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.
  • Where a person as principal, in relation to offers of securities or securities-based derivatives contracts:
    • makes (either personally or by an agent) an offer to any person in Singapore which upon acceptance would give rise to a contract for the issue or sale of those securities or securities-based derivatives contracts by him or another person with whom he has made arrangements for that issue or sale; or
    • invites (either personally or by an agent) any person in Singapore to make an offer which upon acceptance would give rise to a contract for the issue or sale of those securities or securities-based derivatives contracts by him or another person with whom he has made arrangements for that issue or sale.

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
  • Small offers where total amount raised from such offers within any 12 month period does not exceed SGD 5m (or its equivalent in a foreign currency) in aggregate and such offers are restricted to persons with prior relationships and connections with the issuer (i.e. one that is directed at a pre-identified individual or entity and should be conducted in a discrete manner and not be subject to any mass solicitation).
  • Private placement offer made to no more than 50 persons within any 12 month period.
  • Offer to Institutional Investors, 1 An “Institutional Investor” is defined under Section 4A of the Securities and Futures Act (Cap. 289 of Singapore) (“SFA”) to include: (a) an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country whose principal activity is to manage: (i) its own funds; (ii) the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or (iii) the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country; (b) the Government of Singapore or a central government in a country other than Singapore; (c) a bank licensed under the Banking Act (Cap. 19 of Singapore) (“BA”); (d) a finance company that is licensed under the Finance Companies Act (Cap. 108 of Singapore); (e) an approved exchange; (f) a pension fund, or collective investment scheme, whether constituted in Singapore or elsewhere; or (g) a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or expert investors.  Accredited Investors 2 An “Accredited Investor” is defined under Section 4A of the SFA to include: (a) an individual: (i) whose net personal assets exceed in value SGD 2m (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe; (ii) whose financial assets (net of any related liabilities) exceed in value SGD 1m (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe, where “financial asset” means: (1) a deposit as defined in Section 4B of the BA; (2) an investment product as defined in Section 2(1) of the Financial Advisers Act (Cap. 110 of Singapore); or (3) any other asset as may be prescribed by regulations made under Section 341 of the SFA; or (iii) whose income in the preceding 12 months is not less than SGD 300,000 (or its equivalent in a foreign currency) or such other amount as the Monetary Authority of Singapore (“MAS”) may prescribe; or (b) a corporation with net assets exceeding SGD 10m in value (or its equivalent in a foreign currency) or such other amount as MAS may prescribe, as determined by: (i) the most recent audited balance-sheet of the corporation; or (ii) where the corporation is not required to prepare audited accounts regularly, a balance-sheet of the corporation certified by the corporation as giving a true and fair view of the state of affairs of the corporation as of the date of the balance-sheet, which date shall be within the preceding 12 months.  or certain other categories of investors.

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, see response in paragraph 2 above.

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, see response in paragraph 2 above.

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.

Only on the basis of an approved prospectus or subject to complying with the statutory exemptions, the key ones of which are set out in paragraph 2 above.

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.

Generally, yes, subject to compliance with any applicable requirements / exemptions concerning an offer of securities/ securities-based derivatives contracts, the key ones of which are set out in paragraph 2 above and other prescribed requirements (e.g. advertising restrictions).

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.

Generally, yes, subject to compliance with any applicable requirements / exemptions concerning an offer of securities/ securities-based derivatives contracts, the key ones of which are set out in paragraph 2 above and other prescribed requirements (e.g. advertising restrictions).

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. Not expressly covered under the Securities and Futures Act (Cap. 289 of Singapore) (“SFA”).