From 1 July 2019 We can expect a revolution in the market for trading bonds. Among other things, the rules on the issuance of non-public bonds and lien letters will change, which will result in an increase in bond issuance times and make it more difficult for some companies to operate.
Act dated 9 November 2018 amending certain laws with a view to strengthening the supervision and protection of investors in this market (Journal of Laws of 2018, item 2243 hereinafter referred to as: ‘Act dated 9 November 2018”) makes drastic changes. The most important ones we have gathered in this article.
Obligation to dematerialise corporate bonds and obligation to register bonds in securities deposit
one of key changes that will enter into force from 1 July 2019 is the obligation to issue non-public bonds in dematerialised form. Dematerialised securities do not have the form of paper – it is only a record in the register.
Dematerialisation occurs when the security is registered in the National Securities Depository (KDPW) or in another system under a registration agreement. Such an agreement may be concluded with the KDPW or with an entity operating another system if it cooperates closely with the KDPW and meets certain criteria.
Obligation to supervise the issue agent
From 1 July 2019 in the case of the issuance of private bonds which are not listed on a regulated market or entered into an ASO (Alternative Trading System), and in the case of investment certificates issued by a closed investment fund which is not a public investment fund, prior to the conclusion of the contract which is the subject of the registration of those securities in the securities depository, the issuer shall conclude an agreement to perform the functions of an agent for the issuance of those securities with an investment firm entitled to keep securities accounts or with a trust bank.
Obligation for NCBs to collect information on issuers
National Securities Depository to 1 July 2019 will collect and make publicly available information on outstanding bonds, pledge lists and investment certificates issued by individual issuers established in the territory of the Republic of Poland. In addition, KDWP will collect information on the size of their liabilities under these securities, as well as information to determine the extent and timeliness of their performance.
Obligation to inform NDPW of the issuance of bonds registered in another registry system
The issuer of securities registered in another registry system will be required to provide the following information within the deadline 15 days:
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in the case of bonds:
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- identification of their emissions;
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- the number of bonds issued under that issue;
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- the unit nominal value of the bonds and the currency in which it is expressed;
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- the annual interest rate on bonds;
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- the total value and currency of the benefit to be met by the issuer for the redemption of the bonds;
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- The time limits within which the issuer should perform benefits from these bonds;
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in the case of covered bonds:
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- identification of their emissions;
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- the number of pledge letters issued under that issue;
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- the unit nominal value of the pledge letters and the currency in which it is expressed;
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- the amount of the interest rate on the pledges on an annual basis;
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- the total value and currency of the benefit that should be fulfilled by the issuer for the redemption of those pledge letters;
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- the time-limits by which the issuer should exercise the benefits from those pledge letters;
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for investment certificates:
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- the designation of their emissions and, where related to the sub-fund, the designation of that sub-fund;
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- the number of investment certificates issued under that issue;
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- an indication of the benefits resulting from the investment certificates and the dates on which the issuer should perform those benefits.
In addition, the issuer is required to forward to the National Securities Depository within the deadline 15 the days following the end of each subsequent month, information on the value of the benefits arising from the securities that became due during that month, indicating whether and to what extent those benefits have been fulfilled and is to update the information where they no longer correspond to the actual situation.
Bonds issued before 1 July 2019 and reporting obligation
Bonds in the form of a document or such which have been recorded in the records of an investment firm operated under the current rules and issued before 1 July 2019, will continue to be important and the existing rules will apply. However, the issuer of such securities or the entity keeping their records will be required to transfer to the NDP by the date of 31 March 2020 data on all issued bond issues, as per day 31 December 2019 The issuer of the bonds or the entity keeping their records will be required to update the data on the issue made available to the NCB in principle until the bond liabilities expire.
Penalties and penalties
If a person acting on behalf of, or on behalf of, an issuer or an issuer’s account and who is tasked with registering securities in a securities depository, submits false information to the NCB or conceals the real information concerning those securities or an issuer, in addition, information relevant for assessing the admissibility of such registration shall be fined up to 2,000,000 PLN.
The legislative amendment aims at increasing investment security and ensuring transparency in securities issuance. However, in practice, the amendment, in the author's opinion, will be the source of a number of problems related to, among others, the cost of issuing bonds and the extension during the issuance of bonds, which may negatively affect the speed of recapitalisation of small and medium-sized companies.
Authors
Justyna Kyć - Legal adviser in the Legal Department of 2017 associated with Russell Bedford Poland. He specializes in corporate customer service, in particular in drawing up and negotiating commercial contracts and providing ongoing legal advice.