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.
  • Only for public offerings.
  • A public offering of securities is the invitation, properly disseminated, that one or more individuals or legal entities direct to the general public, or certain segments thereof, to perform any legal action related to the placement, acquisition or disposal of securities.

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

Private offerings

Pursuant to Peruvian securities laws, an offer qualifies as private when it is not targeted to the general public or to a segment of the market.

Pursuant to Peruvian securities law:

  1. General public is an undetermined group of individuals, who could be potential investors in Peru.
  2. Segment of the market is a segment of the general public, who could require protection granted
    by the Superintendence of Securities Market.
    The protection of the Superintendence is considered necessary when such segment of the general public has difficulties in adopting a free and informed decision with respect to an offer.

In addition, an offer is considered private when:

  • It is not made via mass media, it is not publicly advertised, and there is no public solicitation. An offer is considered made via mass media when it is made through newspapers, magazines, radio, television, mail, meetings, computer systems or other technological means ideal for making known the content of the offer to the general public or to a segment of the market;
  • It is targeted exclusively to Qualified Investors (including high net worth individuals) (hereinafter, “QIBs”). Pursuant to Peruvian securities regulations, QIBs are individuals, companies or legal entities that, due to their nature, net worth, knowledge and sophistication, understand and evaluate the risks associated with their investment decisions.

Peruvian securities laws consider the following individuals, companies or legal entities to be QIBs:

  1. Banks, finance entities, insurance companies and other companies set forth in the General Act of the Financial and Insurance Systems and of the Superintendence of Banking and Insurance, Act No. 26702; companies authorised to be securities traders; and private pension funds, investment funds and companies authorised to pursue asset-backed securitization;
  2. Foreign entities that develop similar activities to those indicated in section (i) above, as well as ‘Qualified Institutional Buyers’ as this term is defined in Rule 144A of the U.S. Securities Act of 1933;
  3. Healthcare Providers (“Entidades Prestadoras de Salud”) referred to in the Modernization of Social Security Act, Act No. 26790; the Public Pension Fund (“Oficina de Normalización Previsional- ONP”); and the Peruvian Social Security Administration (“Seguro Social de Salud - ESSALUD”);
  4. Private or public legal companies that have as principal activity to invest in securities. In case of private legal entities, to be considered as QIBs, they shall have an investment portfolio in securities with a value greater than or equal
    to PEN 1m (approx. USD 303,000);
  5. The funds administrated by the individuals or companies referred in the previous sections, provided that the investment decision is their sole responsibility and that the individual net worth of the fund is equal to or greater than PEN 400,000 (USD 120,000);
  6. Individuals that have a net worth that exceeds PEN 2m (approx. USD 606,000), and have securities investment portfolios of at least PEN 1m (approx. USD 303,000);  

Or

  • The offering is of financial products (securities) with an individual consideration (face or placement value) of at least PEN 250,000 (approx. USD 75,000) each. These securities are subject to transfer restrictions (may only be transferred to other QIBs, unless the offering is registered with the Superintendence of Securities Market).

Should the offer be targeted to more than 100 individuals, it shall be presumed public.

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 the regulations applicable to each specific investor. Depending upon the type of activity the investor performs (for example, if it is a pension fund manager), there are sectorial rules fixing certain limits on investment.

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. High net worth individuals are those whose personal net worth exceed PEN 2m (approx. USD 606,000), and have securities investment portfolios of at least PEN 1m (approx. USD 303,000).

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.

Not more than 100 individuals.

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, on a one-to-one basis, and provided the requirements set forth in paragraph 2 above are complied with.

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, on a one-to-one basis, and provided the requirements set forth in paragraph 2 above are complied with.

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.