German Location Promotion Act: Impetus for the capital market and start-ups
Location Promotion Act: reforms for IPOs, issuers and venture capital
The German economy is facing structural challenges, with the low number of IPOs and the decline in listed companies signalling an urgent need for action. Against this backdrop, on 10 September 2025 the German government published a draft law to promote private investment and strengthen Germany as a financial centre (draft Location Promotion Act - StoFöG-E). The draft aims to improve the framework conditions for companies and remove barriers to investment in order to realise growth potential. Essentially, the Location Promotion Act is the new version of the legislative bill of the Future Financing Act II (ZuFinG II), which was not passed at the end of the last legislative period.
The draft Location Promotion Act (StoFöG-E) includes amendments to stock corporation law, investment tax law and the German Investment Code (KAGB) to promote investments in renewable energy, infrastructure and venture capital. It also serves to transpose a number of EU capital market laws, in particular the EU Listing Act, and to create a European digital platform (ESAP) to further harmonise the EU capital market.
Facilitating access to the capital market
The draft Location Promotion Act (StoFöG-E) aims to facilitate investments in growth capital and strengthen the IPO as an exit channel. To this end, the draft provides for companies to be able to issue shares with a nominal value of less than EUR 1 ("penny stocks") in future (section 8 (7) draft German Stock Corporation Act (AktG-E). These regulations are flanked by an adjustment of the tax framework for investments in (growth) companies.
Changes to delisting and downlisting
The draft Location Promotion Act (StoFöG-E) contains far-reaching amendments to the regulations on delisting from the regulated market. The amendments primarily concern expanding the admissibility of delisting applications without a purchase offer. In addition to the cases previously codified in section 39 (2) nos. 1 and 2 German Stock Exchange Act (BörsG), section 39 draft German Stock Exchange Act (BörsG-E) will also cover cases (i) in which securities continue to be traded on an SME growth market (in Germany, this is only the "Scale" trading segment of the Frankfurt Stock Exchange) ("downlisting") or (ii) in which insolvency proceedings have been opened against the assets of the issuer. On the downside, it is envisaged that a delisting from an SME growth market, which was possible in the past without a purchase offer, will require such an offer in future. There are currently no plans to grant grandfathering rights to issuers listed on an SME growth market when the law comes into force. It remains to be seen whether companies listed on the Scale segment of the stock exchange will take this as an opportunity to seek delisting before the draft Location Promotion Act (StoFöG-E) comes into force.
For delisting applications with a purchase offer, the consideration in the purchase offer must still consist of a cash payment in euros and must generally correspond to at least the weighted average domestic stock market price of the securities during the last six months prior to publication of the delisting. However, a company valuation is now required to determine the offer price to outside shareholders if the stock market price is unreasonably low over a six-month period because it was influenced by "special circumstances". However, the draft does not conclusively define what falls under "special circumstances". The new legal uncertainty this creates for issuers must be viewed critically.
Another new aspect is the (re-)introduction of judicial compensation settlement proceedings to review the adequacy of the consideration in the event of delisting (section 1 no. 8 draft German Act on Appraisal Proceedings(SpruchG-E)). In connection with the German Future Financing Act II (ZuFinG II), the (re)introduction of judicial compensation settlement proceedings was criticised due to the time and costs involved, as it could further encourage the trend towards listing abroad.
Regulatory relief for securities issuers
To transpose the EU Listing Act, the draft Location Promotion Act (StoFöG-E) provides for regulatory simplifications in the preparation of securities prospectuses. Among other things, companies in Germany will in future be able to offer securities up to EUR 12 million (previously EUR 8 million) to the public using a three-page securities information sheet without having to prepare a prospectus. In addition, it will no longer be necessary to prepare a German summary for English-language prospectuses.
For listed companies with shares with multiple voting rights, the draft contains a prohibition directed at the operators of multilateral trading facilities to refuse admission to trading due to the existence of shares with multiple voting rights. This prohibition is flanked by increased transparency obligations for issuers (section 48b draft German Stock Exchange Act (BörsG-E)).
Transposition of European legal requirements
The following adjustments are also influenced by European legal requirements:
- amendment of thresholds for compliance with EMIR requirements (section 32 (1) draft German Securities Trading Act (WpHG-E)
- special rules of conduct and information for the use and dissemination of analyses and issuer-financed analyses (section 63a draft German Securities Trading Act (WpHG-E)
- abolition of the authorisation requirement for access to trading venues outside EU (deletion of
- sections 102-105 German Securities Trading Act (WpHG))
- introduction of a European Single Access Point (ESAP) at the company register (section 9d draft German Commercial Code (HGB-E)
Conclusion
The draft Location Promotion Act (StoFöG-E) presents comprehensive measures to facilitate access to financing for companies. It is therefore an important milestone in making the German fund market and capital market fit for the future. Overall, however, it remains to be seen whether the planned changes to stock corporation law and capital market law go far enough or whether more far-reaching reforms - such as modernising German stock corporation law, further reducing bureaucracy and using the capital market for long-term wealth accumulation - are required to increase the willingness to invest in German companies.
