Category: Poland

Legal Status

APPLICABLE LEGAL STATUS CONCERNING BANKRUPTCY AND RESTRUCTURING PROCEEDINGS

Declaring bankruptcy: The basis for declaring bankruptcy is the debtor’s insolvency, understood as the loss of the debtor’s ability to meet its due financial liabilities. 

Inability to meet liabilities: It is presumed that the debtor has lost the ability to meet its due financial liabilities if the delay in meeting such exceeds 3 months. A debtor that is a legal person is also insolvent if its financial liabilities exceed the value of its assets, and this condition persists for a period exceeding 24 months. 

Insolvency vs. restructuring: Unlike insolvency proceedings, restructuring proceedings may be conducted against an insolvent debtor or debtor threatened with insolvency. Insolvency under the Restructuring Act is understood in the same way as in the Bankruptcy Act. A debtor threatened with insolvency should be understood, for that matter, as a debtor whose economic situation indicates that he or she may soon become insolvent.

Filing bankruptcy petition: 

• The time limit for filing a bankruptcy petition is 30 days from the date on which the reason for declaring bankruptcy arose.

• Where the debtor is a legal person, the obligation to file such a petition lies with anyone who, under the law, articles of association or statutes, has the right to manage and represent the debtor, alone or together with other persons.

• As a rule, the court will issue a decision on the declaration of bankruptcy within two months of the petition being filed. However, this is a non-binding, instructional deadline.

• The type of petition submitted (i.e. for bankruptcy or for the opening of restructuring proceedings) depends on the level of a debtor’s liabilities and the value of their assets.

Dismissal of bankruptcy petition:

• The court may dismiss a bankruptcy petition where it has been established that the assets of the debtor are encumbered by a mortgage, pledge, registered pledge, treasury pledge, or a ship’s mortgage to such an extent that the residual assets do not suffice to cover the costs of the proceedings. 

• Moreover, the court may dismiss a bankruptcy petition if the debtor is not in danger of imminent loss of the ability to meet its due financial liabilities.
• The court will dismiss a bankruptcy petition where the assets of the insolvent debtor do not suffice to cover the costs of the proceedings or suffice merely to cover those costs.

DECLARATION OF BANKRUPTCY DURING THE COVID-19 EPIDEMIC

The Act amending the Act on special arrangements for the prevention of COVID-19, which is part of what is referred to as the “anti-crisis shield”, provides that during the period of an epidemic emergency or epidemic status associated with COVID-19, judicial and procedural deadlines do not start and those that have already started are suspended. In addition, the time limits laid down in the Act provided for in administrative law are suspended.

• The suspended periods remain “open”, which means that a party may take legal action during the suspension period.

• Suspension of judicial and procedural deadlines should also be understood as meaning that the suspension applies also to deadlines resulting from bankruptcy law, in particular the deadline for filing a petition for bankruptcy or for the opening of restructuring proceedings.

The legislative package constituting the “anti-crisis shield” does not provide for special solutions for the regulations of bankruptcy and restructuring law.

• The suspension of deadlines does not mean that the courts have completely stopped working. The provisions on the effects of the COVID-19 epidemic do not preclude taking action in closed session, if this is permissible in accordance with the relevant procedure. There are no legal obstacles to the handling of applications for bankruptcy and petitions for commencing restructuring proceedings.
• Taking into account the lack of specific regulations on bankruptcy and restructuring proceedings during the COVID-19 epidemic, it should be assumed that if the conditions for declaring bankruptcy/commencing restructuring proceedings have occurred, an appropriate petition should be filed with the court, as it may be reviewed by the court. 

PLANNED CHANGES IN THE AREA OF BANKRUPTCY PROCEEDINGS

In recent days, an amendment to the Act on special arrangements for preventing COVID-19, other infectious diseases and crisis situations caused by them has been prepared, which constitutes the “anti-crisis shield 2.0”.

Under the above mentioned law, the deadline for filing a bankruptcy petition during an imminent or actual epidemic does not start, but it is interrupted and runs anew after the situation passes.

If the basis for bankruptcy arises during an imminent or actual epidemic, the deadline for filing a bankruptcy petition is three months and the bankruptcy is presumed to be due to COVID-19.

