Investment Control in Poland and Beyond

Investment control is a crucial aspect of business strategy, and understanding how it works can make a huge difference in your bottom line. In Poland, the government has implemented various measures to regulate foreign investments, including the requirement for foreign investors to register with the Ministry of State Assets.

Poland's approach to investment control is not unique, however. Many countries have similar regulations in place to ensure that foreign investments align with their national interests. The European Union's (EU) Merger Regulation, for example, sets out rules for the approval of cross-border mergers and acquisitions within the EU.

In Poland, foreign investors are also subject to scrutiny under the country's National Security Agency (ABW). This agency reviews investments to ensure they do not pose a risk to national security. The ABW's role is to protect Poland's interests, but it can also be a source of concern for foreign investors.

Investment control can be a complex and nuanced topic, but by understanding the rules and regulations in place, you can make informed decisions about your investments.

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The investment control process involves a series of steps to ensure that investments are made in a transparent and accountable manner. Investment controlling adds to the visibility, transparency, and credibility of any asset management company.

Investment controlling encompasses a wide range of activities, including performance attribution, market index and benchmark comparisons, and calculation of performance figures and statistics. These activities help to identify actual and potential performance issues and suggest remedial action to solve them.

Some of the key activities involved in investment controlling include:

These activities help to ensure that investments are made in a disciplined and informed manner, which is essential for achieving long-term investment objectives. Maintaining discipline in investing is key to staying on track and avoiding the temptation to react impulsively to market volatility.

Investment controlling is a crucial part of any asset management company, adding to its visibility, transparency, and credibility. It's like having a set of eyes and ears that help you stay on top of your investments.

Investment controlling helps implement best practices in performance measurement and presentation, such as using the GIPS Standards. This ensures that your investment performance is accurately measured and presented.

One of the key benefits of investment controlling is that it enables deep-level analysis, allowing you to identify the real drivers of your account return and risk. This is essential for making informed investment decisions.

Investment controlling also helps to reduce unnecessary discussions by using more objective and less subjective information during performance reviews. This saves time and reduces stress.

Here are some of the key objectives of investment controlling:

By achieving these objectives, investment controlling helps asset management companies to make better investment decisions, reduce risks, and increase returns. It's a win-win situation!

The President of the Office of Competition and Consumer Protection is the competent authority to decide on FDI notifications.

Transactions must be notified in advance, with the foreign investor obligated to refrain from carrying out the transaction until the OCC President's decision is issued.

The regulations provide a deadline for the OCC President's decision to be issued, allowing the transaction to proceed if no objection is raised.

The transaction can only be carried out if the OCC President does not notify any objection to it.

In cases of indirect acquisition due to an action under foreign law, prior notification to the OCCP Chairman is not required, and the notification can be made after the acquisition is made within one of the statutory deadlines.

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The Polish Legal Framework provides a clear set of rules for controlling foreign investments.

The Act on Control of Certain Foreign Investments regulates restrictions on Foreign Direct Investment (FDI) in Poland.

The Act outlines the rules and procedures for the control of certain investments that have acquired or obtained a significant share or dominant position in Polish entities operating in strategic sectors.

Any foreign investor intending to enter into a transaction that falls under the scope of the Act must undergo clearance procedure before the Minister or the President of the Office for Competition and Consumer Protection.

The Regulation specifies groups of foreign investments that are subject to the clearance procedure, supplementing the Act.

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The Polish Legal Framework for Foreign Direct Investment (FDI) is governed by the Act of July 24, 2015 on the Control of Certain Investments, also known as the FDI Act.

The Act outlines the rules and procedures for the control of certain investments that have acquired or obtained a significant share or dominant position in Polish entities operating in strategic sectors.

To undergo the clearance procedure, foreign investors must meet specific criteria, including having a registered office in Poland and a turnover exceeding 10 million EUR in the last two years.

The FDI Act defines four types of entities that are subject to protection, including those engaged in activities such as defense, space, and energy.

