The bonds issuance by a foreign company through a private offer
The bonds issuance is an effective and flexible method of debt financing. Under Polish law, the rules for the bonds issuance, as well as their disposal, acquisition and redemption are regulated by the Act on Bonds as of January 15, 2015 (Journal of Laws of 2015, pos. 238, as amended).
Until the entry into force of the abovementioned act, i.e. until 1 July 2015, a lot of interested was raised by the issues related to bonds issuance by entities with their headquarters outside of Poland. The vague provisions of the pre-existing law did not prohibit issuance of bonds by foreign entities, but they did not explicitly point to such a possibility either. The legislator, along with the introduction of the new Act on Bonds, decided to settle the matter unambiguously, clearly granting the bonds issuance capacity to foreign entities.
Pursuant to the above-mentioned Act on Bonds, bonds may be issued by legal persons, including persons located outside the territory of the Republic of Poland (RP), which run a business or have been established solely for the purpose of issuing bonds. It is worth noting, however, that granting of legal personality to a foreign issuer is decided by the internal regulations of the state in which it has its registered office. In practice, a situation may arise under which a foreign entity, formally without a legal personality under Polish law, nonetheless will be entitled to issue bonds in accordance with the Act on Bonds.
The unequivocal acknowledgement of the issuance capacity to foreign entities was certainly aimed at increasing the free movement of capital and improving the condition and competitiveness of the Polish economy. It is also worth bearing in mind that the possibility of issuing bonds by companies created solely for the purpose of its execution, so-called Special Purpose Vehicles (SPVs) greatly facilitated this type of operations.
Not only the granting of the issuance capacity to foreign entities, but also the lack of restrictions as to the choice of the type of issue is certainly intended to encourage issuance in accordance with the Act on Bonds. Therefore, it should be concluded that legal persons established outside the territory of the Republic of Poland and running their own business or companies established solely for the purpose of issuing bonds have the right to issue bonds both under private placement and through the public offer. This is an additional tribute of the legislator towards foreign issuers, aimed at granting them the same rights as Polish issuers.
The Polish law provides for two ways for issuers to enter corporate bonds on the primary market - as part of public offers or as part of private offers. The main difference between them is the fact that the public issue is addressed to an unlimited group of potential investors and can be advertised in mass media. However, in the case of a private issuance an invitation to purchase the bonds, so-called acquisition proposals, may be addressed by the offeror to no more than 149 - recipients named by name and surname.
The issue of bonds as part of private offers may be interesting for foreign entities for several reasons. The first of these is the fact that private bond issuance is characterized by speed and simplicity of carrying out. In addition, the cost of its implementation is relatively low compared to the costs of issuing bonds through a public offering. Finally, the Act on Bonds makes it possible to draw up conditions for issuing bonds in English, provided that the nominal value of the bond is equivalent to at least EUR 100,000 (according to the relevant exchange rate resulting from the Act on Bonds).
It should be emphasized that due to the determination by the Act on Bonds of the possibility of effective issuance of bonds by foreign entities, the phenomenon of financing enterprises through the issuance of debt financial instruments is gaining increasing popularity on the Polish market. This is certainly a positive signal and shows a progressive trend coming from highly developed countries, involving the use of other opportunities to raise capital in relation to bank loans.