The periods relating to the ineffectiveness of the bankrupt’s actions (under the current legal status one year prior to the filing the petition) are extended by the time when, due to emergency (epidemic) status, the periods for filing petitions are extended.

In our opinion, possible changes to the scope of bankruptcy and restructuring proceedings should also provide for formal simplifications for debtors (e.g. with regard to annexes to a bankruptcy petition, which may be difficult to obtain in the current circumstances) and changes to the scope of presumptions (e.g. extension of the period of delay in payment of liabilities when assessing insolvency), bankruptcy and restructuring cases should also be considered as urgent cases, which under the applicable laws constituting the “anti-crisis shield” are not prohibited from being heard by the courts.

By Wojciech Wasowicz, Associated Partner, and Justyna Solarska, Associate, Noerr

Dentons has advised Savills Investment Management on its acquisition of the Leroy Merlin distribution center near Lodz from Invesco Real Estate. The purchase, which was valued at approximately EUR 71 million, was made on behalf of Korean institutional investors managed by Vestas Investment Management.

According to Dentons, “the Leroy Merlin distribution center is the largest single storey build-to-suit logistics facility developed in Poland to date. The asset is located in Piatek, about 40 kilometers north of Lodz, and offers over 123,000 square meters of usable area.”

Dentons’ team was led by Partner Pawel Debowski and included Counsels Anna Garbula-Wegrzynowska, Agnieszka Nagorska-Kordeczka, and Krzysztof Kazmierczyk, Senior Associate Marcin Gruszka, and Associate Paulina Dabek.

Editor’s Note: After this article was published, CEE Legal Matters learned that Greenberg Traurig had advised Invesco Real Estate on the deal. The firm’s team was led by Partner Agnieszka Stankiewicz and included Associate Aleksandra Staromiejska.

Dentons has advised Hines Poland Sustainable Income Fund on the sale of a portfolio of six Polish distribution parks and the Nord Point office building in Warsaw to Chinese investor CGL Investment Holdings Corporation Limited, which was advised by Baker McKenzie.

Dentons’ team included Partner Pawel Debowski, Counsel Maciej Jodkowski, and Associates Karol Lewandowski, Katarzyna Lawinska, and Wiktor Waclawski.

Baker McKenzie’s team included Partners Katarzyna Kopczewska, Malgorzata Pietrzak-Paciorek, and Mateusz Grabiec, Counsel Michal Maj, Lawyer Marlena Binkiewicz, and Associates Michal Nocon and Kamil Matyskiewicz.

On 31 March 2020, the Polish parliament passed the Covid-19 Act (the “Act”). In its final form, the new law differs somewhat from the draft of the so-called Anti-Crisis Shield dated 21 March 2020 that we have previously reviewed, most notably in the way it regulates the issue of commercial lease agreements.

The Act introduces solutions that interfere with economic freedom to the extent that some might perceive to be unconstitutional. Arguably, only Article 288 of the Constitution could provide grounds for a legal intervention on this scale, and only through the introduction of a state of emergency. What is more, the new regulations were created hastily and there remain numerous ambiguities, the most important of which are indicated below.

DIFFERENCES BETWEEN DRAFT LAW AND FINAL ACT

Shopping Centres

Suspension of Contractual Obligations in relation to Large Shopping Centres

The legislator ultimately abandoned the idea of a 90% discount on rent for tenants leasing premises in shopping centres with sales areas exceeding 2,000 m² who had to suspend operations due to bans or restrictions introduced by the government in response to the Covid-19 outbreak.

Instead, on the basis of the Act, such agreements are currently subject to the following regulations:

