The Future Financing Act was passed by the German Bundestag on November 17, 2023 and took effect on January 1, 2024.
“Omnibus Act”: Various statutory codes revised by the Future Financing Act
With over 30 amended individual laws (“omnibus law”) the new law to enables on the one hand more tax-attractive employee participation models and on the other hand modernized stock and capital market law in specific areas.
Taxation of Management/Employee Equity Participation Schemes
We cover the comprehensive improvements for management/employee equity participation schemes in a separate post.
Corporate and Capital Market Law Changes – Overview
The legislation introduces the possibility to maintain electronic (registered) shares in an electronic security registry or crypto security registry. Furthermore, in anticipation of the EU-wide Markets in Crypto Assets (MiCA) regulation, a rule has been created for the segregation of client crypto assets in the insolvency of the crypto custodian. Institutions conducting crypto custody business must make provisions to separate their own crypto assets from those they are custodian of, as per the amendment to the Banking Act.
For initial public offerings (IPOs), stock exchanges can now waive the previously necessary co-applicants in certain segments, reducing costs. The minimum market capitalization for IPOs has been lowered from 1.25 million EUR to 1 million EUR. Additionally, an application for stock exchange listing can now be made without the previously required issue companion.
Raising equity capital for stock corporations is also to be simplified through the reintroduction of multiple voting rights shares (§ 135a AktG). In other words, the voting majority can be retained, even when investors are taken into the shareholder circle.
The creation of a shell stock company, pursuant to Sec. 44 et seq. German Stock Exchange Act provides an alternative route to the stock market, inspired by the model of Special Purpose Acquisition Companies (SPACs) under US laws.
Capital increases (stock corporations) are facilitated. The threshold for simplified exclusion of subscription rights in stock corporation law is raised from 10% to 20% of the share capital. In addition, the limits for conditional capital for corporate mergers and for employee and management board member subscription rights are increased from 50% and 10% to 60% and 20%, respectively. Disputes over the appropriateness of the issue amount for capital measures are no longer to be decided in an rescission procedure, but in an appraisal procedure.
There are also changes to the liability regulations for crowdfunding projects, as governed by the German Securities Trading Act. The adjusted liability regulation aim at facilitating it for investors to enforce claims.
Financial market supervision is to be modernized by removing digitalization barriers and improving the framework conditions, such as English-language communication with authorities upon request. Written form requirements in supervisory law are supplemented or replaced with digital communication options.
Th German BaFin (Federal Financial Supervisory Authority) will establish a comparison website for payment accounts in accordance with the EU Payment Accounts Directive.
Confidentiality obligations in capital market law are adjusted to improve the exchange of information between financial supervision and tax authorities.
Finally, the Banking Act, implements regulations for the implementation of the Distributed Ledger Technology (DLT) pilot regime under the corresponding EU Regulation (EU) 2022/858.
Further Tax Law Amendment for INVEST funding conditions
Pursuant to Sec. 3 No. 71 German Income Tax Act, the INVEST grant is tax-exempt. As the INVEST funding guidelines were adjusted in 2023, the tax exemption of grants under the INVEST scheme is now adapted to the new funding conditions.
VAT Exemption for Management Services of AIFs
Administrative services of alternative investment funds are now exempted from VAT. However, due to budgetary constraints, the planned extension of the VAT exemption for the management of loans and loan securities by lenders was not implemented.
Higher Employee Savings Bonus
The income thresholds for the employee savings bonus are raised to EUR 40,000 for individual and EUR 80,000 for joint assessment (married, partnered), expanding the circle of eligible persons.
Consumer Protection Law and Other
Other changes enacted by the Future Financing Act concern consumer loan agreements and residual debt insurance. In the future, pursuant to Sec. 307, 308 No. 1a and 1b German Civil Code, an exemption from general terms and conditions control will apply to such general terms and conditions used in contracts for licensed transactions under the German Banking Act), the Securities Institutions Act, and the Payment Services Supervision Act between banks and other financial institutions licensed under these laws.
Supervisory relief for open real estate funds for the acquisition of land on which facilities for generating, transporting, and storing electricity, gas, or heat from renewable sources are located, and the subsequent own operation of such facilities, was not implemented.
