS' MEETING
Pursuant to the act, the general shareholders' meeting must adopt a resolution on the withdrawal of the company's shares from public trading. The resolution must be adopted by a four-fifths majority of votes cast, with a quorum of shareholders representing at least 50% of the company's share capital.
l Level V - DECISION OF THE SECURITIES COMMISSION
We are rapidly approaching our goal. The next step is the issuance of a decision by the Securities Commission revoking its earlier permit for introduction of a company's shares into public trading. The company must apply to the Securities Commission for the issuance of this decision. Although it may be inferred from the wording of the act that the Securities Commission is simply charged with examining whether the formal conditions for delisting have been met, it should be assumed that the Securities Commission will also evaluate the application substantively, from the point of view of whether the withdrawal of shares from public trading may harm the interests of small shareholders.
l Level VI - OFF THE WSE
This level is the easiest. The exclusion of a company's shares from public trading on the WSE does not require any special action by the stockholder. The fact that the Securities Commission issued a decision revoking its previous permit constitutes sufficient grounds for the exclusion. Trading in the company's shares will be suspended by the management board of the WSE on the day on which the decision of the Securities Commission becomes effective, and the suspension will last until the next meeting of the WSE council. Upon the adoption of a resolution by the council, the shares are withdrawn from public trading.
l Level VII - GOAL OBTAINED!
One last step is required to make full transition back to the world of private companies. Shares admitted to public trading are recorded only electronically. After shares are withdrawn from public trading, the company must issue to its shareholders (including our player) share certificates. Although this issuance is made outside of public trading, the company should use lists of shareholders confirmed by the National Depository of Securities.
This article was prepared by Lejb Fogelman, the managing partner of Hunton & Williams with the assistance of Piotr Szelenbaum, an associate attorney.
As with other games, we have to go through certain levels to reach the goal of delisting. Our game is no simple shoot-'em-up adventure. This requires that you maintain a good sense of humor if you run into some problems. Do you have your analytical skills set ready? Then let's play!
Let's assume that you are a shareholder in a publicly traded company listed on the Warsaw Stock Exchange (WSE) and that you want to take the company private. There are some actions that must precede the withdrawal of shares from public trading in accordance with the existing regulations on public trading in securities. We'll call these actions "levels" in our game. Let's briefly walk through each of them.
l Level I - PUBLIC TENDER OFFER
Our game begins with the announcement of a public tender offer regarding a subscription for the sale of all of a company's shares. The tender offer is announced by the shareholder through the intermediary of a qualified brokerage house. The notification of the announcement of the tender offer is filed simultaneously with the WSE and the Securities Commission (KPWiG). Upon receipt of this notification, the WSE immediately announces the tender offer and suspends trading in the company's shares at the next stock exchange session (the suspension lasts one session).
Following the delivery of this notification to the WSE and Securities Commission, the broker must provide to the Polish Press Agency (PAP) the text of the announcement and information regarding the establishment of a collateral backing payment, its type and value. The broker must publish the text of the announcement of the tender offer in at least one national daily newspaper.
l Level II - CONVENING OF A GENERAL SHAREHOLDERS' MEETING
In accordance with the provisions of the Act on Public Trading in Securities, the Securities Commission will not issue a decision on withdrawing a company's shares from public trading unless a shareholder files an application requesting that the management board convene a general shareholders' meeting that includes on its agenda consideration of a resolution regarding withdrawal of shares from public trading.
The request must be filed in accordance with the usual procedures set forth in the Commercial Code for convening general meetings at the initiative of shareholders who hold at least 10% of the share capital. The act stipulates only that the request be filed after the tender offer is made. In accordance with the provisions of the Commercial Code, the period between the management board's announcement of the convening of a general shareholders' meeting in the official journal (Monitor S±dowy i Gospodarczy) and the date scheduled for the meeting may not be less than three weeks.
l Level III - SETTLEMENT OF THE TRANSACTIONS
While waiting for the general shareholders' meeting, we may begin buying the shares. Usually, the conclusion and settlement of transactions within the tender offer takes place after the process of accepting subscriptions for sale of a company's shares has been completed. The transaction is conducted on the WSE. When the transaction has been settled by the National Depository of Securities and the shares have been entered in your securities account, they become your property.
l Level IV - RESOLUTION OF THE GENERAL SHAREHOLDERS' MEETING
Pursuant to the act, the general shareholders' meeting must adopt a resolution on the withdrawal of the company's shares from public trading. The resolution must be adopted by a four-fifths majority of votes cast, with a quorum of shareholders representing at least 50% of the company's share capital.
l Level V - DECISION OF THE SECURITIES COMMISSION
We are rapidly approaching our goal. The next step is the issuance of a decision by the Securities Commission revoking its earlier permit for introduction of a company's shares into public trading. The company must apply to the Securities Commission for the issuance of this decision. Although it may be inferred from the wording of the act that the Securities Commission is simply charged with examining whether the formal conditions for delisting have been met, it should be assumed that the Securities Commission will also evaluate the application substantively, from the point of view of whether the withdrawal of shares from public trading may harm the interests of small shareholders.
l Level VI - OFF THE WSE
This level is the easiest. The exclusion of a company's shares from public trading on the WSE does not require any special action by the stockholder. The fact that the Securities Commission issued a decision revoking its previous permit constitutes sufficient grounds for the exclusion. Trading in the company's shares will be suspended by the management board of the WSE on the day on which the decision of the Securities Commission becomes effective, and the suspension will last until the next meeting of the WSE council. Upon the adoption of a resolution by the council, the shares are withdrawn from public trading.
l Level VII - GOAL OBTAINED!
One last step is required to make full transition back to the world of private companies. Shares admitted to public trading are recorded only electronically. After shares are withdrawn from public trading, the company must issue to its shareholders (including our player) share certificates. Although this issuance is made outside of public trading, the company should use lists of shareholders confirmed by the National Depository of Securities.
This article was prepared by Lejb Fogelman, the managing partner of Hunton & Williams with the assistance of Piotr Szelenbaum, an associate attorney.
