An interview with Danuta Pajewska, the partner in charge of the Capital Markets practice and the Financial Institutions practice at Wardyński & Partners, about the advantages for a company when its shares are admitted to trading on more than one stock exchange at the same time.
Litigation Portal: What is dual listing?
Danuta Pajewska: Dual listing is when the shares of a company are listed on two or more securities exchanges. There are now dozens of companies listed on the Warsaw Stock Exchange that are based outside Poland, but for some of them the WSE is only one of several markets where their shares are traded.
The main reason companies seek a listing on multiple markets is to increase their ability to raise capital—often on a market that is larger than their home market.
However, dual listing does carry a risk of reduced liquidity of the shares on one of the markets, possible price differences between the markets, and the need for the company to comply with specific legal regulations of both markets while maintaining equal rights for all shareholders (e.g. with respect to voting rights, participation in shareholder meetings, and dividends).
What requirements must be met by a foreign company to be listed in Warsaw?
In order to obtain a listing on the WSE, a prospectus must be issued and approved. Steps must also be taken to dematerialise the shares and include them in the international deposit, clearing and settlement system, which is coordinated with the system of Poland’s National Depository for Securities (KDPW). The shares must also meet the conditions for admission to trading on the WSE, particularly with respect to the number of shares in circulation and the value of the issue. The whole process, including the prospectus itself, must reflect the legal conditions under the laws of the country where the company has its registered office (particularly if it is different from the markets where the shares are listed), as well as the laws of the countries where the markets on which the company’s shares will be listed operate—including the country in which the prospectus is to be approved.
In which country should the prospectus be approved?
If the company is established in an EU member state, the prospectus may be approved in the country of incorporation or another EU member state. Companies from outside the EU must obtain approval of the prospectus from an EU member state.
One of the factors influencing the choice of the country where the prospectus will be approved is the language of the prospectus. If the prospectus, including the financial portion, is prepared in English, it is not necessary to translate the entire prospectus into Polish. In such case, a Polish translation of a summary of the prospectus is all that is required. This is one justification for companies to select a jurisdiction where prospectuses may be submitted and approved in English.
The selection of the country in which the country intends to seek approval of its prospectus is a key decision, affecting the procedure and scheduling of the whole process of listing the shares on the WSE.
Is there is any additional information that must be included in the prospectus of a foreign company that is seeking a dual listing in Poland?
The company’s prospectus should address Polish aspects, particularly concerning the conditions for listing on the WSE and for entering the shares in the relevant securities depository system. If the issuer is considering a public offering of shares in Poland, it is particularly important to identify risks relevant to the conditions and procedures for conducting the offering in Poland, with respect to cancellation or suspension of the offering, as well as rules for distribution and allocation of the shares.
In order to properly prepare a public offering of the shares of a foreign company on the WSE, it is important to determine the time at which the rights to newly issued shares arise. In the Polish legal system, creation of shares requires registration of the share capital increase in the court register. Not all jurisdictions have the same rule, and thus determining the actions and documents confirming the existence of the share rights is crucial from the point of view of the procedure for admitting the shares to trading on the WSE. It is also important to insure that the resolutions on issuance of the foreign company’s shares contain the key elements enabling the WSE and KDPW to take a decision to admit the shares to trading and to dematerialise the shares.
Dual listing of shares on the WSE and another securities exchange thus requires advance coordination of the actions to be taken for admission of the shares to trading on both markets. If the prospectus was drafted before it was decided to seek a dual listing, the prospectus will need to be supplemented to address the issues discussed above.
How do the Polish regulations stack up against other national regulations? Are they more or less restrictive?
In the case of issuers from elsewhere in the EU, the regulations are generally similar, as they are derived from EU regulations implemented in the national legal systems of the member states. There are certain differences, however, for example with respect to corporate law, the range of information subject to public reporting, and the rules for acquisition of major stakes in public companies.
Assessment of the market benefits of listing the company’s shares on multiple markets and the opportunities for raising capital in this manner is a separate issue, but the laws governing dual listings within the EU provide an adequate framework for conducting this process effectively and efficiently in Poland.