Acquisitions of companies that meet these criteria will be subject to the clearance procedure, which is overseen by the Minister or the President of the Office for Competition and Consumer Protection.

Here are the specific criteria that determine if a company is subject to FDI control:

Interestingly, the FDI Regulation does not provide a separate definition of a foreign investor, but instead specifies that FDI screening requirements apply to foreign investors who are natural persons without EU, EEA, or OECD citizenship, or foreign companies that have not been established in these regions for at least two years prior to the date of application.

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In Italy, the Golden Power Law has been gaining attention, especially after the Law Decree No. 23 dated April 8, 2020, significantly extended its scope of application.

The Golden Power regime now affects transactions in the defense and national security sectors, as well as energy, transportation, communication, and high-tech sectors. Additionally, it applies to the acquisition of assets or services related to 5G technology infrastructure.

In Poland, similar regulations are in place to protect strategic interests, with the Act on Control of Certain Foreign Investments regulating restrictions on Foreign Direct Investment (FDI). The Act outlines rules and procedures for the control of certain investments that have acquired or obtained a significant share or dominant position in Polish entities operating in strategic sectors.

To determine if a transaction falls under the Golden Power regime in Italy, or the Act in Poland, you need to consider the type of transaction and the sector involved. In Italy, foreign investors must undergo a clearance procedure before the Minister or the President of the Office for Competition and Consumer Protection. In Poland, foreign investment clearance is required for transactions consisting of the acquisition of significant participation or dominance in a protected entity.

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Here's a comparison of the key sectors affected by the Golden Power regime in Italy and the Act in Poland:

In both countries, foreign investors must navigate complex regulations to ensure compliance. Understanding these regulations is crucial for businesses looking to invest in strategic sectors.

There are several types of investors, each with their own unique characteristics and investment strategies.

Value investors focus on finding undervalued companies with strong fundamentals, often using the price-to-earnings ratio (P/E ratio) to determine value.

Some investors, like growth investors, prioritize companies with high growth potential, often looking for those in emerging industries.

Growth investors often take on more risk in pursuit of higher returns, which can be a double-edged sword.

Investors who prioritize income, on the other hand, focus on generating regular cash flows from their investments, often through dividend-paying stocks or bonds.

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In Poland, foreign investors are subject to FDI control, which applies to foreign investors who are not EU, EEA, or OECD citizens.

The Act on Control of Certain Foreign Investments regulates restrictions on Foreign Direct Investment (FDI) and outlines the rules and procedures for the control of certain investments that have acquired or obtained a significant share or dominant position in Polish entities operating in strategic sectors.

Foreign investors who are natural persons without EU, EEA, or OECD citizenship are subject to FDI control.

Foreign companies that have not been established in the EU, EEA, or OECD for at least two years prior to the date of application are also subject to FDI control.

Subsidiaries of the aforementioned entities, as well as their branches and representative offices, are considered non-resident entities of an EU, EEA, or OECD member state.

The act does not stipulate a minimum period for an individual to hold citizenship of a non-EU, EEA, or OECD country.

The following types of foreign investors are subject to FDI control in Poland:

It's worth noting that the act does not provide a separate definition of a foreign investor, and the regulations stipulate that FDI screening requirement applies only to foreign investors who are referred to as acquirers.

IT and Tech Companies are a significant type of investor in the foreign investment landscape. They can be involved in various sectors, including software development and modification.

These companies can engage in the provision of software development or modification services for critical infrastructure such as power plants, networks, and facilities for the supply of electricity, gas, fuel, fuel oil, or district heating.

They can also provide software solutions for the management, control, and automation of drinking water supply or wastewater treatment facilities. Additionally, they can operate equipment or systems used for voice and data transmission or for data storage and processing.

Some examples of IT and Tech Companies include entrepreneurs engaged in cloud computing data collection or processing services, and those providing software solutions for the operation of equipment or systems used in various industries such as transportation, logistics, and food supply.

