GERMANY Law and Practice Contributed by: Carsten Berrar, Florian Späth and Heiko Blaut, Sullivan & Cromwell LLP
As part of the cross-sector regime ( sektorüber- greifendes Verfahren ), the law currently lists 27 categories (including critical infrastructure in a number of sectors and other business activities in many different areas, such as software, health - care, artificial intelligence, semiconductors and others) where the acquisition by a non-EU inves - tor requires a mandatory filing and prior clear - ance by the BMWK. Voting rights thresholds of 10% or 20% apply – depending on the appli - cable category. In case the German company is active in certain areas of military, defence or security of government information technology, acquisitions by non-German investors of 10% or more of the voting rights trigger a mandatory filing and pre-closing clearance requirement as part of the sector-specific regime ( sektorspezi- fisches Verfahren ). In all other cases, the BMWK is entitled to review any acquisition by non-EU investors of at least 25% of the voting rights, even if no mandatory FDI filing is required. For an investor who already owns a participation above the entry thresholds, the crossing of cer - tain further thresholds may require prior clear - ance (20%, 25%, 40%, 50% and 75%). Pursu - ant to guidance from the BMWK, the acquisition of additional voting rights as part of capital increases or financing rounds is only covered by the German FDI regime if the percentage share of voting rights crosses a relevant threshold as a result of the transaction (ie, not if an investor acquires shares only to the extent required to prevent a dilutive effect). Foreign investment approvals have become increasingly significant in the realm of VC and start-up investing, as the German regime was amended several times during the past few years to cover a broader range of activities with - out regard to the size of the business. At the same time, almost half of the VC funds invested in Germany derive from third countries, accord -
ing to reports of the German Start-up Associa - tion ( Bundesverband Deutsche Startupse.V. ). The European Commission is currently working on a comprehensive revision of the legal frame - work with the objective to instigate a dedicated investment screening law in all EU member states. Investments in Regulated Banks, Financial or Payment Services Providers and Insurance Companies In the fintech/insurtech space, an investor that intends to acquire a direct or indirect participa - tion in a German regulated bank or other finan - cial institution – such as a financial services provider, payment services provider, e-money institution or investment firm – of over 10% of the capital or voting rights is required to submit a notification to BaFin and obtain pre-closing approval in the context of an owner control pro - cedure ( Inhaberkontrollverfahren ). During this procedure, BaFin reviews, among other things, the strategic plans, financial standing and reli - ability of the investor. The legal basis depends on the company’s regulatory status. Crossing of 20%, 30% and 50% thresholds requires addi - tional clearances. In the case of German banks that fall under European banking supervision, the approval process involves the European Central Bank. An owner control approval is also required for direct and indirect investments in insurance and reinsurance undertakings as well as in certain regulated asset (fund) management companies – in each case, also starting at 10% of the capital or voting rights. Stamp Duties and Currency Control The German government imposes no stamp duties nor any control on the purchase or sale of foreign currencies.
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