Poland
Giving or taking security
Some documents creating security interest have to be executed in a special form, for instance:
- Statement on granting a mortgage has to be executed in the form of a notarial deed (there are certain statutory exceptions to this rule).
- Agreement for the establishment of a civil pledge over shares has to be executed in writing with signatures certified by a notary.
- Security assignment agreement and security transfer of assets have to be executed with a certified date.
Once granted, security often needs to be properly perfected before it is valid against third parties. Perfection formalities range from having the secured asset delivered to the security holder, registration of the security, and notice being given to third parties. For instance, registered pledges and mortgages have to be registered in the relevant registers.
Like guarantees, for a certain period after a new security interest has been granted (known as the hardening period), it is at risk of being set aside in certain circumstances under insolvency and restructuring laws.
In the case of a guarantor that is a limited liability company, the shareholders may not receive, under any title, any payments from the company's assets needed to fully finance the share capital.
For more information, see Tax issues – stamp taxes.
Are there any restrictions on lending and borrowing?
Lending
The grant of loans is not a regulated activity. However, lenders that grant loans must comply with civil law provisions relating to loans and collateral.
Consumer loans are subject to a range of regulatory requirements that do not apply to unregulated loans. For example, there are particular restrictions around how:
- the loans are marketed, originated and sold;
- lenders administer the loans on an ongoing basis; and
- to deal with borrowers who fall behind with their payments.
There is a set of regulations which defines caps on interest and non-interest costs that may be charged by lenders in connection with consumer loan agreements.
The EU Mortgage Credit Directive (2014/17/EU) is being implemented into Polish law through adoption of the Act on Mortgage Credit (Ustawa o kredycie hipotecznym). The Act on Mortgage Credit will apply the above-mentioned restrictions to mortgage credits.
In addition, regulated credit agreements have specific requirements around how the agreement is drafted and formatted and what information must be included.
Borrowing
While borrowers are generally not regulated, it is advisable for borrowers to consider whether they are subject to consumer credit regulations.
What are common lending structures?
Lending in Poland can be structured in a number of different ways to include a variety of features, depending on the commercial needs of the parties.
A loan can either be provided on a bilateral basis (a single lender providing the entire facility) or on a syndicated basis (multiple lenders each providing parts of the overall facility).
Syndicated facilities by their nature involve more parties (such as agents and trustees that fulfil certain roles for the financing parties), are more highly structured, and involve more complex documentation. Larger financings will typically be done on a syndicated basis with one member of the syndicate taking the lead in coordinating and arranging the financing.
Loans will be structured to achieve specific objectives, eg term loans, working capital loans, equity bridge facilities, project facilities and letter of credit facilities.
Loan durations
The duration of a loan can also vary between:
- a term loan, provided for an agreed period of time but with a short availability period;
- a revolving loan, provided for an agreed period of time with an availability period that extends nearer to the maturity of the loan and which may be redrawn if repaid;
- an overdraft, provided on a short-term basis to solve short-term cash flow issues; or
- a standby or a bridging loan, intended to be used in exceptional circumstances when other forms of finance are unavailable and often attracting a higher margin.
Loan security
A loan can either be secured, unsecured or guaranteed. For more information, see Giving and taking guarantees and security.
Loan commitment
A loan can be committed, meaning that the lender is obliged to provide the loan if certain conditions are fulfilled.
Loan repayment
A loan can be repayable on an amortizing basis (in instalments over the life of the loan), or scheduled (usually meaning the loan is repayable in full at maturity).
What are the differences between lending to institutional / professional or other borrowers?
Lending to institutional/professional borrowers is subject to less regulatory oversight and so less burdensome from a compliance perspective.
Do the laws recognize the principles of agency and trusts?
Trusts are not recognized under Polish law.
Polish law provides for certain types of agencies that may be used in financing transactions, eg pledge administrator (administrator zastawu) or mortgage administrator (administrator hipoteki), who will act on behalf of the secured parties.
In addition, the concept of the parallel debt is recognized by the Polish courts.
Are there any other notable risks or issues around lending?
Generally
Loan agreements and other finance documents are subject to general contractual principles.
Specific types of lending
Polish law regulates consumer credit activities. For more information, see Regulated activities – authorization.
Standard form documentation
Most Polish law syndicated finance transactions are governed by documentation based on recommended forms published by the Loan Market Association (LMA).
Are there any other notable risks or issues around borrowing?
Borrowers face a number of systemic risks such as regional or national recessions, regional or national house price declines or national increases in interest rates. In response to the recent foreign currency loan crisis (the Swiss franc mortgage loans) , i.e. mortgages which are denominated or indexed in a currency other than PLN the Act on the Borrowers Support was changed in 2019 by forming a separate Restructuring Fund, which will be used for voluntary restructuring of loans in foreign currency.
Borrowers should be aware of the potential implications of the EU’s Bank Recovery and Resolution Directive (BRRD) (implemented in Poland by the Act of 10 June 2016 on the Bank Guarantee Fund, Guaranteed Deposit Scheme and Mandatory Restructuring), which outlines certain measures for dealing with failing financial institutions.
The BRRD applies to financial institutions incorporated in the European Economic Area (EEA), but does not apply to EEA branches of non-EEA incorporated entities.
Article 55 of the BRRD gives authorities the power to ‘bail in’ the obligations of failed EEA financial institutions and also postpone the enforcement of early termination rights against the affected institution. ‘Bail in’ describes a variety of write down and conversion powers, such as the power to convert certain liabilities into shares or cancel debt instruments. In the case of EEA law contracts, including Poland, such powers override what the contracts say. In the case of non-EEA law contracts, there are requirements to incorporate such provisions into these contracts.
Mariusz Hyla
Partner
DLA Piper Giziński Kycia sp.k.
[email protected]
T +48 22 540 78 22
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