New powers of KOWR in the context of acquiring shares or stocks under the right of first refusal.

NEW RIGHTS OF THE NATIONAL CENTER FOR AGRICULTURAL SUPPORT IN THE CONTEXT OF PURCHASE OF SHARES OR SHARESUNDER THE RIGHT OF PRECEDENTIAL PURCHASE In connection with the amendment of the Act of 11 April 2003 on shaping the agricultural system (the “Act“), the powers of the National Centre for Agricultural Support (“NEBR“) with regard to the right of first refusal have been significantly expanded.
The

• scope of the change

Until now, NEBR had the right of first refusal to buy shares and stocks in companies which are owners or perpetual usufructuaries of:

• agricultural real estate with an area of at least 5 ha; or
• agricultural real estate with a total area of at least 5 ha.

On the other hand, due to the entry into force of the amendment, on 5 October 2023. NEB has also acquired the right of first refusal to purchase shares in the parent company that holds shares or stocks in companies that own or use such properties.

KOWR’s entitlement has thus been extended to include the possibility of purchasing units (shares or stocks) in companies which, although they do not directly own agricultural real estate in their assets, hold shares or stocks in companies which are owners or perpetual usufructuaries of such real estate.

• Direct domination

The right of

NEB may be exercised only with regard to directly domineering companies, i.e. companies which are partners in the company holding the right to agricultural real estate.

The above results from the wording of Article 3a(1)(2) of the Act, according to which: “The National Centre acting on behalf of the State Treasury shall have the pre-emptive right to purchase shares and stocks in a parent company within the meaning of Article 4 § 1 item 4 of the Act of 15 September 2000.– Code of Commercial Companies , which holds shares or stocks in the company referred to in item 1.“. In turn, item 1. of the cited provision refers to “a capital company within the meaning of Article 4 § 1 item 2 of the Act of 15 September 2000.– Code of Commercial Companies, which is the owner or perpetual usufructuary of agricultural real estate with an area of at least 5 ha or of agricultural real estate with a total area of at least 5 ha“.

Thus, the pre-emptive right of KOWR is exercised at the level of the company directly above the subsidiary that disposes of agricultural real estate and cannot be applied to companies which are at a higher level of the holding structure.

A parent company is to be understood as a company under commercial law that:

• holds directly or indirectly a majority of the votes at the shareholders’ meeting or at the general meeting, also as a pledgee or usufructuary, or on the management board of another capital company (subsidiary), also on the basis of agreements with other persons, or
• is entitled to appoint or dismiss a majority of the members of the management board of another capital company (subsidiary), also on the basis of agreements with other persons,

• or
• has the power to appoint or dismiss the majority of the members of the supervisory board of another capital company (subsidiary), also on the basis of agreements with other persons, or
• the members of its management board constitute more than half of the members of the management board of another capital company (subsidiary), or
• exerts a decisive influence on the activities of a subsidiary capital company, in particular by concluding an agreement between the parent company and the subsidiary providing for the management of the subsidiary or the transfer of profits by such company.

The assessment of a dominance relationship on the basis of the Code criteria may raise practical doubts, and therefore, in the event of uncertainty as to whether the criteria for a dominance relationship are met, one should be inclined to include the NEB in the procedure for the disposal of shares or stocks, in particular in view of the sanctions provided for a breach of the provisions on the NEB’s pre-emptive right (as discussed below).

• Additional diligence

Extension of the

pre-emptive right of the NEB in practice results in the necessity to exercise additional diligence in the course of the share or stock sale transaction.

This is because, as part of the due diligence, the assets of the subsidiaries must be thoroughly examined for rights over agricultural real estate.

Indeed, the sanction for infringement of the pre-emptive right of the NEB is severe. Acquisition of shares in breach of the pre-emptive right of KOWR results in the invalidity of the legal transaction and this invalidity cannot be remedied by way of subsequent notification of the transaction to KOWR.

It should be borne in mind, however, that the provisions governing the pre-emptive right of KOWR do not apply to cases in which the transfer of shares takes place on a basis other than a sale agreement. The provisions regulating the right of purchase of agricultural real estate, which is a different mechanism provided for by the Act, apply to such a situation.

• Exclusions

It should

be borne in mind that the Act provides for a number of exclusions in which NEB’s right of first refusal does not apply. These include the sale of shares to a relative or the sale of shares for the purpose of redemption.

A full catalogue of exemptions can be found in Article 3a(2) of the Act.

• Summary of changes

With

the above in mind, it should be pointed out that NEB may now intervene in the structure of companies which have only indirect ownership control over companies which remain the owners or perpetual usufructuaries of agricultural real estate of a certain area.

The existing and new powers of the NEB in the context of the pre-emptive right are presented in the table below.