Mateusz Tusznio | In Principle

Under the Polish Restructuring Law, in principle an arrangement covers all claims against the debtor except for those expressly identified in the law as outside the arrangement. But sometimes it is not necessary to reach an agreement on all the debtor’s obligations in order to carry out an effective restructuring. This happens when the debtor only has difficulty servicing selected obligations that are otherwise essential to operation of its business. For such situations, parliament introduced the institution of a partial arrangement.

When a creditor enforces its registered pledge by taking title to pledged shares, it’s just the start. To effectively take control of the company and satisfy its claim by selling the shares or assets, the creditor must take a series of legal and factual steps. It’s not always easy.

What is a registered pledge on shares in a limited-liability company, and how is this security enforced? These questions are answered in the latest episode of News from Poland—Business & Law by Mateusz Tusznio, an advocate and restructuring adviser specialising in banking and finance law and restructuring of corporate debt.

A request for a payment guarantee may appear on an investor’s desk suddenly, causing numerous complications. Sometimes, contractors make such a demand to have an excuse to withdraw from the contract. Then a race against the clock begins, not to give them that excuse. But in advance, the investor can also arrange a commercial solution to the problem, i.e. a bank guarantee facility in the loan agreement.

Sometimes, in financing transactions, for various reasons related to the structure of the particular transaction and the commercial arrangements of the parties, atypical assets are offered as collateral for receivables of the financing party. In such situations, the parties need to think about how to select legal instruments to implement commercial collateral arrangements. Investment participation units in a fund are an interesting asset due to the specific statutory regulations.

To prove that a power of attorney on behalf of a foreign entity was granted by persons authorised to represent the entity, an excerpt from the commercial register or a notary’s certificate is usually submitted. But what about countries where there are no commercial registries and notaries have no power to confirm representation?

The pandemic has made it hard to organise traditional deal closings. Earlier, in typical financing transactions, it was no problem to arrange a physical meeting of the parties to sign the complete set of financing documentation, including security instruments (e.g. a pledge agreement or agreement to establish a mortgage). Indeed, some clients insisted on holding a traditional closing. The pandemic has changed this perspective, focusing the parties’ attention on the possibilities for remote signing of agreements.

Assignment of rights for security is a popular method of securing claims on the Polish market. This is due to the great flexibility of this instrument and the absence of such formalities as registration in court. In short, such assignment consists of transferring to the lender claims held by the borrower against third parties (e.g. receivables for the sale of goods). If the credit is not repaid on a timely basis, the proceeds from the claims assigned for security can be used to satisfy the lender’s claims. But can the rights under a promissory also be assigned in this manner?

In 2019, legal regulations came into force providing for a mandatory dematerialisation of investment certificates issued by closed-end investment funds, including those which are not a part of a public offering and have not been admitted to an organised trading market. Newly issued certificates will no longer be able to be issued as a document, or function as an entry in the record of investment certificates kept by an investment fund company. They will have to be registered in the depository of securities kept by the Krajowy Depozyt Papierów Wartościowych (National Depository for Securities, KDPW). These regulations were then supplemented by rules for how an issuing agent must operate a register of investment certificates before their registration in KDPW. This fundamental change entails a number of practical and formal consequences that are significant in establishing and enforcing collateral on investment certificates.

Environmental protection is a major issue today, and many organisations and enterprises attempt to incorporate environmental protection requirements into their operations. Banks are also trying to keep up with the trend by offering eco-loans or green loans.

It is clear that an ordinary pledge can secure only one claim. In the case of a financial pledge the opinions are divided.

Until now, it has been distinctly easier for banks in Poland to secure and later enforce their receivables than for other creditors. Will a new amendment to the Banking Law change this?