Definition and legal classification of the offering
The term “offering” is used in a wide variety of ways in both German and international legal practice and plays an especially significant economic and legal role. Essentially, “offering” refers to the submission of an offer, mostly in the context of financing, capital markets, or corporate processes, with the terminology predominantly adopted from Anglo-American legal systems. The legal consideration of the offering extends to various areas of law, in particular corporate law, securities law, supervisory law, contract law, and capital market law.
Types of offering
Public Offering
A public offering generally refers to the initial or repeated, voluntary or legally mandated submission of an offer of financial instruments—particularly securities—to an indeterminate number of investors on the capital market. A typical example is the “Initial Public Offering” (IPO), where a company’s shares are publicly offered and placed on a stock exchange for the first time. The public offering is usually subject to extensive legal requirements, transparency obligations, and approval procedures.
Key legal bases include the prospectus obligation under the EU Prospectus Regulation (Regulation (EU) 2017/1129), the German Securities Prospectus Act (WpPG), and relevant provisions of the German Securities Trading Act (WpHG). The aim of these regulations is to ensure investor protection and capital market transparency through disclosure and information requirements.
Process of a Public Offering
The legal process of a public offering typically includes the following steps:
- Decision on the offering: Resolution by the issuer to publicly offer financial instruments.
- Preparation of the securities prospectus: Preparation of the legally required information and compliance with transparency obligations.
- Approval by the supervisory authority: Examination and approval of the prospectus, e.g., by the German Federal Financial Supervisory Authority (BaFin).
- Publication and placement: Making the offer accessible to investors and conducting the placement on the market.
Private Offering (Private Placement)
A private offering, also referred to as a private placement, is the non-public, targeted submission of an offer to a defined group of investors, such as institutional investors, family offices, or high-net-worth individuals. Legally, the private placement is subject to reduced regulatory requirements compared to a public offering; in particular, the prospectus obligation may be wholly or partially waived if the statutory requirements under the Prospectus Regulation or § 3 WpPG are met.
Typical areas of application include growth financing, corporate participations, and the placement of corporate bonds with professional investors.
Legal requirements and obligations
Prospectus obligation and exemptions
Core regulations concern the requirement to produce a prospectus in connection with an offering. As a rule, for public offerings, a securities prospectus must be prepared, approved by the competent authority, and published. Exemptions from this requirement include, among others, the following cases:
- Offers exclusively to professional investors or to fewer than 150 natural or legal persons per Member State (excluding qualified investors)
- Minimum subscription amount per investor of at least 100,000 euros
- Offers with a low total value within a twelve-month period (threshold according to the EU Prospectus Regulation)
If offerings fall under such exemptions, certain information and transparency requirements must still be observed, e.g., based on the German Civil Code (BGB), Capital Investment Code (KAGB), or Securities Trading Act.
Duties of the issuer
Depending on its structure and scope, the provider (issuer) of the offering is subject to extensive requirements:
- Preparation of truthful, complete, and up-to-date offering documents
- Compliance with publication deadlines and reporting obligations to supervisory authorities
- Observance of insider law and prohibition of market manipulation (e.g., according to the EU Market Abuse Regulation)
- Implementation of mechanisms to limit risks and protect investors
Contract law aspects of the offering
The offering is also to be legally classified as an offer within the meaning of § 145 ff. BGB if it is a binding offer for acceptance by one or more third parties. In the context of securities offerings, a public offer as defined in § 656a BGB is usually made, which leads to a binding contract upon acceptance (e.g., subscription of a share).
Particular attention must be paid to provisions regarding the right of withdrawal, interpretation issues in cases of ambiguity (e.g., background under general terms and conditions law), and information obligations towards consumers.
Implications for capital market and supervisory law
BaFin and other supervisory authorities
The Federal Financial Supervisory Authority (BaFin) is the competent authority in Germany for the approval of prospectuses and the supervision of capital market offerings. At the European level, the European Securities and Markets Authority (ESMA) is relevant. Cross-border offerings are also subject to notification and authorization requirements within the EU as well as under the national laws of target countries.
Market abuse and insider law
Offerings are subject to extensive rules to prevent market abuse. This particularly concerns information obligations, ad hoc disclosure, and insider law under Directive 2014/57/EU (MAR, Market Abuse Regulation). Violations are subject to severe legal sanctions and, in addition to civil liability, may also have criminal law consequences.
Liability in connection with an offering
In the event of incorrect information or omissions in offering documents, the provider is liable under civil law, supervisory law, and, where applicable, criminal law provisions. Investors may bring claims for liability under the prospectus liability regime, for example, for rescission, damages, or reimbursement of expenses. Relevant provisions can be found in §§ 9 ff. WpPG, § 826 BGB (intentional immoral damage), and in special statutory regulations.
