Legal Eye: Mergers, timing and meticulousness

A merger of two Polish companies offers enough legal paperwork and tightly coordinated deadlines to keep the most meticulous lawyer too busy to pick up a sudoku puzzle. 

Of the various ways of incorporating another company's operations into that of your own, mergers are not high on my list of personal favorites. But there are times when tax and business considerations trump concerns over the unduly bureaucratic procedures for mergers.  

Pre-merger consents

Regardless of the form of the potential acquisition in Poland, you must always consider whether any pre-merger consent is required. The two most common consents are from the Ministry of Interior and Administration and from the Office of Competition and Consumer Protection (UOKiK). The first typically comes into play if the acquired entity (or any subsidiary) holds real property, and the acquiring company is based outside - or is controlled by a company headquartered outside - the European Economic Area (the EU countries, plus Norway, Iceland and Liechtenstein, but not including Switzerland). 

As to the second consent, a pre-merger notification must be filed with UOKiK when big players are involved in the merger. You will need to request consent if the merging companies (and all their affiliates) cross either of these thresholds: world-wide turnover of more than EUR 1 (zł.3.2) billion or turnover in Poland of more than EUR 50 (zł.160) million.

Even if you cross these thresholds, several exceptions exist. As examples, you do not need consent if the Polish company (including any subsidiaries) to be acquired is relatively small, with a turnover of less than E10 (zł.32) million, or if the merging companies already are part of the same capital group.

Aside from these administrative approvals, you should review whether any internal consents might be needed, such as a blessing from the supervisory board or shareholders of the merging firms.

Merger plan

If you needed an administrative consent, you will most likely have to wait a couple of months before it is issued. In the meantime, you will want to prepare the merger plan. 

How complicated the merger plan will be depends on a number of factors, but most crucially on whether you may use the simplified procedures for vertical mergers of subsidiaries. The merger plan, as its name suggests, provides an overview of the merger, including drafts of the shareholders resolutions approving the merger and a valuation of the acquired entity. The plan must be published in the official court announcement journal, the Court and Economic Monitor, at least six weeks before the planned date of the adoption of the shareholders' resolutions approving the merger.

Also, unless you are eligible for the simplified procedures, the merger plan will need to be reviewed by a court-appointed auditor. You should plan on up to two months for this review.

The remaining steps

The timing of the rest of the merger steps will depend on the date of the publication in the Monitor and the completion of the court-appointed auditor's review. With a publication date in hand, you may notify the shareholders about the planned merger. This must be done twice, with the notices sent at least two weeks apart, and the last notice made at least six weeks before the planned date of the adoption of the shareholders' resolutions approving the merger. The shareholders must also be given an opportunity to review the merger documents, for at least a month before the planned merger. 

Merger accomplished

Congratulations, the end is in sight! But, for the merger to be effective, it must be recorded in the National Court Register. After that, all that's left is announcing the merger to the world. Whether or not you take out an advertisement in a newspaper is up to your marketing people, but you will need to announce the merger in the Court and Economic Monitor.

Judith Gliniecki is a Partner with Wierzbowski Eversheds