Germany: Future Finance Act Aims to Boost Access to Capital, Embraces Digital Securities

Earlier today, Germany’s Federal Minister of Finance, Christian Lindner, and the Federal Minister of Justice, Dr.Marco Buschmann, announced regulatory and policy changes designed to boost entrepreneurship, access to capital, and embrace the digitization of finance with digital securities – or security tokens.

The Financing Act. Das Zukunftsfinanzierungsgesetz.

In a statement, the two Ministers noted that “Germany is facing the enormous task of shaping the digital change.” This can only be accomplished if there is sufficient access to private capital along with public funds thus the government aims to make capital markets more efficient and make the” German financial center more attractive.”

Germany is planning various tax, capital market, and corporate law measures are intended to improve the financing of future investments and access to the capital market for companies, especially start-ups, growth companies, and SMEs.

Lindner stated:

“We want to make Germany the leading location for start-ups and growth companies. That is why we are improving access to the capital market and making it easier to raise equity. Small and medium-sized companies will also benefit from this. We pursue a comprehensive approach: We [have] created financial market law simplifications, [developed] company law and [improved] the tax law framework, especially for employee capital participation. In tax law, [we provided] [an] important impetus to strengthen the share culture. We want to create an allowance for profits from the sale of shares and share funds in private assets. We are lifting narrow loss offsetting limits and at the same time simplifying the investment.” [translated]

Buschmann said the digitization of capital markets is especially important for the future – alluding to digital securities and Fintech in general.  In some respects Germany has been slow to embrace digital finance but now it appears this has changed:

“In the future, we will also let the digital age dawn for shares,” stated Buschmann. “The law on electronic securities is, therefore, to be extended to include shares. We are also increasing the opportunities for raising equity by facilitating capital increases.”

The Financing Act includes several different aspects, including enabling SPACs, lower capital requirements for IPOs, improving the “tax attractiveness” for investors including higher tax exemptions for capital gains, and more.

Of interest is the policy for the digitization of finance. To quote the ambition of the Act:

“[The] Digitization of the capital market, for example by creating the possibility of issuing shares as electronic securities – possibly also due to blockchain technology or comparable technologies. Improved transferability of crypto assets is also being examined. So far, German law only has regulations for the transfer of selected crypto assets.”

The Act seeks to remove obstacles to the digitization of finance providing “up to date” supervision from BaFin – the financial regulator.

Overall, the goal is to improve Germany as a financial center and support innovation with an improved legal framework as well as better access to capital and incentives for investors.

The outline of the Future Act is available here (in German).

It was not immediately clear how this will impact online capital formation in Germany under the new European Crowdfunding Service Provider Regulation (ECSPR), the pan-European investment crowdfunding rules that are in force. Any securities crowdfunding platform based in Germany must be regulated by the relevant authority, BaFin.

 

 

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