Anti-Crisis Shield proposals issued by the Office of Competition and Consumer Protection (UOKiK’s) on 25 March 2020
- The President of the Office of Competition and Consumer Protection (“UOKiK”) is actively combating the economic effects of the COVID-19 pandemic in Poland and proposes solutions that are intended to protect consumer interests and counter abusive practices on the market. The key proposed solutions relate to the following actions:
- Proposed new price control tools imposing price and margin ceilings on certain products important for society and new accompanying sanctions:
- up to PLN 5 million for violating the prohibition on applying prices or margins above the respective ceiling;
- up to 10% of the annual turnover for repeated or large-scale infringements.
- UOKiK also proposed amendments to the so-called “Crisis Act” – the Act of 2 March 2020 on extraordinary measures aimed at preventing and combating COVID-19:
- Based on the proposed regulations, the Minister of Health in consultation with the Minister of Development and the Minister of Agriculture and Rural Development will be authorized to issue ordinances imposing maximum prices or maximum margins on wholesale and retail sales of goods and services that are critical for the protection of human health, safety or for household expenses.
- According to the draft, using prices or margins above the ceiling will be punishable by fines in a range from PLN 5,000 to PLN 5,000,000.
- Additionally, the UOKiK is to be authorized to impose penalties of up to 10% of the turnover in the preceding financial year on entrepreneurs who repeatedly infringe price and margin ceilings, do so with respect to various goods or services, or infringe them on a large scale.
- Penalties for procedural infringements, such as refusing to provide the information requested by the UOKiK President, frustrating or hindering inspections, may amount up to 5% of the annual turnover but no more than PLN 50,000,000.
- UOKiK also proposed a temporary reduction in the maximum level of non-interest costs on consumer loans; the amount of non-interest costs should not exceed 5% on loans with maturity of less than 30 days and 15% plus 6% for each year of the term for loans with maturity of more than 30 days.
- The current draft does not include the working proposal made earlier by UOKiK that consumers should be permitted to suspend the performance of a consumer loan or mortgage loan, which would release consumers from the obligation to make payments under such loans, and no interest or other fees would be charged in respect of the suspension period.
Lease during the pandemic – special new legal solutions
- Shopping malls and the entire retail sector are suffering huge losses due to COVID-19 pandemic. Since mid-March 2020, only some shops may operate in facilities above 2,000 square meters, including e.g. food, home-improvement and construction stores, and pharmacies. Catering and entertainment facilities have been closed also outside shopping malls.
- The above are only a few extraordinary changes introduced in the laws regulating the rental market. The government’s bill of 25 March 2020 amending the Act on Extraordinary Measures for Preventing, Counteracting and Combating COVID-19, Other Infectious Diseases and Emergencies Caused by Them, and Certain Other Acts (the so-called ‘Shield’) provides for special regulations concerning:
- Lease in shopping centers;
- Lease of premises;
- Lease of property from public resources.
Commercial lease in shopping malls
- In accordance with the bill, in the period of the ban on operating in commercial facilities with a sales area of more than 2,000 square meters, mutual obligations of the parties under lease contracts concerning these facilities are ‘extinguished’.
- This means that for the entire period of the operation ban (from 14 March 2020), tenants affected by this ban are not required to pay any rent or maintenance fees, and landlords are not required to make premises available to tenants. The exemption of tenants from the obligation to pay rent and service charges is non-refundable and applies to the entire amount of rent and service charges (100%), for the entire period of the ban on business operations.
- Under the new regulations, irrelevant are the area of the leased premises, the amount of rent, the lifetime of the lease agreement or the status of the tenant.
- As transpires from the bill (albeit not explicitly), the exempted from payment of rent are only those tenants, to whom the ban on activity applies (and not all tenants).
- In order to take advantage of the exemption, the tenant should, within three months from the date of lifting the ban on business operations, submit to the landlord an offer to extend the lifetime of the agreement, on hitherto binding terms, for the duration of the ban, extended by six months. It seems that the legislator’s intention was to give tenants the opportunity to decide whether they choose to “terminate” their leases, but with an extension of 6 months (under the current rules), or whether they prefer to continue paying rent, but then without an obligation to extend the contract.
- The exemption from rent does not apply to tenants operating in a) commercial premises with a sales area of less than 2,000 square meters, and b) other than commercial premises (e.g. office buildings). It seems that limiting the exemption only to tenants from the largest shopping malls may in practice mean that large chain tenants will become its biggest beneficiary.
- The ‘Shield’ permits the parties to the lease agreement to apply provisions of the Polish Civil Code – this means the possibility of taking advantage of the provisions on force majeure or fundamental change of circumstances (the possibility of avoiding liquidated damages / indemnity, the possibility of demanding a change of contract conditions, the possibility of refraining from paying the rent).
- The new regulations do not provide for any form of compensation or financial support dedicated to shopping malls deprived of rent, including in particular repayment holidays (most of the malls have been built thanks to a bank loans, which the malls have to repay regularly).
Regulations concerning all lease agreements – effective until 30 June 2020
- Extension of lease agreements concluded for a fixed period, which would expire after the shield enters into force,
- Prohibition to terminate tenant’s lease agreements or to increase the rent.
Leasing of property from public resources
Proposals concerning the lease of premises owned by the State Treasury or local government units include, among others:
- a simplified procedure for cancelling or deferring rents, or enabling their payment in instalments,
- a simplified procedure for individual withdrawal of rent claims,
- the possibility for local government bodies (e.g. municipal councils) to adopt resolutions on the general grant of allowances, debt cancellation and waiver of debt recovery.