• Until the ban on operations is lifted, parties to lease or similar agreements under which one party makes commercial space available for another party to use are released from their mutual contractual obligations – it is worth noting that, even though contracting parties are temporarily discharged from their obligations, the contractual relationship itself endures. If entire agreements were to expire based on this regulation, it would put the effectiveness of any measures used to secure such agreements in question. Consequently, one might assume that what is meant here is a temporary suspension of mutual obligations that is contingent on the tenant’s offer to extend the lease beyond the point when the ban on operations is lifted (please see points 2 and 3 below). Furthermore, the Act refers only to a period for which such obligations are to be suspended, not to the entities subject to the What the Act fails to specify is whether the above applies solely to tenants who are directly prohibited from conducting business for the duration of the current epidemic or to all tenants whose operations are affected (even indirectly) by the ban, for example, as a result of restrictions on movement in shopping centres (as suggested by the justification given for a self-correction included in the Act). Another source of doubt is the fact that the regulation concerns commercial space made available for use, without specifying the type of business conducted in such space, thus potentially giving rise to disputes with tenants as to whether a particular leasable area inside a commercial facility should be treated as commercial space within the meaning of the Act.
• Within three months of the ban being lifted, tenants should make their landlords irrevocable, binding offers to extend lease agreements on current conditions for another six months counting from the end of the ban – only tenants are granted the right to make an offer that has the consequences envisaged by the Act. Such an offer concerns extending an existing lease agreement, and not making a new one. The Act does not address issues such as possible rejection or negotiation of the offer by the landlord.
• If the tenant does not offer to extend the lease agreement in a timely manner, the landlord will no longer be bound by the obligation described in point 1 above – there is no logical explanation for the way this provision is structured. Its current wording might suggest that if the tenant does not make an offer, the landlord is nevertheless obliged to provide premises and may even charge rent, while the tenant’s obligation to pay such rent is suspended indefinitely. Our assumption is that this provision was meant to restore the parties’ mutual obligations, in which case the tenant’s failure to make an offer would result in all obligations from the period covered by the ban being restored. It is also worth emphasising that the Act does not specify the manner of settlement of such obligations between the parties.
• The above regulations do not affect the provisions of the Civil Code governing contractual obligations in situations where economic freedom is restricted – assuming that the legislator meant the possibility of invoking the rebus sic stantibus principle (allowing courts to modify contractual obligations in response to an extraordinary change of circumstances), it should be noted that a temporary suspension of obligations would, as a rule, effectively prevent contracting parties from invoking the said principle, which supports the interpretation of these regulations as a temporary suspension of mutual obligations between contracting parties.

According to the justification provided for the Act, the new law aims to release tenants and landlords from mutual obligations that would only serve to generate costs for both parties. Consequently, tenants will not be charged rent and other fees, including their share of common costs. On the other hand, the Act does not envisage any form of compensation for landlords who are about to lose their income while being forced to bear the costs of maintaining commercial facilities, which can no longer be transferred to tenants.

SIMILARITIES WITH DRAFT LAW

Stores Allowed to Restock on (Most) Sundays

As long as the threat of epidemic or an official state of epidemic persists, as well as for a period of 30 days after the restrictions are lifted, stores will be able to restock on Sundays unless there is a public holiday that happens to fall on a given Sunday. This means that stores will now be allowed to accept, unload, and display basic products on most Sundays, instructing their regular staff to perform these tasks or hiring someone else to do it.

Commercial and Office Premises

No Lease or Rent Rate Termination

Until 30 June 2020, landlords will not be able to terminate lease agreements or rent rates unless the tenant breaches contractual provisions or violates legal regulations on the manner of using premises or unless the building in which the premises are located needs to be demolished or renovated.

Lease Extension by Tenants

Tenants will be able to extend lease agreements made before the Act entered into force and set to expire after its enactment but before 30 June 2020 without changing lease conditions. As long as the tenant informs the landlord about the intended extension no later than on the planned expiry date, the lease term will be extended until 30 June 2020.

No such extension is possible if any of the following is the case:

• the tenant has been in delay with payment of:
• rent, or
• other amounts due on account of using the premises, or
• amounts that the landlord collects on behalf of another person or company

for (at least) a single settlement period during the last six months before the Act entered into force or – if the agreement had been concluded less than six months before the Act entered into force – during the term of the agreement, and the total amount of debt exceeds monthly rent;

• the tenant has breached the lease agreement by using the premises in a manner contrary to their agreed or intended use or has damaged the premises by neglecting to perform contractual obligations;
• the tenant has leased or subleased the premises (or a part of the premises), or allowed a third party to use them free of charge, without obtaining the landlord’s prior written consent as required.

