The law on financing future-proof investments – or Future Financing Act for short – is intended to make it easier for startups and growth companies to to mobilise private capital for investments and promote innovative developmentsFor example, the minimum capital required for an IPO is reduced or the option for employee participation is simplified.
Marco Buschmann, Federal Minister of Justice, commented:
"With the Future Financing Act, we are providing an important boost for Germany as a business and financial center. We are increasing the competitiveness of the German economy – absolutely essential in times of a difficult economic environment. By facilitating capital increases for stock corporations and introducing shell companies, we are opening up new opportunities for companies to generate capital. The new regulations meet the economy's need for a less bureaucratic, more digital, and more modern legal framework – thus enabling more growth: Startups, growth companies, and small and medium-sized enterprises will particularly benefit from this."
Future Financing Act: This is what should change
Easier access to capital markets
- Stock exchanges may allow the previously required co-applicant to be waived, which can reduce the costs of IPOs.
- The minimum market capitalization for IPOs is reduced from EUR 1.25 million to EUR 1 million.
- The issuance of multiple voting shares, with voting rights of up to 10:1, is now possible. This allows founders to maintain influence over the company despite raising capital.
- The stock exchange shell company (BMAG) paves an alternative route to the capital market, modeled on the Special Purpose Acquisition Companies (SPACs) in the US. The shell company serves as a vehicle so that young companies do not have to handle the complex and expensive process of going public themselves.
Better framework conditions for employee participation
- The tax allowance for employee share ownership increases from EUR 1,440 per year to EUR 5,000, thus reaching a competitive level by European standards.
- The allowance can also be used up by converting wages up to 2,000 euros per year.
Further simplifications and modernizations in financial market and tax law
- Facilitating capital increases for a stock corporation in order to improve the framework conditions for raising equity capital
- Introduction of the electronic share in an electronic securities register or crypto securities register
- Separation of customers' crypto assets in the event of the crypto custodian's insolvency is legally possible
- Improving liability regulations for crowdfunding
- Modernisation of financial market supervision, for example by removing barriers to digitalisation and improving the framework for English-language communication with BaFin
- Establishment of a comparison website for account fees at BaFin that complies with the European Payment Accounts Directive
- Adaptation of confidentiality obligations in financial supervisory laws to improve cooperation and information exchange between financial supervisors and tax authorities
- Extending the VAT exemption for the management of venture capital funds to level the playing field in Europe
The complete government draft of the Future Financing Act is available here.
The law is expected to come into force this year and must be approved by the Bundestag and Bundesrat.
