Private placings

Specific regulation

Are there specific rules for the private placing of securities? What procedures must be implemented to effect a valid private placing?

As a basic description, an offer to the public is an offer directed at the general public, which means an offer that targets an unlimited number of potential investors. In contrast, a private placement of securities (debt and equity) requires, for example, a personal relationship between the issuer and the actual investor prior to the offer. Hence, Germany has broad exemptions from disclosure requirements for sales to sophisticated investors or to market professionals. An offer is not deemed to be an offer to the public (and therefore no prospectus is required) if it is made only to certain categories of investors. The key exemptions (some of which may be combined) in this regard are stated in article 1, clause 4 of the Prospectus Regulation.

Further, pursuant to article 1, clause 5(i) of the Prospectus Regulation, there is no prospectus requirement where non-equity securities issued by credit institution register credit institutions for a total consideration of less than €75 million of securities offered in the European Economic Area for a period of 12 months, provided such securities are not subordinate, convertible or exchangeable; or not entitled to subscribe or acquire other securities and are not linked to a derivative.

In addition, under article 1, clause 5 of the Prospectus Regulation, an issuer is not required to publish a prospectus for securities admitted on a regulated market if the detailed criteria are applicable.

Investor information

What information must be made available to potential investors in connection with a private placing of securities?

In the case of a private placement of securities, there are no specific statutory requirements for any information to be provided to potential investors. However, if the issuer is providing potential investors with information, such private placement documents might be expected to contain, in an understandable manner, all information necessary to enable investors to make an informed assessment of the issuer’s assets and liabilities, financial situation, profits, losses and future prospects, and the rights attached to the securities. Further, it should include warning notices, essential information about the securities and statements by the responsible persons. In relation to minimum requirements, the Prospectus Regulation can, therefore, be used in an analogous manner. Further, if an issuer does not make use of an exemption under article 1, clause 4 of the Prospectus Regulation and prepares an informational document, such a document will be regarded as a prospectus and the Securities Prospectus Act and other rules will apply.

Transfer of placed securities

Do restrictions apply to the transferability of securities acquired in a private placing? And are any mechanisms used to enhance the liquidity of securities sold in a private placing?

There are no statutory provisions that apply especially to the transferability of securities (debt and equity) acquired by investors through a private placement. If the exceptions stated in the Prospectus Regulation and Securities Prospectus Act apply and the securities are admitted to trading on the stock exchange, the related securities can be traded on the stock exchange in accordance with the applicable laws and regulations of that stock exchange. Where such securities are not admitted to trading (eg, restricted shares), it should be noted that in the issuer company’s articles of association the transferability of securities may also be defined, and such articles may restrict the transferability of such securities. Further, there are no mechanisms in place to enhance the liquidity of securities in a private placement.