Location Promotion Act: Strengthening the Capital Market

Ultimately, the StoFöG is the Future Financing Act II in new, black-red guise, as the latter was no longer passed after the collapse of the traffic light coalition at the end of 2024.

The StoFöG, which largely came into force on February 10, 2026, is intended to strengthen Germany as a financial center. To this end, it facilitates companies’ access to the capital market and improves tax framework conditions to mobilize private growth and innovation capital.

The following regulations are particularly noteworthy:

• Introduction of so-called penny stocks
• Facilitation of downlisting
• Adjustments to delisting
• Extension of prospectus-free securities issuance

Penny Stocks

The newly created Section 8(7) AktG makes it possible to issue shares in the future with a nominal value of just one euro cent—instead of at least one full euro as previously required. Germany is thus following a practice that has been established in many other countries for years.

The trend toward lower nominal amounts since the reduction of the minimum nominal value to one euro in 1998 shows that lower nominal values improve the tradability of shares and are particularly advantageous for SMEs and growth companies with low share capital. Capital increases are facilitated and fairer competitive conditions are created on international stock exchanges.

Downlisting

The StoFöG also brings comprehensive changes to the regulations for downlisting from the regulated market. In particular, Section 39 BörsG is amended so that an application for revocation of stock exchange admission may in future also be permissible without submitting an accompanying tender offer.

The revised version of Section 39 BörsG now also includes situations in which the securities continue to be traded on an SME growth market (so-called “downlisting”) or in which insolvency proceedings have been opened over the issuer’s assets. In Germany, the “Scale” segment on the Frankfurt Stock Exchange is currently the only established SME growth market within the meaning of European regulation.

For downlisting to an SME growth market, the obligation to submit a tender offer is now eliminated. A tender offer is a public offer to shareholders to sell their shares to the issuer or a third party at a specified price. Conducting such an offer is regularly associated with considerable financial expense as well as complex legal and organizational requirements. This step is justified by the fact that SME growth markets now have a regulatory level comparable to regulated markets and that orderly trading is thus still guaranteed. The changes will make downlisting significantly easier in the future and may therefore lead to remaining on the capital market rather than complete delisting.

As a second category, the obligation to submit a tender offer is eliminated in the future if insolvency proceedings have been opened over the issuer’s assets. This is intended to avoid disadvantaging creditors and to facilitate the restructuring of the company.

Delisting

For delisting applications with a tender offer, the consideration offered must remain a cash payment in euros and must at least correspond to the weighted average price of the securities on German stock exchanges during the last six months before publication of the delisting application.

If special circumstances during the relevant period have influenced the stock price so strongly that it would lead to unreasonably low consideration, a Business Valuation is required to determine an appropriate offer price. Special circumstances exist in particular in the event of violations of the prohibition on insider trading or market manipulation. However, these violations must also have had a material effect on the calculated average price. This materiality is assumed if at least two immediately consecutive stock prices of the issuer differ by more than 5%.

Another new feature is that the appropriateness of the consideration offered can now be reviewed upon application in judicial appraisal proceedings. The court examines whether the offered price is fair and appropriate and can order adjustments if necessary. This step is criticized because appraisal proceedings involve considerable cost and time and can thus place an additional burden on the delisting process. This could further reinforce the general trend toward listings abroad.

Extension of the previous so-called 8-million-euro exemption

The Location Promotion Act (StoFöG) also contains regulatory relief in the preparation of securities prospectuses. Section 3 WpPG—and thus the threshold of 8 million euros—is repealed without replacement with effect from June 5, 2026, so that the directly applicable EU Prospectus Regulation (ProspektVO) now applies and the upper limit effectively rises to 12 million euros.

Companies in Germany can now publicly offer securities up to this amount using a three-page securities information sheet without having to prepare a prospectus. This significantly reduces the costs for smaller securities issues, as the preparation and publication of a securities information sheet requires considerably less effort than a complete securities prospectus. The new 12-million-euro exemption is therefore particularly welcome and opens up attractive opportunities especially for SMEs. In addition, the obligation to prepare a German summary for English-language prospectuses is eliminated.

Conclusion

Whether the Location Promotion Act can sustainably remedy the structural deficits of the German financial market remains to be seen. Regardless, it is an important step toward approaching the successful and significantly more efficient U.S. capital market regulatory framework.

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