Online message – Wednesday 08/16/2023
Legislation | Federal government passes future financing law (BMJ)
On August 16, 2023, the federal government passed the draft of a law on the financing of future-proof investments (Future Financing Act – ZuFinG). The draft law is intended to strengthen Germany as a financial center through an extensive package of measures and improve the economic framework for start-ups, growth companies and SMEs.
background: The Future Financing Act aims to facilitate market-based financing on the German capital market. On the one hand, this is intended to strengthen the position of Germany as a financial center in international competition and, on the other hand, to provide economic impetus. A more attractive capital market and improved financing options should make it easier for start-ups and growth companies in particular to raise new capital for investments. In addition, young companies as well as established SMEs should benefit from new tax rules for employee capital participation in the competition for international specialists.
The essential measures:
Easier capital market access for start-ups and growth companies
European capital market law is highly harmonized. With the Future Financing Act, in conjunction with the simplifications sought at European level in the so-called Listing Act, existing national leeway is used to
Lowering barriers to capital market access
and the Facilitate going public.
In the case of IPOs, the stock exchanges will in future be able to dispense with the previously required co-applicant in parts of the regulated market, which can reduce the costs of IPOs.
The minimum market capitalization for IPOs will be reduced from EUR 1.25 million to EUR 1 million in order to also open up the way for smaller companies to the capital market.
The issue of shares with multiple voting rights, with a voting right of up to 10:1, is made possible. This creates new incentives for IPOs, as founders retain their influence on the company despite raising capital and can thus continue to contribute their expertise extensively to the company. At the same time, investors are protected without multiple voting rights.
With the stock exchange shell company (BMAG), a modern instrument based on the model of the Special Purpose Acquisition Companies (SPACs) in the USA is made available that opens up an alternative route to the capital market for start-ups and growth companies, from which investors can also benefit. In doing so, it is ensured in accordance with international standards that adequate protection of investors is guaranteed. The shell company serves as a vehicle so that young companies do not have to carry out the complex and expensive procedure of going public themselves.
Better framework conditions for start-ups, growth companies and SMEs
Companies are competing internationally for the brightest minds like never before. However, in order to successfully launch their innovative ideas and new technologies on the market, start-ups, growth companies and SMEs in Germany urgently need committed employees. With attractive Rules for employee share ownership the Future Financing Act strengthens the German economy in the competition for skilled workers. In the future, employees will also be better able to participate financially in the development of their company.
Tax allowance for employee share ownership will be increased from the previous EUR 1,440 per year to EUR 5,000 (§ 3 No. 39 EStG) and thus raised to a level that is competitive in a European comparison.
The allowance can also be exhausted by converting wages up to 2,000 euros per year.
In particular, the law regulates the so-called Dry income problem defused. To this end, the scope of application of the provision on deferred taxation under Section 19a of the Income Tax Act will be comprehensively expanded.
Further simplifications and modernizations in financial market law
Capital increases for an AG are made easier, thereby improving the general conditions for raising equity. A higher quota of 20 percent (instead of the previous 10 percent) is planned for the simplified subscription right. In suitable cases, contesting disputes about the issue amount is excluded and arbitration proceedings are introduced instead.
An area exemption from the judicial control of the general terms and conditions for contracts concluded between financial service providers is created. This strengthens the ability to connect to international standards and thus the competitiveness of Germany as a financial location. Contracts with companies in the real economy and with consumers are not included.
The possibility is created to issue electronic shares in an electronic securities register or crypto securities register.
The law creates a regulation that allows the separation of crypto assets from customers in the insolvency of the crypto custodian with legal certainty.
Legal certainty and manageability in the regulation of liability for crowd funding (crowdfunding) will be improved. For investment funds, investments in plants for renewable energies are made easier from a supervisory perspective.
Financial market supervision is being modernized further – for example by removing obstacles to digitization and improving the framework conditions, for example in English-language communication with BaFin.
A comparison website for payment accounts according to the EU Payment Accounts Directive is being set up at BaFin.
Confidentiality obligations in the Financial Supervision Acts will be adjusted to improve cooperation and information exchange between the Financial Supervision and the tax authorities.
The law also creates new regulations for the DLT pilot regime in accordance with the corresponding EU regulation.
Further tax policy adjustments for a level playing field
VAT exemption for managing venture capital funds will be expanded to level the playing field in Europe.
Administrative services provided by underwriters with open syndicated loans
from sales tax.
Those: Federal Ministry of Justice, press release from 16.8.2023 (il)