With the Future Financing Act (ZuFinG), German lawmakers have introduced specific corporate law regulations for so-called shell companies (Börsenmäntel for short). The aim is to open up the German capital market to this special form of corporate financing and make it more competitive internationally.
Shell companies are publicly traded shell companies without their own operating business. Through a shell company transaction, an operating business indirectly enters the stock market. This form of financing has gained considerable international importance in recent years.
SPACs (special purpose acquisition companies) are considered a special form of shell company, whereby it is not an operating company in the traditional sense that is looking for a shell company, but rather the other way around: the shell company (SPAC) first raises capital and then identifies a suitable operating company to acquire.
Legal hurdles previously encountered in “German” SPAC transactions were often overcome by using foreign legal forms. One example of this was the use of the Luxembourg SE, whose shares could then be traded on the stock exchange.
This has changed with the amendment of German stock corporation law. The new regulations are specifically tailored to the special requirements of SPAC transactions.
Among other things, the law expressly permits IPO proceeds to be deposited in a trust account – a core element of any SPAC structure. In addition, the law provides for a right of return for investors in the event of a SPAC transaction – a mechanism that was previously hardly practicable under German law. The use of so-called “naked warrants” – i.e., separately tradable subscription rights – is now also expressly permitted. Another milestone is the legal anchoring of the competence of the general meeting to decide on the target transaction.
The possibility of carrying out SPAC transactions with German vehicles, which is now enshrined in law, greatly strengthens the shell company sector and the financing options available to companies, making Germany more competitive internationally.
The new regulation shows that legislators have recognized that innovative forms of financing require a flexible legal framework and have taken an important step in the interests of further developing a sustainable capital market with this reform.
About INSTANT IPO SE:
INSTANT IPO is Europe’s first independent specialist focusing on fast IPOs and is the German market leader in shell companies.
As an official capital market partner of the Düsseldorf Stock Exchange, INSTANT IPO realizes customized, time- and cost-efficient IPOs for companies in every industry. In addition to implementing traditional initial public offerings (IPOs) or pure listings, INSTANT IPO’s special expertise lies in particular in the segment of shell company/SPAC transactions (reverse IPOs, reverse mergers, reverse takeovers, cold IPOs), as shell companies offer considerable advantages to companies seeking to go public.
