Capital Market Regulations in Germany

Legislation related to capital markets in Germany

The Frankfurt Stock Exchange (FSE) is the main stock exchange in Germany and it is divided into two segments: the regulated market and the open market. The regulated market has two subdivisions:

• -          the prime standard,
• -          the general standard.

The open market is also divided in the entry standard and the quotation board for secondary listings.

The legislation covering listing requirements on the German capital markets are:

• -          the Stock Exchange Act,
• -          the Securities Trading Act,
• -          the Securities Prospectus Act,
• -          the Exchange Rules for the Frankfurt Stock Exchange,
• -          the Stock Exchange Admission Regulation.

Additionally, the German Commercial Code also provides for the registration of investment companies.

Requirements for trading on the regulated market in Germany

Local and foreign companies wanting to trade on the German regulated capital markets must comply with certain requirements. These are:

• -          the issuer must publish a prospectus approved by the German Federal Financial Services Supervisory Authority (BaFin)
• -          the German company’s shares must be freely transferable,
• -          the company must file an application for listing with the FSE.

The total market value of the shares to be listed must be at least 1.25 million euros if they are traded on the open market. German companies wanting to list their shares on the entry standard must have a minimum share capital of 750,000 euros. After being admitted to the listing, the securities can be traded with the German capital market.

Requirements for trading on the secondary market in Germany

In order to list a German company on a secondary capital market, the issuer must comply with the same regulations as for listing requirements on the primary market. Initial Public Offerings can be structured as offers of new shares from capital increase, or as an offer of existing shares from German shareholders selling their parts in a company. The following steps must be followed when applying for a listing on German capital markets:

• -          appointing advisers and investment banks,
• -          preparing a business plan,
• -          preparing the prospectus,
• -          negotiating and drafting the underwriting documents,
• -          registering the capital increase with the German Trade Registry,
• -          allocating the shares,
• -          registering with the Stock Exchange.

If you need assistance with the preparation of the prospectus you can contact our law firm in Germany.