CMS Expert Guide to the private placement of equity securities

1. Prospectus requirement

  • Offer to the public.
  • Admission to trading of securities on a regulated market.

Prospectus is required where an offer is to the “public” which is defined widely and includes any section of the public in Hong Kong.

2. Prospectus exemptions

Key exemptions

Offer to the public

  • Qualified Investors.
  • Less than 150 persons per EEA state, other than Qualified Investors.
  • The aggregate consideration for which securities are publicly offered in the European Economic Area is less than EUR 8m during the preceding twelve months (however, in cases where the aggregate consideration is EUR 100,000 or more, the issuer must produce a 3 page securities information sheet which must be approved by the German Financial Supervisory Authority (BaFin) and published).

In cases where the aggregate consideration is EUR 1m or more, the exemption may only be used, if securities are only provided in conjunction with investment advice or investment brokerage by an investment firm that is obliged to verify that the aggregate value of securities that can be purchased by each non-qualified investor does not exceed the following amounts:

  • EUR 1,000, or
  • up to EUR 10,000, if the respective non-qualified investor holds at least EUR 100,000 in cash and/or financial instruments of which he can freely dispose;
  • twice the non-qualified investor’s average monthly net income, subject to a maximum amount of
    EUR 10,000;
  • offers made by credit institutions or issuers whose shares are already listed on a regulated market of a member state of the European Economic Area with an aggregate consideration for which securities are offered of less than EUR 8m.

Admission to trading on a regulated market – Listing

  • Admission to trading/Listing new shares of the same class as shares already admitted to trading on the same regulated market, representing less than 20% of the existing issued share capital in a rolling 12 month period.
Key exemptions
  • Not more than 50 persons.
  • Professional investors which generally include financial institutions, financial intermediaries, corporate investors with total assets of not less than HKD 40m and high net worth individuals with a portfolio of not less than HKD 8m.
  • Total consideration does not exceed HKD 5m.
  • Minimum consideration payable by any offeree is not less than HKD 500,000.

3. Ability to offer shares to

3.1 Institutional/professional/authorised investors (for example investment funds, insurers, pension funds)

Only on the basis of an approved prospectus or if the potential investors are Qualified Investors pursuant to Article 2 (e) of the Prospectus Regulation or subject to complying with an exemption set out in paragraph 2 above or Article 1 para 4 of the Prospectus Regulation.

Yes, subject to falling within meaning of “professional investors”.

3.2 High net worth individuals 

Only on the basis of an approved prospectus or if the potential investors are Qualified Investors pursuant to Article 2 (e) of the Prospectus Regulation or subject to complying with an exemption set out in paragraph 2 above or Article 1 para 4 of the Prospectus Regulation.

Yes, subject to falling within the meaning of “professional investors”.

3.3 Retail/public/others

Only on the basis of an approved prospectus or subject to complying with an exemption set out in paragraph 2 above or Article 1 para 4 of the Prospectus Regulation.

No - any such offer may fall within the meaning of “offer to the public” and will therefore be subject to the prospectus requirements.

4. Can the issuer approach potential investors on their own?

Yes. Note however that if the issuer is a financial institution it needs to hold a respective regulatory licence.

Yes, subject to numerous restrictions including restrictions relating to issuing documents with invitations to acquire equity; and the manner of approach must not be construed as an offer to the public and thus any offer document should be serial numbered, state that it is not an offer to the public, and should be individually addressed to a specific offeree and only that offeree may accept the offer.

5. Can the issuer's financial adviser/ placement agent approach potential investors on their own?

Yes. Note however that such financial adviser/ placement agent needs to have a licence to provide financial services in Germany.

Yes, subject to numerous restrictions including restrictions relating to issuing documents with invitations to acquire equity and the manner of approach must not be construed as an offer to the public.

6. Are there any other exemptions which may be relied on?

As long as a public offer is not made in Germany, a prospectus is not required. In cases where a foreign financial services provider is approached by a German customer on such customer’s own initiative, the financial services provider is not operating in Germany and therefore does not require a licence for Germany.

No.