Additionally, the newly adopted Ani-Crisis Shield stipulated:
- Industrial Development Agency (ARP) will obtain from the Polish government up to PLN 1.7 billion through transfer of newly issued treasury securities
- The funds obtained by Industrial Development Agency will be primarily used to create a mechanism for refinancing lease contracts concluded by entrepreneurs, dedicated primarily to the transport sector and liquidity loans enabling support for the day-to-day operations of the companies with a 15-month grace period.
- Availability of loans for micro-enterprises that do not employ employees. To submit for the loan relief, the micro-company will have to operate for 3 months from the date of the loan. The estimated total value of loans available will amount to approximately PLN 9.6 billion of which up to PLN 8.7 billion may be forgiven.
- Reliefs in the repayment of the loans granted by BGK under the loan program „First Business - Startup Support”, including:
- suspension of repayment of principal and interest installments for a period not longer than 6 months,
- extension of the grace period by an additional period of up to 6 months,
- extension of the repayment period by an additional period of up to 12 months,
- reducing the interest rate on loans to 0% per annum for a period not exceeding 12 months.
- The option of renegotiating the terms of the bank loans by all entrepreneurs, regardless of their size
- Funds received by entrepreneurs in relations to preventing COVID-19 will be secured against enforcement (under civil proceedings, court bailiff or administrative enforcement).
- Availability of government's grants will also be available to companies established between 1 February and 1 April this year.
On 8 April 2020 the Polish government announced the Financial Shield - a new support program under the Anti-Crisis Shield; respective legislative laws have been approved by the parliament.
The aim of the program is to protect the labor market and support financial liquidity of the companies during the crisis.
The Financial Shield consists of three basic components with a total value of PLN 100 billion (i.e. approx. 4.5% of the Polish GDP) under which, the following support will be provided depending on the size of entities:
- PLN 25 billion support will go to micro-enterprises (i.e. companies employing from 1 to 9 employees with annual turnover or total assets less than EUR 2 million). Financing in the form of interest-free preferential loans supported by banks.
- PLN 50 billion support for small and medium enterprises (i.e. companies with 10 to 250 employees and annual turnover less than EUR 50 million or total assets below EUR 43 million). Financing in the form of interest-free preferential loans supported by banks.
- PLN 25 billion support for large enterprises (employing over 250 employees with turnover exceeding EUR 50 million or total assets above EUR 43 million). The financial support for large enterprises will be managed by the State owned Polish Development Fund (PFR) and provided in the form of:
- loans or bonds for the period of 2 years (up to PLN 1 billion per entity)
- preferential loans for the period of 3 years partially non-refundable (up to PLN 750 million per entity)
- acquisitions of shares or stocks of underperforming entities on an arm's length basis or as part of public aid worth (up to PLN 1 billion per entity).
- The financing may be granted to the micro, small, medium and large entities that:
- were operating before 31 December 2019
- recorded decrease in sales revenues of minimum 25%
- settled taxes for the last 2 financial years in Poland (if applicable) and have active status of Polish tax residence (or the beneficiary is obliged to transfer his tax residence to the territory of Poland within 9 months of granting the loan)
- are not under bankruptcy, liquidation or restructuring proceedings
- as at 31 December 2019 or as at the date of financing, the payments of taxes and social security contributions by entrepreneur were not delayed.
- Additional criteria to be taken into account while granting support to large enterprises are: lost ability to manufacture, provide services or the lack of components, services or resources in connection with COVID-19; no payments received for sales as a result of COVID-19 in excess of 25% of total receivable; no access to the capital market or credit limits in connection with new contracts due to disruptions in the functioning of the financial market; participation in Sector Programs organized by PFR.
- Up to 75% of loans granted to lenders may be forgiven, if they maintain their operations and employment levels.
On 30 April 2020 the Polish Sejm adopted the Anti-Crisis Shield 3.0 - a new support program under the Anti-Crisis Shield – that yet needs to be approved by the Senate.
The draft act is being considered by the Senate, which will meet again on this issue on May 12 this year. Senators are currently discussing the shape of solutions, and in the case of amendments proposed to the Act, they will be decided by the Sejm.
Below are selected changes adopted under Anti-Crises Shield 3.0 by the Sejm in respect of taxes, social security and other public charges:
- Extending the catalog of entrepreneurs entitled to exemption from paying social contributions (ZUS) also to some self-employed persons whose revenues exceeded the threshold of 300% the average monthly salary.
- allowing the exemption from paying social contributions to persons paying social contributions in a situation where their revenue was higher than 300% of the forecasted average monthly gross remuneration in the national economy in 2020, but their income from this activity was below PLN 7,000 in February 2020.
- the exemption provided for in this regulation applies only for two months (i.e. April and May 2020), and not three, as in the case of entrepreneurs with revenues lower than three times the average salary
- Extension of the catalog of persons entitled to a [parking] allowance - also for self-employed persons who conducted business activity before April 1, 2020 (so far: before February 1)
- Expanding the group of micro-entrepreneurs entitled to receive the so-called "Micro loans" also for those who started their operations before April 1, 2020 (so far: before March 1)
- Extension of the payment deadline and submission of a declaration on the amount of ‘solidarity levy’ to May 31, 2020 (on the same terms as the extension of the payment deadline and submission of the PIT declaration - based on the so-called "active regret" institution)
- the Minister of Finance will also be able to refrain from charging interest for late payment from unpaid solidarity levy (the Minister will have to issue a regulation in this respect)
- Introduction of a new public duty - an obligation to make payments to the Polish Film Institute (PISF) by entrepreneurs providing audio-visual media services on demand (VOD). The amount of the new duty payment is 1.5% of the revenue obtained from fees for the use of VOD portals in Poland.