Deposit return scheme operators are actively seeking to attract producers to their schemes. The reason is obvious: more producers and more packaging placed on the market mean greater revenue from producer fees and, consequently, higher profits for the operator.
Operators encourage producers to participate not only as customers but also in the ownership structure as shareholders. The producer then becomes an entity that, in addition to paying producer fees:
- subscribes for and pays for shares, contributing capital to the operator;
- may have to recapitalise the operator if it lacks sufficient funds.
In return, producers expect influence over how the operator functions, including expenditure, development priorities and management. In practice, however, an operator usually having several shareholders is reluctant to grant special rights to individual shareholders, especially minority shareholders.
Tools enabling a producer to influence the operator
Minority shareholder status need not automatically mean having no influence over the operator’s activities. A producer can use legal instruments enabling it to participate in decisions about the deposit return scheme. The most important include:
- The right to appoint a supervisory board member
The operator is a joint-stock company in which shareholders have no individual right of inspection. Oversight is exercised by the supervisory board, whose responsibilities include supervising the management board’s actions. It is therefore worth securing the producer’s right to appoint its own representative to that board. However, as a rule, inspection and supervisory powers over the operator are exercised by the supervisory board in corpore, rather than its individual members. In practice, this requires cooperation by all or part of the supervisory board, which is often difficult or even impossible. Moreover, information obtained by supervisory board members is confidential and cannot be passed to shareholders.
- The management board’s reporting obligations towards minority shareholders
Given this model of oversight and inspection by the supervisory board, it is crucial to ensure that the management board regularly provides producers with information about the operator’s current position, for example in monthly reports, and gives them access to relevant documents, particularly financial records.
- Key decisions subject to minority shareholders’ consent
It is also important that the operator’s management board obtain minority shareholders’ approval before making key decisions. This mechanism can be introduced by extending the list of actions requiring approval by the general meeting, expressed by a qualified majority.
Particularly sensitive decisions that should be subject to such control include:
- agreements between the operator and other shareholders that could be used to transfer funds from the operator to them;
- incurring obligations above a specified threshold, risking excessive indebtedness;
- material amendments to the operator’s articles of association.
- Influence over changes in the operator’s shareholding structure
It is also worth ensuring that producers have a real say in who joins the operator’s owners. A priority right to acquire shares being sold can serve this purpose. A shareholder intending to sell must first offer its shares to the other shareholders. Only if they do not exercise their right can the shares be sold to an outside entity.
If exercised in proportion to existing shareholdings, this priority right also minimises the risk of a sudden and adverse change in the operator’s ownership structure.
- Protection against dilution
To preserve the ownership structure and prevent dilution of minority shareholders, it is also worth ensuring that any funding through an increase in share capital respects pre-emption rights. These enable shareholders to subscribe for new shares in proportion to their existing holdings.
- Confidentiality of information provided to the operator
Because producers must provide the operator with extensive information about packaged products placed on the market, while the operator’s shareholders are competitors, it is crucial to ensure that the operator neither allows this information to be exchanged between shareholders nor makes it available to other shareholders.
The rights of producers that are minority shareholders should be clearly defined in both a shareholders’ agreement between all shareholders and the operator, and the operator’s articles of association. Legal advice is advisable to ensure that the provisions are precise and effectively protect producers’ interests.
Would you like to understand the full legal context? All the details are available in our main guide: The deposit return scheme in Poland.
