Equity Capital Market:
In Germany, the equity capital market is governed by both EU and German law.
Its landscape depends on the stock exchange in Germany on which a company’s shares are (to be) admitted to trading. There are some regional stock exchanges, but the main stock exchange in Germany is the Frankfurt Stock Exchange (“FSE”) – the FSE will be the stock exchange referred to throughout this article. The FSE operates the EU-regulated market and the Open Market segments, which both provide for sub-segments (e.g. Prime Standard and General Standard on the EU-regulated market) with different admission requirements and post-admission obligations.
The most important sets of rules at the European level are the prospectus regulation (“Prospectus Regulation”), the delegated regulations based thereon and respective ESMA Guidelines as well as the market abuse regulation (“MAR”). At the German level those are the German Stock Exchange Act (Börsengesetz, “BörsG”), the German Stock Exchange Listing Regulation (Börsenzulassungsverordnung, “BörsZulV”), the German Securities Prospectus Act (Wertpapierprospektgesetz), the German Securities Trading Act (Wertpapierhandelsgesetz, “WpHG”), the German Stock Corporation Act (Aktiengesetz, “AktG”), the German Transformation Act (Umwandlungsgesetz, “UmwG”) and the German Corporate Governance Code (“GCGC”; Deutscher Corporate Governance Kodex) as well as the respective rules and regulations of the relevant stock exchange in Germany (e.g. Exchange Rules for the FSE, “FSE-Rules”; Börsenordnung für die Frankfurter Wertpapierbörse).
In general, a company’s shares may be admitted to trading on the FSE if (i) a securities prospectus has been approved (“Prospectus Approval”) and (ii) the admission of the shares to trading on the FSE has been decided upon positively (“Admission Decision”) (for exemptions see no. 2). The Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, “BaFin”) is the competent authority for the Prospectus Approval and the management (Geschäftsführung) of the FSE is the competent body for the Admission Decision.
Debt Capital Market:
The regulatory framework applicable to the debt capital market in Germany is very similar to the framework for equity capital markets described above. There are, however, a number of differences, both from a legal and a market practice perspective.
A prospectus must be prepared in accordance with the Prospectus Regulation for the public offer or admission to trading on a regulated market of debt instruments. In contrast to equity instruments, the most relevant stock exchanges for debt instruments in the German market are the Irish Euronext Dublin and, in particular, the Luxembourg Stock Exchange.
To avoid the time-consuming prospectus approval procedure with a competent authority, wholesale debt securities are often only admitted to trading on an unregulated market (for example the Euro MTF market of the Luxemburg Stock Exchange). The stock exchanges themselves are responsible for reviewing the admission prospectuses drawn up for this purpose; the Prospectus Regulation does not apply.
The most important German law specific to debt securities is the German Debenture Bond Act (Schuldverschreibungsgesetz, “SchVG“). The law regulates general principles applicable to German law governed debt securities such as the equal treatment of holders and contains an optional procedure for majority resolutions of holders, which only applies if the terms and conditions of the securities contain an explicit reference to the SchVG.