German future financing legislation to make corporate financing easier

News  >  Capital market law  >  German future financing legislation to make corporate financing easier

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One of the purposes of Germany’s Future Financing Act (ZuFinG) is to make it easier for high-growth companies to mobilize private capital for investments, meaning the legislation will have implications for capital markets law.

The bill – whose full name in German is the “Gesetzentwurf zur Finanzierung zukunftssichernder Investitionen” – has already been approved by the country’s federal cabinet. One of its aims is to make it easier in future for start-ups and other high-growth companies to access the capital markets with a view to mobilizing capital for investment and innovation. Those seeking counsel should look no further than the team of capital markets experts at MTR Legal Rechtsanwälte.

The Future Financing Act is set to bring changes to both capital markets law and stock corporation law, which is why it makes sense to consult an experienced attorney.

One of the proposed changes is the introduction of electronic shares. Going forward, it will also be possible for open-ended real estate funds and infrastructure funds to acquire land featuring exclusively renewable energy installations and to operate these installations. To this end, investment companies can turn to lawyers specializing in capital markets law for legal advice.

There are also plans to make it easier for smaller businesses to carry out an initial public offering by reducing the minimum market capitalization to one million euros. Additionally, it will be possible to issue shares that confer multiple voting rights (dual class shares) at a ratio of up to ten to one. While German capital markets law does not currently provide for dual class shares, this is set to change. An experienced attorney can highlight the pros and cons of these types of shares to interested businesses. One advantage is that they enable founders to retain influence despite raising capital, which is why it should only be possible to endow registered shares with multiple voting rights. The plans also include proposals to facilitate capital increases at stock corporations.

Another capital markets innovation is the planned introduction of a type of shell corporation known as a “Börsenmantelaktiengesellschaft (BMAG)” modeled on special purpose acquisition companies (SPACs) in the United States, with the idea being to make it easier for young companies to go public while also ensuring that investors are adequately protected. A lawyer who is well-versed in stock corporation law can advise businesses and investors alike.

What’s more, the bill contains provisions designed to support employee equity participation. For instance, the legislation provides for an increase in the tax allowance for employee equity participation from the current 1,440 euros per year to 5,500 euros.

While Germany’s lower and upper houses of parliament have yet to discuss the bill, the bulk of its provisions are expected to enter into force before the end of the year.

MTR Legal Rechtsanwälte advises on all aspects of capital markets law, including the Future Financing Act.

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