By Malgorzata Blahuciak, Izabela Bogucka, and Iga Piotrowska, Senior Associates, Penteris

Clifford Chance has advised a consortium of banks including Intesa Sanpaolo Oddział w Polsce as lender and paying agent, Banca IMI, London Branch and China Construction Bank Oddzial w Polsce as mandated lead arrangers and bookrunners, and Banca IMI S.p.A. as facility agent on a PLN 500 million syndicated loan to Tauron Polska Energia. Tauron Polska Energia was advised by Linklaters.

According to Clifford Chance, “the interest rate on the loans will be floating and will be calculated based on WIBOR benchmark rate increased by a margin. The margin depends on, among other things, the level of utilization of the credit facility and the level of pro-environmental key performance indicators, i.e., the level of gas emissions and the share of renewable energy sources in the power generation mix of the borrower’s group.”

The Clifford Chance team consisted of Partner Andrzej Stosio, Senior Associates Anna Miernik and Maksymilian Jarzabek, and Associate Bartosz Zielinski.

Linklaters’s team included Partner Jaroslaw Miller, Associate Piotr Hurkala, and Junior Associate Michal de Bialynia Wojcikiewicz.

Head of Banking & Finance Michal Markowski and Head of Dispute Resolution Maciej Jozwiak have been promoted to Partner at Eversheds Sutherland in Warsaw.

Markowski has been with Eversheds Sutherland since 2016. According to the firm, “he has over a decade of experience providing legal advice to businesses. He specializes in providing legal support for project finance transactions. In recent years he has succeeded in building up the firm’s advice for the financial sector, expanding the firm’s portfolio of clients to include leading banks on the Polish market.”

Markowski is a graduate of the Uniwersytet Kardynala Stefana Wyszynskiego in Warsaw, the University of Warsaw, and holds an LL.M. from the University of Edinburgh. Prior to joining Eversheds Sutherland, he spent almost five years with K&L Gates Jamka sp. k. (and legacy Hogan & Hartson Jamka sp. k.), almost four years with Bird & Bird, and almost year and a half in-house with PGE EJ 1.

Jozwiak is a graduate of Warsaw University. He began his career with four years at the Robert Marciniak & Marta Szymanek Law Firm, then joined Eversheds Sutherland in February, 2008. After almost six years he left the firm in November, 2013 to join the Modzelewska & Pasnik Law Firm, then rejoined Eversheds Sutherland in the spring of 2014.

Agnieszka Hajos-Iwanska, Roman Iwanski, and George Havaris have been made Partner at JSLegal in Poland.

Agnieszka Hajos-Iwanska heads the Krakow office of JSLegal. Prior to joining the firm in March, 2012, she spent almost five years as an Associate at CMS. She holds a Ph.D. in Law from the Faculty of Law and Administration at the Jagiellonian University in Krakow.

Roman Iwanski has over 12 years of experience in providing and coordinating commercial legal advice to business entities as well as representing parties in litigation, arbitration or settlement negotiations.His practice areas include: global management consulting, legal governance, risk management and compliance, litigation and arbitration, settlement negotiations and ADRs, IP rights, real estate and complex technology disputes, insurance and reassurance, corporates disputes, employment and labor law, among others.

A citizen of both Poland and Canada, Iwanski obtained his law degree at the Warsaw University. Prior to joining JSLegal, he spent four years at CMS, two years at White & Case, and a year at Dentons.

George Havaris, who is a transactional lawyer with experience working on cross-border financing and M&A transactions, co-heads JSLegal’s Private Equity / Venture Capital practice and heads the firm’s English Law Desk. He is a Solicitor of the Senior Courts of England and Wales. He has represented domestic and international clients regarding their cross-border commercial transactions, as well as lenders and borrowers on their cross-border syndicated financing transaction. Prior to joining JSLegal in May 2014, he spent seven years with Linklaters in London, Warsaw, and Moscow.

Lower Salaries and Reduced Working Time

The Covid-19 Act offers a range of solutions for employers struggling due to a decrease in turnover as a consequence of the epidemic. To be eligible for support, businesses have to demonstrate a drop of at least:

• 15%, calculated by comparing turnover generated over any two consecutive months in 2020 with
  the corresponding period of the previous year; or
• 25%, calculated by comparing turnover generated in any month of 2020 with the previous month.

