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Lock-Up Period and Right of First Offer: Controversies in Clauses in M&A Contracts in the Fuel Market in Europe (Case Study)

K. Jakub Gladkowski and Malgorzata Kieltyka


  • Lock-up clauses, limiting the sale of assets for a specified period, ensure stability but may hinder market reactions, as seen in the fuel market.
  • The right of first offer intends to provide a privileged offer for asset purchase, but it may impede market development by restricting new entities' entry.
  • Lock-up clauses, used to prevent rapid share sales, may disadvantage minority shareholders and disrupt power balances.
Lock-Up Period and Right of First Offer: Controversies in Clauses in M&A Contracts in the Fuel Market in Europe (Case Study)
Jacek Kadaj via Getty Images

Lock-up and right of first offer are key clauses in M&A contracts, especially in dynamic markets. Although these caveats serve specific purposes, they have sparked controversy in practice. Often included in M&A agreements, lock-up limits the possibility of selling assets for a specified period. In the context of fuel markets, applying this caveat may be controversial. On the one hand, it ensures stability and protects against sudden changes in ownership, but on the other hand, it may hinder market reactions. The second issue is that the right of first offer, which intends to provide a privileged offer for a given party to purchase an asset before an offer to others, may hinder the entry of new entities into the market and impede its development.

A Controversial M&A Agreement on the Fuel Market in Poland

In the fuel industry of the Polish jurisdiction, there has been a questionable disposal of assets of a refining company. The effect of the transaction was to create a situation (intentional or unintentional) in which the minority shareholder blocks the majority shareholder. This is the state of affairs:

1. undesirable - because it violates the proportion of power in the company; and

2. non-standard - because usually, the aim is to distribute power in the company in proportion to the number of shares (the desired effect is to bring the power in the company closer to the proportion of the profit achieved from the share in relation to other shareholders).

In 2018, Polish Joint-Stock company “O.” announced plans to purchase Joint-Stock company “L.” but it had to meet the requirements set by the European Commission. During the explanatory proceedings, the European Commission collected extensive data and feedback from competitors and customers of the merging companies and expressed its concerns that this would lead to market monopoly and harm competition. In response, Company “O.” made several proposals, primarily the sale of 30 per cent of shares in the “L.” refinery with an accompanying large package of management rights and the disposal of nine fuel depots to an independent logistics operator and the construction of a new jet fuel import terminal that would be transferred to this operator. Finally, in 2022, the Commission consented.

The Fuel and Energy Market as a Regulated Market

The fuel and energy market is regulated, which means that transactions such as the analyzed one are subject to review (in this case, it was the consent of the European Commission and the Polish Office of Competition and Consumer Protection).

The Commission approved the proposed purchasers of the assets sold as part of the implementation of the remedial measures specified in Regulation (EC) No. 139/2004 regarding the conditional consent to the concentration consisting in the takeover by the Company “O.” of control over the Company “L.”

Purposes of the Lock-Up Clause


The Company “O.” aimed to block the foreign investor from selling the purchased shares for three years. Using a lock-up clause typically protects against a foreign investor’s too-quick sale of shares. This issue is critical in times of rapid changes in energy industry dynamics. Parties to a lock-up agreement intend to avoid a scenario in which a group of shareholders or one majority shareholder takes the company public and sells it to investors, escaping with the profits. Only after this period has expired can shareholders sell their shares freely. Volatility or a sharp decline in a company's share price can cause investors to lose confidence. Lock-up agreements, therefore, help maintain market confidence in investing in the company. In M&A, these agreements can serve as a sign of commitment for the acquiring company, reassuring other stakeholders of the new owner's long-term intentions and providing stability in the typically turbulent post-merger period. Lock-up agreements may potentially work to the detriment of minority shareholders because insiders cannot sell their shares, so minority shareholders could find themselves in a difficult position if the share price falls. It creates a situation in which the minority shareholder, through lock-up, blocks the majority shareholder. On the one hand, this violates the proportion of power in a capital company. This is unconventional because the intention is usually to distribute power in the company in proportion to the shares. The Polish legal system regulates these issues by Article 338 §1 of the Commercial Companies Code. However, a breach of such an agreement by a shareholder does not affect the validity of the action performed; therefore, the sale of shares will be effective. This is under Art. 57 §1 of the Civil Code.

Applying the Right of First Offer

In the context of the right of first offer, the Company “O.” tried to ensure that it had the right to be the first to receive offers to purchase the sold shares. As in the case of lock-up, the Polish Commercial Companies Code regulates this issue in Art. 338 §2. Under Art. 600 §1 of the Polish Civil Code, the eligible shareholder receives a binding offer to purchase the shares, which means that if the offer presented is accepted, it will acquire the shares on previously agreed terms. The right of first offer gives higher priority to shareholders with these rights (usually investors) to potentially purchase the shares before their sale to a third-party buyer. This allows shareholders to acquire a larger stake in the company and prevents unwanted shareholders from purchasing shares by offering a higher price. A key issue for shareholders when negotiating agreements is to limit the transfer of shares to third parties who may be competitors or parties with whom cooperation is undesirable. In this respect, Poland applies the Act of July 24, 2015, to control certain investments (Journal of Laws 2023.415), which introduces control of foreign direct investments in Poland. Accordingly, the President of the Polish Office of Competition and Consumer Protection may block certain transactions if an investor is from outside the OECD or the European Economic Area.


In summary, the nature of lock-up and right of first offer in M&A agreements emphasizes the balance needed to navigate the energy market. Although lock-up provides a sense of stability and continuity, its accuracy and rigidity can be challenging when flexibility and adaptation to market dynamics are so important. The situation is similar to the right of first offer, which aims to protect existing stakeholders. However, there is concern that this makes it difficult for new entities to enter the market and does not support innovation.