The past year saw a number of changes to Polish corporate governance regulations meant to bring them closer to European and world standards.
In May 2017, an updated version of the Act on Statutory Auditors, Audit Firms and Public Oversight was introduced to align the Polish legal system with EU regulations regarding audit and financial statements at publicly listed companies. At the board level, the amendment made important changes to committee composition standards, which previously only required one independent director. Going forward, audit committees must comprise at least three members, a majority of whom should be independent (including the chair), and at least one of whom should have audit and accounting experience
Furthermore, the amended act introduces a change to the statutory auditor’s term of providing services to a company. After five years of conducting company audits, the company is obliged to rotate firms and appoint a new auditor; the previous entity can only be reappointed once three years has passed since their last audit. The hiatus period has been extended by one year in comparison to the previous version of the provision.
For companies where the state is a major shareholder, 2017 has been a year for introducing new regulations regarding appointment of management and supervisory bodies’ members, and exercising rights from shares.
In addition to accounting amendments, the Act on Principles of State Assets Management, which came into force at the start of the year, set out a range of new regulations regarding disposal of assets and investment decisions, as well as the appointment of management and supervisory bodies’ members.
Under the Act, the supervisory body is required to approve such issues as disposal, transfer and acquisition of significant assets as well as disposal, acquisition or subscription of the State Treasury shares in another company. Furthermore, supervisory board approval would be required for conclusion of contracts for legal and marketing services in the field of public relations, donation agreements or contracts for release from debt of a high value. As a result, all state-owned entities are required to incorporate an obligation to obtain relevant approval for transactions of significant value as well as the rules of procedure for disposals of assets (particularly a tender procedure) within the articles of association.
The regulations to be included under the law are minimal and each company is entitled to introduce its own, stricter terms. This reflects the dissolution of the Ministry of State Treasury, with the Prime Minister now the main decision maker with respect to delegating rights to other bodies. The Prime Minister or other eligible body or person has a right to exercise rights from shares as well as to submit, on behalf of the State Treasury, a declaration of will on taking up shares. Disposal of shares owned by the State Treasury requires approval of the Council of Ministers according to the Act on Commercialization and Certain Employee Rights.
The Act also specifies the requirements for the members of supervisory and management bodies, which include holding a tertiary education degree, at least 5-years of employment (based on different types of contracts or on conducting business activity on their own account) as well as such necessary qualifications as a PhD in economics, legal or technical sciences, MBA and various accounting and financial certificates. Candidates may obtain additional qualifications by passing an examination before a board appointed by the Prime Minister. Moreover, the candidate cannot be employed by the company or conduct any activities constituting a conflict of interest with the company. In addition, any candidates must receive the approval of the Chancellery of the Prime Minister’s council for state owned companies.
Last year saw many companies amend their articles to reflect these changes; however, the legislation is still undergoing revision, and as a result new adjustments and amendments can be expected going forward, particularly at companies where the state holds the majority of voting rights.
Aleksandra is an analyst covering the Polish market.