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.
  • Offer of securities to the public.
  • Issue of securities to be listed on a regulated exchange.

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

Exempt offers

  • offer to professional clients who are not natural persons;
  • offer in or from the DIFC directed at fewer than 50 persons in any 12 month period, excluding professional clients who are not natural persons;
  • an offer where the total consideration to be paid by a Person to acquire the Securities is at least USD 100,000, or an equivalent amount in another currency;
  • an offer where the total aggregate consideration offered is less than USD 100,000 (or equivalent) calculated over a period of 12 months;

Exempt securities which may be admitted to trading without a prospectus

  • shares representing, over a period of 12 months, less than 10% of the number of shares of the same class already admitted to trading on the same DFSA authorised market institution (being DFSA licenced exchanges and clearing houses);

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.

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 if they meet the requirements for ‘Assessed’ Professional Client which includes individuals who:

  • have net assets of at least USD 1m; and
  • either (i) are, or have been in the previous 2 years, an employee in a professional position at a DFSA authorised firm or other regulated financial services institution; or (ii) appear, on reasonable grounds, to have sufficient experience and understanding of relevant financial markets, products or transactions and any associated risks, or close family member joint account holders of persons meeting the above criteria.

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.

Yes, on the basis of an approved prospectus or subject to the requirements and exemptions referred to 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.

Yes, subject to the requirements and exemptions referred to in paragraph 3 above.

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 the requirements and exemptions referred to in paragraph 3 above.

Any advisor or placement agent not licensed in the DIFC must ensure it is not breaching the financial services prohibition and must consider and comply with restrictions on financial promotions.

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.

Response to genuine unsolicited reverse enquiries.