publication
2025-04-29 08:30
One of the problems of the Polish capital market is the issue of forced redemption of shares listed on the WSE. According to the Association of Individual Investors, the current shape of the regulations is harmful to minority shareholders, and the EU directive existing for years has been implemented in Poland in an inappropriate way. Therefore, a petition regarding these activities was sent to the Minister of Finance.
As Sii argues in a petition to the Minister of Finance Andrzej Domański, forced redemption should guarantee a minority shareholders a price corresponding to at least a fair value of forced operations. The current legal status does not ensure this, and the existing provisions are contrary to the Constitution of the Republic of Poland, which means that there is a clear injury of minority shareholders, which can be compared to expropriation for an icide.
To make matters worse, Polish regulations regarding forced redemption are much less favorable for minority shareholders than The EU directive existing for yearswhich was implemented in Poland in an inappropriate way. The state of protection of minority shareholders is far worse in our country than in force in Germany, France and the Czech Republic, as well as Great Britain or the USA.
Problematic terminology
As Kamil Kosiński notes in “Puls Biznesu”, Fair Value is not fair market value. Although the EU directives are translated into all languages of the member states, her translator into Polish did not show off the knowledge of the specific terminology of financial markets.
“The directive requires that forced redemption preceded by a simultaneous takeover of control and exceeding the threshold of 90-95 percent took place after” fair price “(in the English version) or Juste Prix (in the French-language version), which, according to the principles adopted by the Polish Federation of Associations of property appraisers (PFSRM), is identified with The concept of “fair value” relating to a situation in which the seller is not able to stop the subject of the valuation, “we read.
“However, while the concepts of fair price and Juste Prix are used consistently in English and French-speaking versions of the directive, in Polish translation the concept of honest and fair benefit was used interchangeably. And this is not the same, because according to PFSRM the price of the fair, or” equitable price “, it is identified with” Fair Market ” Value “and refers to a situation when the seller did not act under coercion,” adds Kosiński.
– The harmful investors on the forced redemption are one of the largest pathologies existing on the Polish capital market. As Sii, we are determined to change this adverse state of affairs. A rich analytical material has been attached to our petition, which clearly shows the scale of the problem. We need many more people in Poland investing in companies from the WSE and one of the conditions to bring this to this is to increase the level of protection of minority shareholders – comments Jarosław Dominiak, president of the Association of Individual Investors.
How to fix the market?
SII postulates include adopting the following solutions:
- Conducting forced redemption of shares at a price not lower than their fair value, which will be determined by an audit company (subject to the presumption of price fairness in cases regulated by the directive on the takeover offers).
- Enabling the Polish Financial Supervision Authority to control the correctness of the valuation of the audit company regarding the price of forced redemption of shares in the event of a doubt as to the valuation of the audit company.
- Providing a person whose shares were subject to forced redemption, real right to court by adding regulations regarding a special action for payment of fair value.
The petition addressed to the Minister of Finance Andrzej Domański contains proposals of specific changes in the Act on public offer and the conditions of introducing financial instruments into an organized trading system and on public companies.
Forced purchase for pennies
In the case of shares of companies listed on the regulated market (e.g. the main WSE dance floor) or in an alternative trading system (e.g. NewConnect), the reference point for setting the price in the forced purchase is the market price – the highest value from three such prices:
- average market price from a period of 3 months preceding forced redemption,
- average market price from a period of 6 months preceding forced redemption,
- the highest price paid by the purchase in the last 12 months.
Sii draws attention to the fact that the market price is often affected by low liquidity of trading in shares on the stock exchange, which may occur in the face of the marginalization of minority shareholders and the risk of delisting, and companies being the subject of forced redemption, before its announcement, often have low free flloat. What's more, it is often a self -propelled mechanism: Fears of the forced redemption at a low price cause a decrease in the stock course, which further drives fears and further decrease in the course and, as a result, also valuations of the company.
The price of shares as a forced redemption set as the average stock price from certain periods of trading is not a fair price and is not naturally shaped, related to the fundamental business value of a given company – Arguemnta SII.
The petition was also accompanied by material in the form of a detailed analysis of forced redemption on the Polish market, while illustrating the defectiveness of the regulations. Its authors are Raimondo Eggink and Aleksander Eggink, who additionally supported the association's initiative.
– Already more than 20 years ago I fought to civilize the rules of carrying out forced redemptions in non -public companies. With the help of the judgment of the Constitutional Tribunal, it succeeded. On the public market, however, to this day, the standards of forcibly purchased shareholders are unfortunately much lower, which in my opinion is negatively affected by market development – comments Raimondo Eggink.
This is another SII action on forced redemption. In 2019, Sii appealed to change the regulations in this regard. In 2024, SII supported one of the members in the submission to the Constitutional Tribunal of the constitutional complaint in this matter. More in the article “Individual investors against expropriations for nothing”.
