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The Warsaw Voice » Law » December 19, 2007
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Stock Exchange Launch: Capital, Image... Paperwork
December 19, 2007   
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These are good times for people with vision who are not afraid of taking a risk and developing their businesses-usually through acquisitions or new investments. But why not, instead, raise capital and create a positive image for your company all at the same time? If this appeals to you, consider a listing on the Warsaw Stock Exchange. While an initial public offering does involve substantial effort, the end results can pay dividends.

The process
The procedures themselves are fairly straightforward. The company, assisted by professional advisors, prepares an issue prospectus. After approval by the Financial Supervision Authority (FSA), the company (the "issuer") publishes it and starts to look for investors. Following a successful subscription and pretty standard arrangements with the Warsaw Stock Exchange and the National Depository for Securities, the listing starts. Although the whole process is not particularly arduous, there are some tricky things to be dealt with, and one of them is the issue prospectus and updating it.

The prospectus

The whole concept of drafting a prospectus is based on Commission Regulation (EC) No. 809/2004.* This Regulation sets out minimum content requirements for a prospectus, but issuers are free to go beyond this and choose the format in which information is provided in the prospectus. However, you have to be careful-with greater freedom comes greater responsibility, as outlined in the 2005 Act on Public Offerings. It requires the issuer to provide true and complete information on all legal, financial and economic issues which may influence share value. In other words, all the information an investor needs to reach a measured investment decision. This requirement forces the company and its advisors to investigate the whole business and its history in the smallest detail to disclose all relevant information in the prospectus. After all, the goals of the prospectus are not only to showcase great business forecasts, but also to convince investors that it is going to be a transparent and trustworthy company.

Since 2005 a prospectus may take the form of (i) a consolidated document (as before) or (ii) a set of documents including: a registration document, an offer document, and summary documents. The second option is handy if you intend to offer or to introduce to trading on regulated market securities in the near future, but do not know the exact date yet. It allows you to prepare and deliver for FSA approval only the registration document (which takes a lot of time and work). Generally, the registration document is valid for 12 months after approval. Once the decision is made to offer or introduce to trading on a regulated market, an offer document together with a summary document (which may be prepared earlier) can be delivered for FSA approval.

And then there is the next tricky bit-amending the prospectus to disclose all events/information that may materially influence an investment assessment. To this end, the issuer submits an annex for FSA approval. Deciding what to include can be problematic, especially as this duty is based on discretionary and qualification elements. Relying to a certain extent on judgment calls is hard, but at least it allows the issuer to decide what is material and what should be disclosed to investors to give them a full picture of the company and the specifics of its operations. An additional difficulty is that the annex should be delivered to the FSA within 24 hours of the reported event/information taking place. Following FSA approval, the annex is published in the same way as the prospectus.

Listing, and what happens next

Anyone dreaming of the stock exchange should bear in mind that listing is not the end of the story. Companies on the Warsaw Stock Exchange are subject to legal requirements to make public disclosures of information, classified as current/periodical reports and confidential information. Many of the listed companies view these reporting duties as quite onerous and sometimes find it difficult to comply. This leads to some companies kicking up a veritable information cloud, while others shy away from disclosing too much. Public companies generally do not see disclosure requirements as anything other than a pain they could do without, although some enlightened businesses do accept it might be an additional field on which they could compete with each other and communicate their strengths to investors.

Artur Cieślik
Inga Dulska

* Commission Regulation (EC) No. 809/2004 of April 29, 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements (Official Journal of EU L 149 of 2004, p. 1).
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