GERMANY Law and Practice Contributed by: Carsten Berrar, Florian Späth and Heiko Blaut, Sullivan & Cromwell LLP
in Section 2 paragraph 1 VermAnlG. No pro - spectus is needed, inter alia, if: (i) there is only a low distribution of the investment (maximum of 20 shares); (ii) the sales price of the investment offered within a period of 12 months does not exceed a total of EUR100,000; or (iii) the sales price of the investment amounts to at least EUR200,000 per investor. Determining the fair market value of privately- held company shares (or virtual instruments) for secondary market transactions can be challeng - ing due to the absence of publicly available pric - ing data and market benchmarks. As there is a shortage of investors facing a significant number of potential investment targets, an information asymmetry persists on the buy-side. Shareholders’ Agreements tend to stipulate vari - ous share transfer rights and restrictions such as ROFRs, ROFOs, co-sale and tag-along rights which apply in respect of secondary transac - tions and can complicate, or even block, trade sale transactions. It remains to be seen how well transfer restric - tions in German market practise and the con - tinued use of virtual instruments permit an evolution of secondary trading and whether shareholder agreements will pre-clear certain transactions relating to vested shares in late- stage companies.
tors (who are deemed to have sufficient sources of information to obtain the necessary basis of knowledge). If a public offer targets non-quali - fied investors, a prospectus is not required if it is addressed to fewer than 150 natural or legal persons. The public offer of GmbH shares does not require the publication of a prospectus under the VermAnlG if the offer is addressed to a lim - ited number of persons or it is addressed only to employees by their employer or by an affiliate of their employer. If numerous employees/entitlement holders exist in a (late-stage) start-up organised as an AG, the transferability of shares is usually largely restricted. Consequently, in such cases, these shares do not qualify as securities under the EU Prospectus Regulation. Even in instances where transferability is not restricted, a prospectus is not mandatory if a document is provided con - taining information about the quantity and char - acteristics of the securities, as well as the rea - sons and particulars of the offer. 7.2 Restrictions Foreign Direct Investment Screening (FDI) The German foreign investment screening framework is governed by the Foreign Trade and Payments Act ( Außenwirtschaftsgesetz ) and the Foreign Trade and Payments Regulation ( Außen- wirtschaftsverordnung ). The competent author - ity, the BMWK, has the authority to examine whether the investment in a domestic company through the direct or indirect acquisition of vot - ing rights is expected to negatively affect the public security or order of Germany, another EU member state or with respect to projects of EU interest.
7. Regulation 7.1 Securities Offerings
For an AG/SE/KGaA, in the event of a sizeable transaction such as a capital increase with no (statutory) pre-emptive rights, a prospectus is not required in the case of a public offer if the offer is exclusively directed to qualified inves -
232 CHAMBERS.COM
Powered by FlippingBook