Poland’s pension funds have once again flexed their muscles to protect minority shareholder rights in a case complicated by legal uncertainties in Polish share listing regulations.

The investment at stake is Global City Holdings (GCH), an entertainment and real estate company, which floated on the Warsaw Stock Exchange (WSE) in 2006.

The WSE is the Dutch-registered company’s sole listing.

The largest single investor is Israeli-based IT International Theatres, with a 53.9% shareholding, while five Polish pension funds hold between them 26.6%.

In February, GCH’s board, with the support of its majority shareholder, recommended a delisting from WSE, together with a public tender by the company at a price of approximate PLN40 (€9.70) a share, based on the average of the previous six months’ trading.

GCH arguments for the delisting include a change of strategy, the costs of maintaining the listing, the low and declining trading volumes of its shares in the past seven years, and the likelihood the Polish pension reform of 2014 will reduce the pension funds’ appetite for investing the WSE, and consequently the liquidity of GCH shares.

The shareholding pension funds have objected to the proposals.

Ahead of an extraordinary general meeting held in Rotterdam on 20 March, the management companies of five pension funds (ING, representing both its second and third-pillar funds, Aviva, Nordea and PZU) signed a temporary agreement on protecting minority shareholder rights.

In a joint statement, they argued that delisting would be detrimental to minority shareholders, while the PLN40 tender offer price fails to provide them with a fair exit opportunity as it diverges from the company’s fair value.

The statement also pressed for the delisting decision to be approved by a qualified majority of four-fifths of votes cast, “in line with Polish standards”.

Otherwise, reads the statement, “the delisting would be a unilateral decision by the minority shareholder of the company”.

Grzegorz Chłopek, chief executive at ING PTE, told IPE: “We are not generally against delistings, but we would prefer they be done according to regulations in place in Poland. GCH wanted to use a legal loophole.”

Under Article 91 of the Act on Public Offering, delistings require the approval of four-fifths of the shareholders, but the Act only applies to domestic companies and foreign companies with dual listings.

Of the 51 foreign companies listed on the WSE’s main and parallel market, 22 have single listings.

Where the Act does not apply, the ‘Warsaw Stock Exchange Rules’ come into force, but these do not specify a qualified majority.

On 13 March, the WSE’s management board issued a communiqué stating that the delisting process of single-listed foreign companies should proceed on the same terms as that defined in Article 91 of the public offering act.

According to Chłopek, the WSE’s communiqué was a positive step, as all quoted companies would now require 80% participating shareholder approval.

“Otherwise, minority shareholders could be forced to sell their shares at a much lower price than the company’s book value,” he said.

“However, the most important issue is not the share price, but that all companies should respect the same law.”

Which law applies could be a moot point.

On 23 March, GCH filed a delisting application with the WSE, citing Dutch legal grounds.