Public companies’ obligations regarding transactions with related parties
- 4 minuty
In recent years, public companies have been subject to new obligations relating to transactions entered into with related parties. These obligations arise under Chapter 4b of the Act on Public Offering[1] and apply to material transactions. According to the Act on Public Offering, a material transaction is one whose value exceeds 5% of the company’s total assets, calculated on the basis of the latest approved financial statements.
What disclosure obligations apply to public companies when entering into material transactions with related parties?
At the latest upon entering into a material transaction with a related party, the company is required to publish information about the transaction on its website.
In assessing whether a transaction qualifies as material, companies must take into account all transactions concluded with the same related party over the past 12 months, if their aggregate value exceeds 5% of the company’s total assets.
Qualification and publication
The management board’s obligations extend beyond mere publication. Prior to disclosure, the event must be assessed and classified as a material transaction with a related party, and clearly distinguished from inside information within the meaning of Article 17 of the MAR Regulation[2].
Moreover, public companies must obtain the supervisory board’s approval before concluding a material transaction with a related party.
What are the consequences of non-compliance with Chapter 4b?
Compliance with these disclosure obligations is crucial to avoid serious legal and financial consequences. Individuals responsible for the company’s operations, as well as members of the supervisory board, may face civil and criminal liability.
In addition, if the required corporate approval has not been obtained, the material transaction may be rendered invalid.
What actions can public companies take?
The provisions are designed to ensure transparency and that related party transactions are carried out on an arm’s length basis, thereby protecting the interests of minority shareholders. It is therefore essential that public companies:
- regularly monitor the value and nature of transactions with related parties,
- assess the market conditions of such transactions prior to execution,
- implement internal procedures to ensure the required corporate approvals and timely publication on the company’s website.
Are you unsure whether your company is fulfilling its disclosure obligations correctly? Get in touch with the experts at MDDP and Osborne Clarke. We offer comprehensive support in identifying and implementing disclosure obligations related to material transactions with related parties.
[1] Act of 29 July 2005 on Public Offering, Conditions Governing the Introduction of Financial Instruments to an Organised Trading System and on Public Companies (Journal of Laws 2024, item 620, consolidated text of 23 April 2024).
[2] Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 12 June 2014, p. 1)
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This article was prepared in collaboration with experts from Osborne Clarke – Aleksandra Sztajer and Jan Ośka.
FAQ
Which parties are considered related?
Pursuant to the Act on Public Offering, related parties within the meaning of international accounting standards should be considered as parties related to a public company.
What constitutes a material transaction under the Act on Public Offering?
A material transaction is one whose value exceeds 5% of the company’s total assets, calculated based on the most recently approved financial statements. The calculation must take into account aggregated transactions with the same related party over the preceding 12 months.
What obligations apply to public companies when entering into material transactions?
Public companies are required to:
- identify related parties, including key employees, who have a real impact on the company's operations and control,
- identify the material transactions for the company and its subsidiaries, and distinguish these events from inside information referred to in the MAR Regulation,
- verify whether transactions are carried out on arm's length terms, are justified by the interest of the company and shareholders who are not related parties, including minority shareholders,
- monitor transactions with related parties and obtain the consent of the supervisory board to conclude a material transaction and, if applicable, obtain the consent of the general meeting,
publish information about the material transaction on the website at the latest at the time of its conclusion.
What are the consequences of non-compliance with the regulations?
Failure to comply may result in:
- civil and criminal liability for members of the management board and the supervisory board,
- the risk of invalidity of the material transaction if the necessary corporate approval has not been obtained.
What preventive measures can companies implement?
Companies should:
- implement procedures to monitor transactions with related parties,
- assess the market conditions of such transactions prior to conclusion,
- ensure compliance with information and corporate governance requirements.
Martyna Filipiak
Manager | Transfer Pricing
Tel.: +48 608 401 370
Marta Olejniczak
Senior consultant
Tel.: +48 503 975 936