Since May 2016 regulations guaranteeing Polish land in Polish farmers’ hands have been hampering corporate mergers and acquisitions.
As of 30 April 2016 the Polish Agricultural Property Agency (Agency) has been equipped with a pre-emptive right to acquire shares and stockholdings in companies that own agricultural real property.
Application of the new regulations is very broad, because all kinds of land can be qualified as agricultural real property. This includes land which even might be used for agricultural purposes (in theory, any undeveloped piece of land will do) unless it is smaller than 0.3 ha or has been appropriated for purposes other than farming in a local zoning plan. The problem is that the majority of land in Poland is not covered by zoning plans.
This means that, potentially, the new rules may concern e.g. real estate development companies that own land on the outskirts of cities, or manufacturing companies which – alongside their production facilities – hold pieces of real estate with agricultural status, planned for potential expansion of the production site, but not covered by a zoning plan.
The pre-emptive right applies even if real estate constitutes an insignificant portion of the company’s assets.
The above rules further apply even if only a part of the shares or stocks in a company is being sold. So in theory the State Treasury might become one of the shareholders.
The pre-emptive right can also apply on acquisition of shares/stocks in M&A transactions, or during intra-group acquisitions. However, it seems the new rules do not apply to taking up newly created shares or stocks.
The experience of the half year that has passed since the new rules came into force shows that they are basically a dead letter. The Agency has not once exercised its pre-emptive right with regard to shares or stock, and did so only once with regard to real property as such (the new law allows for that, too).
The Agency affirms that it is interested only in land actually used for agricultural purposes but not in land which only formally qualifies as farmland. It would also be irrational for the Agency to buy a company where agricultural real estate constitutes only an insignificant part of that company’s assets. Agency officials promise that they will firmly state if they are interested in buying or not, so that the actual buyers do not have to wait for the lapse of the one-month deadline that the Agency formally has in which to exercise its right.
Nonetheless, the new rules significantly extend and complicate the whole transaction process because a sale contract must be concluded under a suspensive condition and the parties must wait – either until the lapse of one month or receipt of the Agency’s waiver statement.
The risk of nullity of the whole transaction makes it strongly advisable to go through the whole notification procedure with the Agency in every case where the pre-emptive right might even remotely come into play.
Source: Act on Agricultural System Shaping dated 11 April 2003 (J.L. no. 64, item 592; unified text J.L. of 2012, item 803, as later amended)