Good Practices

Attachment to Resolution No. 20/1287/2011 of the Exchange Council of 19 October 2011

Best Practices for WSE Listed Companies

Preamble

Polish stock market is developing dynamically, systematically building its supra-local position among other European capital markets, especially the markets of the Central and Eastern European region.

The condition for this development is to strengthen and deepen the competitiveness of the Polish stock exchange market, which is all the more important the stronger the competition between capital markets in terms of attracting investments and capital. The conditions for the development and building of a supra-local position are also innovation in the way of solving the problems of the capital market, thanks to which it becomes attractive for investors and issuers and stands out in this respect among many other places of concentration of capital turnover.

Good practices, as a set of corporate governance principles and principles defining standards for shaping the relations of listed companies with their market environment, can be an important instrument strengthening the competitiveness of the market. They can also be a carrier of an innovative approach to the problems of the stock market, and thus build its attractiveness in the international dimension.

The importance of the set of corporate governance rules therefore results from the processes taking place on the capital markets. The validity of a set of corporate governance rules depends on whether they accurately recognise the expectations of stock market participants and whether they are effective, i.e. whether they take the form of good practice modelling the corporate behaviour of listed companies.

Acting with the intention of strengthening the principles of corporate governance as an instrument increasing the competitiveness of the market, the Warsaw Stock Exchange coordinates the process of determining the content of corporate governance rules, as a result of a broad consensus, involving mainly the beliefs and expectations of investors associated with the WSE and issuers listed on the Stock Exchange.

The Warsaw Stock Exchange, striving to create conditions for the universal and full application of The Good Practices, will pay attention to the fact that the Good Practices concern matters belonging to the sphere of vital interests of participants of the 1st capital market, so that the application of Good Practices is a natural phenomenon, not a forced or fictitious one.

The Warsaw Stock Exchange ensures the functioning of a mechanism which, as part of the "comply or explain" principle, allows the market to obtain full and unambiguous information on the application of corporate governance principles by listed companies.

The Warsaw Stock Exchange also undertakes to promote the principles of corporate governance through solutions that are based on rewarding companies that meet the expectation of applying the Best Practices to the full extent.

"Best Practices of WSE Listed Companies" refer to and express the tradition of Polish corporate governance, whose first formalized work was the set of principles "Good Practices in Public Companies in 2002", developed by a number of people and institutions related to the financial market, with a significant opinion-forming and implementation role of the Committee of Good Practices and in the course of discussions with the Institute for Market Economy Research. This led to the transfer of a set of corporate governance principles for further implementation by WSE, which enabled dynamic propagation of the practical application of the principles.

The aim of the "Code of Best Practice for WSE Listed Companies" is to strengthen the transparency of listed companies, improve the quality of communication between companies and investors, strengthen the protection of shareholders' rights also in matters not regulated by law, and at the same time not to create burdens for listed companies, not balanced by benefits resulting from market needs. Therefore, Good Practices concern only areas in which their application may have a positive impact on the market valuation of enterprises, and thus reduce the cost of raising capital.

Good Practices in the scope covered by Parts II, III and IV of this collection are the rules for which, as part of the "comply or explain" principle, the mechanism of providing the market with unambiguous information about the violation of good practice, and at the same time rewarding listed companies that meet the expectation of applying the Good Practices to the full extent, is applied. The principles set out in Part One of this Collection are recommendations that are not fully subject to such a mechanism, but express trends in the proper way of arranging internal relations and relations of listed companies with their environment and, therefore, like the rules covered by Parts II, III and IV, are the subject of annual reports on compliance with corporate governance rules, prepared by listed companies.

I. Recommendations on good practices of listed companies

1. The company should conduct a transparent and effective information policy, both using traditional methods and using modern technologies and the latest communication tools ensuring speed, security and effective access to information. Using these methods to the fullest extent possible, the Company should in particular:

  • maintain its website, with the scope and presentation modeled on the model investor relations service, available at: http://naszmodel.gpw.pl/;
  • ensure proper communication with investors and analysts, also using modern methods of Internet communication for this purpose;
  • enable the transmission of the general meeting using the Internet, record the course of the proceedings and make it public on their website.

2. (repealed)

3. The Company should make every effort to ensure that the cancellation of the general meeting or the change of its date does not prevent or limit the shareholder's right to participate in the general meeting.

4. The company should strive to ensure that, where securities issued by the company are traded in different countries (or on different markets) and within different legal systems, the implementation of corporate events related to the acquisition of rights on the part of the shareholder takes place on the same dates in all countries in which they are listed.

5. The company should have a remuneration policy and rules for its determination. In particular, the remuneration policy should specify the form, structure and level of remuneration of the members of the supervisory and management bodies. When defining the remuneration policy for members of the supervisory and management bodies of a company, the Recommendation of the European Commission of 14 December 2004 on the promotion of an appropriate system for the remuneration of directors of listed companies (2004/913/EC), supplemented by the EC Recommendation of 30 April 2009, should apply. (2009/385/EC).

