Merger control – M&A with investment fund participation

Reporting M&A transactions for merger control to UOKiK (Polish merger authority) requires correct determination of the composition of the capital group and the so-called ladders of parent entities, up to the entity that ultimately controls or co-controls a group of entities. Polish or foreign investment funds often participate in mergers reported to UOKiK. The specificity of investment funds often raises doubts in determining who their parent entity is for the purpose of controlling mergers.

Merger with the participation of open investment funds
Open investment funds, i.e. those whose participation units are widely available, are usually managed and controlled by specific management entities. In the Polish legal system in accordance with the Act of 27 May 2004 on investment funds, open investment funds (OFI) are created and managed by the so-called investment fund companies (TFI).

While examining mergers involving open investment funds, the Office of Competition and Consumer Protection has repeatedly stated that the entity administering an open investment fund should be considered as the dominant entity in relation to the fund itself. As mentioned above, in the Polish legal system it will be Towarzystwo Funduszy Inwestycyjnych (TFI). The position of UOKiK was presented, among others, in decisions regarding merging: DKK-23/08 and DKK-82/2010.

Merger with the participation of closed investment funds
The situation is somewhat more complicated in the case of closed investment funds, i.e. those in which participation units are available in a specified number or within certain limits. In the Polish legal system in accordance with the Act of 27 May 2004 on investment funds, there is a board / creditor assembly in closed investment funds, which plays a controlling role. In practice, however, in many cases, the powers of the board / creditor assembly are significantly extended giving it the power to exercise decisive influence over the fund’s operations. Similarly, the situation may be shaped in foreign investment funds in which the managing entity has often lesser influence over the fund than investors, e.g. by means of control mechanisms.

In its guidelines, the Polish Office of Competition and Consumer Protection expressed the opinion that in the case of closed investment funds, the assessment of who is the parent entity of a closed investment fund should be made individually, taking into account all the rights affecting the fund’s management. The result of such an assessment may vary, and in particular mean that control over the fund is exercised by:

• only investors,
• only the entity managing the fund,
• jointly by investors and the managing entity (joint control).