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The Act on bonds which came into force on August 20 1995 deals with particular types of bonds such as convertibles. Since then, no convertible bonds have been publicly offered by Polish issuers and quoted on the Warsaw Stock Exchange. However, a few convertible bond issues are now known to be in preparation. Convertible bonds need to be attractive securities to satisfy both corporate and financial needs (eg, they may serve as protection against an unexpected takeover; the public offer or private placement, as the case may be, of convertible bonds is often easier and more successful than that of standard bonds).

Issuers must, under Article 6.3 of the Act, meet the following requirements to be eligible to issue unsecured bonds:

  • The value of the issuer's capital and equity capital must be at least five times greater than the minimum share capital required for a joint stock company under the Commercial Code, now Z100,000 (US$35,000). This means that an issuer's capital and equity capital must be at least Z500,000.
  • The issuer must have prepared financial statements for at least the last three accounting years.

If not eligible to issue unsecured bonds, issuers must secure the issue by means of securities.

The decision to issue is taken by the company's AGM. Where convertible bonds are to be offered and traded publicly, the issue will also be subject to the provisions of the Securities Act of March 22 1991. Accordingly, consent for the admission of securities to public trading and for prospectuses should be requested from the Polish Securities Commission.

The conditions of the issue should be detailed. In particular, the purpose of the issue must be described: bonds must be issued for a specific purpose and the issuer must use the proceeds solely for the purposes specified. The information will be in relatively general terms. For instance, it may be aimed at financing the company's working capital needs and the development of the company's production capacities.

The conditions of the conversion of the bonds into shares should also be set out. The Act does not provide for any method of adjusting the number of shares issuable on conversion if specific events (such as a share capital increase of the issuing company, merger or consolidation of the issuing company, etc) occur.

To convert bonds into shares, no notification of the Anti-Monopoly Office is theoretically required if an economic entity is acquiring the stock of a publicly-traded company. However, what the Anti-Monopoly Act allows in this instance is picked up by other acts. The Securities Act (Article 72) requires notification of the Polish Securities Commission and the Anti-Monopoly Office if an entity (eg a bondholder) intends to acquire defined threshold percentages of the stock of a publicly-traded company, from 5% to 10%.

In addition, if an entity intends to acquire, as a result of bond conversion, shares entitling it to 25%, 33% or 50% or more of the total number of votes at the shareholders' meeting, the Polish Securities Commission must be notified. In such cases, within seven days of the notification, the Commission may prohibit the conversion, after having consulted the Anti-Monopoly Office, where the conversion leads to a violation of the Anti-Monopoly Act.

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