6. A member of the supervisory board should have adequate knowledge and experience and be able to devote the necessary amount of time to the performance of his or her duties. A member of the supervisory board should take appropriate measures to ensure that the supervisory board receives information on material matters concerning the company.

7. Each member of the supervisory board should be guided in his conduct by the interest of the company and the independence of opinions and courts, in particular:

  • not to accept unjustified advantages that could have a negative impact on the assessment of the independence of its opinions and courts,
  • expressly expressly express their objection and dissenting opinion if they consider that the decision of the supervisory board is contrary to the interests of the company.

8. No shareholder should be privileged over the other shareholders in respect of transactions and agreements entered into by the company with shareholders or their related parties.

9. WSE recommends to public companies and their shareholders that they ensure a balanced participation of women and men in the performance of management and supervisory functions in companies, thus strengthening creativity and innovation in the company's business activities.

10. If a company supports various forms of artistic and cultural expression, sports activities or activities in the field of education or science and perceives its activity in this area as part of its business mission and development strategy, affecting the innovativeness of the enterprise and its competitiveness, it is good practice to publish, in the manner adopted by the company, the principles of its activity in this area.

11. A manifestation of the care of a listed company for the proper quality of information governance is that it, in the form of a message posted on its website, takes a position – unless the company deems other action to be more appropriate – in a situation where concerning the company:

  • the information publicly provided is from the outset untrue, partially untrue, or has become so subsequently,
  • opinions made publicly are, either from the outset, or as a result of subsequent circumstances, not based on compelling objective considerations.

This rule applies to opinions or information made publicly by representatives of the company in a broad sense or by another person whose statements may have an opinion-forming effect, and regardless of whether this information or opinions contain suggestions favorable to the company or unfavorable suggestions.

12. The company should provide shareholders with the opportunity to participate in the general meeting using electronic means of communication, consisting in:

  1. real-time transmission of the General Meeting,
  2. two-way communication in real time, in which shareholders can speak during the general meeting while staying in a place other than the place of the meeting,
  3. exercising in person or by proxy the right to vote during the general meeting.

Ii. Good practices implemented by the management boards of listed companies

1. The Company maintains a corporate website and publishes on it, in addition to the information required by law:

  1. basic corporate documents, in particular the statutes and regulations of the company's bodies,
  2. professional CVs of members of the company's governing bodies,
    1. annually, in the fourth quarter – information on the participation of women and men respectively in the management board and in the supervisory board of the company in the last two years,
  3. current and periodic reports,
  4. (repealed)
  5. in the event that the members of the company's body are elected by the general meeting – the justifications for the candidacies submitted to the management board and the supervisory board together with professional CVs made available to the company, in time to familiarize themselves with them and adopt a resolution with due discernment,
  6. annual reports on the activities of the supervisory board, taking into account the work of its committees, together with the assessment of the internal control system and the system of managing risks relevant to the company provided by the supervisory board,
  7. questions of shareholders on matters included in the agenda, asked before and during the general meeting, together with answers to the questions asked,
  8. information on the reasons for cancelling the meeting, changing the date or agenda of the meeting together with the justification,
  9. information about the break in the general meeting and the reasons for ordering the break,
  10. information on corporate events, such as the payment of dividends, and other events resulting in the acquisition or limitation of rights on the part of the shareholder, taking into account the timing and rules for conducting these operations. That information should be provided in time for investors to take investment decisions.
  11. information obtained by the Management Board, on the basis of a statement of a member of the Supervisory Board, on the links between a member of the Supervisory Board and a shareholder holding shares representing not less than 5% of the total number of votes at the general meeting of the company,
  12. in the event of the introduction of an incentive program based on shares in the company or forecasted similar costs of instruments that it will incur – information on the company in connection with its introduction,
  13. a statement on the application of corporate governance principles, included in the last published annual report, as well as the report referred to in § 29 section. 5 of the Exchange Regulations – if published,
  14. information on the content of the company's rule regarding the change of the entity authorized to audit financial statements or information on the lack of such a rule.

2. The Company shall ensure the functioning of its website also in English, at least to the extent indicated in Part II, point 1.

3. The Management Board, before the company concludes a material agreement with a related party, asks the Supervisory Board for approval of this transaction/agreement. The above market obligation with not in the entity is subject to the framework of a subsidiary transaction, in which a typical, operating company has a majority capital share on the terms of the company. For the purposes of this set of rules, the definition of a related party within the meaning of the Regulation of the Minister of Finance issued on the basis of Art. Whereas article 60 (2) of the Treaty provides that the community may 2 of the Act of 29 July 2005 on public offerings, conditions governing the introduction of financial instruments to organised trading, and on public companies (Dz. U. No. 184, item. 1539 from late. died.).