International offering: special features in a cross-border context
For international offerings, such as placements in multiple countries, the capital market and supervisory requirements of the target jurisdictions must be observed in addition to local legal requirements. This often requires coordination with multiple supervisory authorities and consideration of different prospectus regimes, offering forms, and admission requirements.
Summary
The offering is a central instrument of corporate and capital market financing whose legal structuring and execution are shaped by extensive corporate, capital market, and supervisory regulations. Careful compliance with relevant legal requirements is essential when planning and conducting an offering in order to reduce risks and avoid legal violations. Given the wide array of legal provisions relating, for example, to prospectus requirements, liability, and market supervision, the offering is a highly complex and significant process within the legal system.
Frequently Asked Questions
Who is legally permitted to conduct an offering?
An offering, i.e., the public offer of financial instruments such as shares, bonds, or other securities, is subject to strict statutory regulations in Germany and the EU. Anyone wishing to conduct an offering generally requires a license as a securities services enterprise or at least explicit authorization under the German Banking Act (KWG) or the Securities Institutions Act (WpIG). Private companies wishing to offer securities to the general public must also comply with the transparency requirements and prospectus obligations set forth in the EU Prospectus Regulation (EU Regulation (EU) 2017/1129). Individuals or companies without the necessary authorization are generally acting unlawfully if they conduct collective fundraising or a public offer without a prospectus.
What legal documentation and publication obligations must be observed in an offering?
As part of an offering, there is generally an obligation to prepare a detailed securities prospectus containing all relevant information about the offer, the issuer, the securities, the risks, and the intended use of the funds. This prospectus must be approved by the national supervisory authority—in Germany, the Federal Financial Supervisory Authority (BaFin)—and then made publicly available. Additionally, reporting obligations apply to BaFin, if applicable to Deutsche Börse, and publication obligations on the issuer’s website. Furthermore, data protection requirements and, where applicable, anti-money laundering provisions must be observed when accepting investments.
What liability risks do issuers face in connection with an offering?
Issuers and persons involved in preparing the prospectus face significant civil and criminal liability risks. According to § 21 of the German Securities Prospectus Act (WpPG), issuers, board members, prospectus examiners, and other involved parties are liable for incorrect, misleading, or incomplete information in the prospectus. Investors who incur financial losses as a result of such prospectus errors may assert claims for compensation. Intentional deception or fraud in connection with the offering can also result in criminal penalties. For this reason, careful legal and factual review of all data in the offering is essential.
When is a prospectus required and what exemptions exist?
As a general rule, a prospectus must be published for every public offer of securities. However, there are numerous exemptions, particularly those regulated in the EU Prospectus Regulation. For example, the prospectus requirement is waived for offers made exclusively to qualified investors or if the total value of the offer within a twelve-month period does not exceed a certain threshold (currently 8 million euros in Germany). Other exemptions apply to offers made to fewer than 150 persons per Member State or to employees of the issuer. Nevertheless, in such cases, information requirements and, where applicable, requirements under the German Investment Products Act (VermAnlG) must be reviewed and fulfilled.
How are investors legally protected in an offering?
Investor protection comprises a variety of requirements, above all the obligation to provide complete, understandable, and objective information on the offering in the prospectus. In addition, the Securities Trading Act (WpHG) requires that investment advice and intermediation be tailored to investors’ individual knowledge and experience, and that conflicts of interest be disclosed. Prospectus review by BaFin and civil prospectus liability provide added safeguards. In certain cases, issuers may be obliged to inform investors of material new circumstances after publication of the prospectus (requirement to supplement).
What legal consequences can result from violations of offering requirements?
Breaches of prospectus obligations, incorrect information, or unauthorized public offerings are subject to severe sanctions. BaFin can impose fines, prohibit the offer, or stop ongoing offerings. Violations of civil information obligations regularly lead to claims for damages. Serious violations—such as fraud or market manipulation in connection with the offering—are subject to criminal penalties under the German Criminal Code (StGB) and the Securities Trading Act. In addition, approval as a financial service provider may be revoked, or management can be held personally liable.
Do special legal provisions apply to digital offerings (e.g., token offerings)?
Digital offerings, such as Security Token Offerings (STO), are fundamentally subject to the same financial market requirements as traditional securities offerings. In particular, if tokens are classified as securities or investment assets, prospectus and approval obligations apply. Nevertheless, specific challenges may arise in the areas of technology, international marketing, or regulatory classification, for example, in relation to the German Regulation on the Protection of Cash Registers or new EU rules such as the MiCA Regulation (Markets in Crypto-Assets). A comprehensive legal assessment of the specific offer and the token structure is therefore essential.