Employers may:

• lower the salaries of employees who cannot work due to businesses having been forced to temporarily cease operations, by up to 50% (with the proviso that salaries cannot fall below a minimum wage calculated proportionately to their working time);
• reduce employees’ working time by 20% (with the proviso that employees still have to work at least 50% of full working time), in which case employees are entitled to at least a minimum wage calculated proportionately to their working time.

Such changes need to be consulted with trade unions or official employee representatives. Employers should also provide regional labour inspectors with documents specifying which employees are to be affected, to what extent, and for how long.

Subsidies from Guaranteed Employee Benefits Fund

Employers who have implemented the above solutions may apply for subsidies, which can cover up to:

• 50% of the minimum wage in the case of businesses whose operations have been brought to a halt;
• 50% of the employee’s salary (with the stipulation that the subsidy cannot exceed 40% of the previous quarter’s average monthly salary) in the case of businesses that have been forced to reduce employee working time.

In either case, subsidies do not apply to employees whose salary for the previous month was higher than 300% of the previous quarter average monthly salary. Employers who are behind with payment of any taxes or statutory contributions (for example, social security or health insurance contributions), as well as those on the verge of bankruptcy, will not be subsidised. Subsidies are granted for a period of up to 3 months, and employers cannot simultaneously receive more than one type of public aid to cover the same salary.

Flexible Working Hours and Minimum Rest Periods

In order to ensure the survival of their businesses, employers struggling due to a decrease in turnover as a consequence of the epidemic may temporarily:

• introduce a ‘system of equivalence’ allowing them to vary the length of a working day so that employees may be required to work up to 12 hours a day, which is then balanced by shorter working days;
• reduce uninterrupted rest periods to 8 hours per day and 32 hours per week;
• implement even less favourable employment conditions upon consultation with trade unions or official employee representatives.

By Piotr Bobrowski, Senior Associate, Penteris

As a result of the Covid-19 Act and Finance Minister’s Regulation which have just entered into force, companies will have more time to meet their reporting obligations and report ultimate beneficial owners. The time limits have been extended by 3 months.

From companies’ perspective, the following changes are particularly important:

Reporting of Ultimate Beneficial Owners

• The extended deadline is 13 July 2020.

Filing of Financial Statements

Deadlines have been extended only with respect to obligations relating to a financial year ending after 29 September 2019 but before 30 April 2020, provided that the original deadline had not elapsed before 31 March 2020. The time limits indicated below have been calculated for companies whose financial year ended on 31 December 2019:

• Management reports and financial statements should be prepared and signed by 30 June 2020.
• Financial documents should be approved by 30 September 2020.
• Documents should be sent to the Repository of Financial Documents by 15 October 2020.

By Irmina Kondraciuk, Associate, Penteris

Former Kochanski & Partners Head of Private Equity and Cross Border Gabriel Olearnik has been hired as Managing Director at Delta Capital Partners Management LLC.

According to its website, Delta “is a US-based global private equity firm specializing in litigation and legal finance, judgment enforcement, asset recovery, and related strategies serving claimants, businesses, private investment funds, law firms, and other professional service firms across the world. The firm provides capital and expertise that enables such parties to de-risk, significantly enhance the probability of a successful and timely resolution of claims, and/or maximize the effectiveness of their businesses.”

Olearnik, who will lead Delta’s business in Europe, is based in London and Warsaw. He spent the past two and a half years at Kochanski & Partners, after spending a year with Halliwells, two years with Mayer Brown, and seven years with Dentons (during which time he was seconded for seven months with Tristan Capital Partners as General Counsel).

Christopher DeLise, Delta’s Founder, CEO and Co-CIO, stated, “Delta continues to meet key business objectives for 2020 by hiring top-tier professionals and building out our geographic footprint. These developments continue to strengthen Delta’s business and competitive advantages in key markets. The hiring of Gabriel Olearnik materially enhances our capabilities across Europe and demonstrates our ongoing commitment to providing unparalleled service to claimants, law firms, professional service providers, and other end-users of litigation and legal finance in those important regions. We are pleased to have someone with Gabriel’s talent and experience joining Delta’s senior management team.”