4. A member of the Management Board should inform the Management Board about the conflict of interest or the possibility of its occurrence and refrain from taking part in the discussion and from voting on the resolution on the matter in which the conflict of interest arose.

5. (repealed)

6. Members of the Management Board should participate in the general meeting in a composition enabling them to provide a substantive answer to questions asked during the general meeting.

7. The Company shall determine the place and date of the general meeting so as to enable as many shareholders as possible to participate in the deliberations.

8. If the management board of the company receives information on convening a general meeting pursuant to Article 399 §§ 2 – 4 of the Commercial Companies Code, the company's management board immediately performs the activities to which it is obliged in connection with the organization and conduct of the general meeting. The rule also applies in the case of convening a general meeting on the basis of an authorization issued by the registry court in accordance with Article 1. 400 § 3 of the Commercial Companies Code.

Iii. Good practices applied by members of supervisory boards

1. In addition to the activities listed in the law, the supervisory board should:

  1. once a year, prepare and present to the annual general meeting a concise assessment of the company's situation, including an assessment of the internal control system and the system of managing risks relevant to the company,
  2. (repealed)
  3. consider and give opinions on matters to be the subject of resolutions of the general meeting.

2. A member of the supervisory board should provide the company's management board with information on his or her relations with a shareholder holding shares representing not less than 5% of the total number of votes at the general meeting. The above obligation applies to economic, family or other relationships that may affect the position of a member of the supervisory board in a matter decided by the board.

3. Members of the supervisory board should participate in the general meeting in a composition enabling them to provide a substantive answer to questions asked during the general meeting.

4. A member of the supervisory board should inform the supervisory board about a conflict of interest or the possibility of its occurrence and refrain from taking part in the discussion and from voting on a resolution on a matter in which a conflict of interest has arisen.

5. A member of the supervisory board should not resign from performing his function in a situation where it could adversely affect the ability of the supervisory board to act, including the adoption of resolutions by it.

6. At least two members of the supervisory board should meet the criteria of independence from the company and entities with a significant relationship with the company. As regards the criteria for the independence of the members of the supervisory board, Annex II to the Recommendation of the European Commission of 15 February 2005 on the role of non-executive or supervisory directors of listed companies and committees of the (supervisory) board should be applied. Notwithstanding the provisions of subparagraph (b) of the said Annex, a person who is an employee of a company, subsidiary or affiliated entity may not be considered to meet the independence criteria referred to in that Annex. In addition, a relationship with a shareholder that excludes the independence of a member of the supervisory board within the meaning of this principle shall be understood as a real and material 9 relationship with a shareholder who has the right to exercise 5 % or more of the total number of votes at the general meeting.

7. (repealed)

8. Annex I to the Recommendation of the European Commission of 15 February 2005 on the role of non-executive directors should be applied to the tasks and functioning of the committees operating in the supervisory board (…).

9. The conclusion by the company of an agreement/transaction with a related party, meeting the conditions referred to in part II point 3, requires the approval of the supervisory board.

Iv. Good practices applied by shareholders

1. Representatives of the media should be allowed to attend general meetings.

2. The rules of procedure of the general meeting shall not impede the participation of shareholders in the general meeting and the exercise of their rights. Amendments to the rules of procedure should apply at the earliest from the next general meeting.

3. (repealed)

4. The resolution of the general meeting on the issue of shares with pre-emptive rights should specify the issue price or the mechanism for its determination or oblige the body authorized to determine it before the date of the pre-emptive right, in time to make an investment decision.

5. The resolutions of the general meeting should ensure that the necessary time interval is maintained between the decisions giving rise to certain corporate events and the dates on which the shareholders' rights arising from those corporate events are determined.

6. The dividend entitlement date and the dividend payment date should be such that the time between them is as short as possible and in any case not longer than 15 working days. The establishment of a longer period between those time limits requires detailed justification.

7. A resolution of the general meeting on the payment of a conditional dividend may contain only such conditions, the possible fulfillment of which will take place before the date of determining the right to dividend.

8. (repealed)

9. The resolution of the general meeting on the distribution of the nominal value of shares should not set the new nominal value of the shares at a level that could result in a very low unit market value of those shares, which in consequence could pose a threat to the correctness and credibility of the valuation of a listed company.

10. The Company should provide the meeting with the use of the possibility of participating in the general electronic communication, consisting in:

  1. real-time transmission of the General Meeting,
  2. two-way communication in real time, in which shareholders can speak during the general meeting while staying in a place other than the place of the meeting,
  3. exercising in person or by proxy the right to vote during the general meeting.

This rule should apply from 1 January 2013 at the latest.