Here are some specific examples of IT and Tech Companies that can be involved in foreign investment:

Transaction costs can significantly cut into investment returns. Higher costs can depress a portfolio's growth by a substantial amount.

Assuming a yearly return of 6% and a starting balance of $100,000, investment costs can make a big difference in the end balance. For example, if investment costs are taken at the end of the year, they can cut into the returns and reduce the final account balance.

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Circumvention Clauses are in place to prevent companies from exploiting loopholes in the FDI regulations. They allow for verification proceedings to be launched against companies from certain countries, including the EU, EEA, and OECD member states, if there's evidence of abuse or circumvention.

The FDI Act considers the creation of artificial structures or the acquisition of companies solely to avoid Polish FDI regulations as a form of circumvention. This is a serious issue, as it undermines the integrity of the regulations.

Companies that acquire significant participation or dominance may also be subject to verification procedures if they don't actually conduct business on their own behalf, except for activities related to the acquisition. Alternatively, if they don't have a permanent establishment, office, or personnel in the territory of a member state, they may be scrutinized.

Here are some specific scenarios that may trigger verification proceedings:

Transactions in Poland can be subject to Foreign Direct Investment (FDI) control, which requires clearance for certain types of transactions.

To be considered a transaction subject to FDI control, the acquisition of a significant participation or dominance in a protected entity is required.

Acquiring 20% or more of the shares or number of votes in the constituent body of a protected entity, or obtaining control, i.e. the ability to decide on the direction of the protected entity's business, constitutes significant participation or dominance.

Indirect and subsequent acquisition is also subject to FDI control in Poland, including events such as amendment of the articles of association, redemption of company shares, renting or leasing a part of another company's business, and fiduciary acquisition.

Polish companies with a turnover exceeding 10 million EUR in the last two years are subject to FDI regulation, provided they are registered in Poland and meet the basic criteria as entrepreneurs.

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The acquisition of a target company may be subject to FDI regulation if it meets the basic criteria, including being registered in Poland and having a turnover exceeding 10 million EUR in the last two years.

Foreign Investment clearance covers the purchase of entrepreneurs engaged in business activities that involve, for example, manufacturing, wholesale and retail trade, and other business activities.

In Poland, the type of target company subject to FDI control is identified in the FDI Act article 12d (1-3), which lists four types of entities that are protected.

The buyer is generally responsible for notifying the competent authority of the acquisition or achievement of a significant shareholding or assumption of dominance in a protected company.

There are exceptions to this rule, including indirect acquisition or achievement of a significant position, where the obligation to notify is on a derivative or associated company.

In cases of complementary acquisitions, the target company is the party obliged to notify the competent authority when the buyer acquires or achieves a significant stake in the target company or gains dominance over the target entity.

The acquisition of a target company through indirect or subsequent acquisition is also subject to FDI control in Poland, according to the Polish FDI regulation act.

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Setting clear goals is crucial in achieving financial success. An investment goal is essentially any plan investors have for their money.

Many of us aspire to achieve a certain quality of life or fund a specific business objective. Being explicit about one's investment goals helps investors turn their aspirations into reality.

Savings and investment returns both contribute to the achievement of any investment goal. Over any given goal horizon, an investment balance is the sum of savings plus the investment returns on the total amount invested.

Assuming a fixed 4% real return over inflation and equal annual contributions, an investor needs to invest annually to achieve a given investment goal for different time horizons.

Minimizing costs is crucial for investors, as it can significantly impact their portfolio's growth. Higher costs can cut into investment returns, making it harder to reach financial goals.

Assuming a starting balance of $100,000 and a yearly return of 6%, which is reinvested, investment costs can make a big difference. In this scenario, the accounts return 6% annually, then investment costs are taken at the end of the year.

Taxes and investment costs are two broad categories of costs that investors should try to minimize. These costs can include expense ratios, transaction costs, and sales charges.

Together, taxes and investment costs can cut into investment returns.

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