Select the IPO-experts who usually consist of

• an IPO-advisor,
• an issuing bank and a banking syndicate,
• certified accountants and lawyers as well as
• a PR-agency.

At the beginning of the IPO-process you work out an IPO-conception jointly with the IPO-counsel and/or the issuing bank, which serves as schedule leading to the ultimate object “IPO“.

An initial public offering (IPO) is a complex process requiring both practical as well as special technical knowledge. It is divided into a preparation stage, a planning stage and an actual process stage. On its way to going public, the company needs qualified partners during the different processes that render assistance in various ways. Therefore, for its IPO the company will seek the assistance of a team consisting of IPO-advisor, an issuing bank and further syndicate banks, certified accountants and lawyers as well as a PR-agency, if need be. In cooperation with part of their IPO-underwriters the company will prepare a project plan covering the complete IPO-performance, which determinates and structures its contents and arranges the time schedule. This IPO-conception forms the base for the cooperation of all persons involved in the project.

Due to the complexity of an IPO, counselling in various areas performed by experts from different functional directions is required. As a rule, these are:

IPO-advisor

Often the IPO-advisor is the first contact point for the company planning to go public. Depending on the agreement concluded with the company, the IPO-advisor’s activities may be limited to a kick-off counselling or may cover the complete process. The IPO-counsel’s position is that of an independent counsel. In this function, the IPO-advisor might be in conflict with the issuing bank, for one, due to a possible interference of their areas of activity and, for another, due to the fact that the IPO-advisor is under no obligation towards the cooperating banks and can position the company in relation to the syndicate banks. In many cases it will be the IPO-advisor who takes over the management for the preparations along the way to going public and who assumes project management and coordination.
Above all, the possible fields of activity of an IPO-advisor are the following:

• review if the company meets the requirements for going public,
• review of the company strategy, the corporate planning and the management processes,
• assistance with compiling the company’s equity story displaying key skills, success factors and perspectives of the company,
• preparation of a fact book as well as a management presentation,
• preparation and assistance of the company in selecting the underwriting banks or other capital market experts (so-called “beauty contest“),
• project management and coordination of the cooperation between all the IPO-underwriters and the company and
• development of a first IPO-conception with benchmarks of the IPO-plans.

In addition, the IPO-advisor may support the company, if need be, even after the IPO in the course of public and investor relations activities.

Issuing bank and banking syndicate

Generally an IPO will be accompanied by a banking syndicate, i. e a consortium of several banks and/or financial services providers with one of the banks assuming the function of the syndicate manager. The leading issuing bank as well as the other underwriting syndicate members often are selected by means of a so-called “beauty contest“. The company provides several banks of its choice with information on the company, for instance in form of a fact book and a description of the company’s personal equity story, and invites the banks to apply for syndicate membership or for the syndicate manager position for the IPO in question. The banks and financial services providers will use the information on the company to gain a first evaluation of the possible success of an IPO with this company.
The company’s decision for a certain candidate as syndicate manager is of great importance and gives direction to the further success of the IPO. Therefore, the size of the institute should not bet he only criterion, but the company should consider in its selection also other matters which are listed in exemplary manner here.

In practice, the selection of the leading issuing bank and the composition of the banking syndicate will be directed to the objective of addressing a preferably wide-spread investor circle and to achieve an optimal offering price for the company’s stock.

The core functions of the issuing bank belong to the actual process stage. During this stage the responsibility of the syndicate manager reaches from the preparation of a detailed time schedule covering the complete IPO-process and the care for adherence to this schedule, to the performance of a thorough evaluation of the company (due diligence), to the company’s positioning on the capital market by means of the equity story up to the successful marketing and placement of the stock offered. Simultaneously, the issuing bank is involved in the preparation of the securities prospectus and leads the company through the subsequent stock market listing process from application submittal to the first price fixing.
In short, the syndicate manager’s functions, above all, are the following:

• review if the company meets the requirements for going public
• performance of due diligence and company evaluation
• preparation of a thorough IPO-conception including a detailed time schedule
• preparation of research and analysts’ presentations
• cooperation in the preparation of the securities prospectus
• marketing and placement of the IPO
• assistance during the complete process of admitting the securities for listing
• support of the issuer after the IPO.

For performing all of its functions the issuing bank relies on the company’s close and trusting cooperation.

Legal counselling

Lawyers may be involved at various times in the IPO-process. During preparation stage, the company might need to undergo restructuring measures under company law in order to meet the requirements for going public. In such a case, the supporting lawyers will assist the company, for example, with changing its legal form of organization to a joint-stock company or with modifications of its existing articles of association.
During the actual process stage, the preparation and performance of a legal due diligence is among the lawyers’ core tasks in the course of an IPO. The legal due diligence serves the purpose of checking the complete legal circumstances of the company and to discover and evaluate, as thoroughly as possible, any and all legal risks resulting from the issuer’s legal and business relationships. In this context, pending legal disputes will also be reviewed.
Finally, experienced lawyers will generally be involved in the preparation of the securities prospectus. Thus the company can safeguard that the contents of the prospectus will comply with all requirements set forth in the Wertpapierprospektgesetz [WpPG, German Securities Prospectus Act] and the Prospektverordnung [Prospectus Regulation (EC)]. After preparation of the prospectus, the lawyers will also assist the company during the approval procedure at the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) [German Federal Agency for Financial Market Supervision] and support the company at implementing the necessary prospectus supplements and corrections. After performing the due diligence and preparing the prospectus, the lawyers, if need be, will confirm to the syndicate manager or other parties involved in the process by means of a legal opinion, that the prospectus correctly and completely displays the legally relevant topics.

Certified accountant

Depending on the trading segment and transparency standard aspired, there are different requirements regarding the accounting standard of the candidate for flotation. Therefore, it might be necessary to involve the certified accountant into the IPO-process at an early stage already. In case of a public offering of securities the accountant will assist the company, for instance, already during the planning and preparation stage with the conversion form national accounting to IFRS-accounting required for Annual Consolidated Report or with reorganization measures performed by the company in advance, insofar as the preparation of financial information is necessary.
Further on, the certified accountant performs a thorough financial due diligence, in the course of which the company’s economic development so far as well as the economic development it intends to take in the future come under critical review. This review and the definition of chances and risks are entered in form of secured financial information and risk notices into the securities prospectus. Depending on the trading segment selected and the related transparency standard, the IPO requires the financial statements of preceding business years to be reviewed and provided with the auditor’s certificate and included in the securities prospectus.
Moreover, the certified accountant confirms, by means of a comfort letter towards the issuing bank the financial figures and financial statements contained in the prospectus. This comfort letter also serves as documentation of the individual review services performed by the accountant.

PR-agency

The public relations counsel (PR-counsel) manages in close collaboration with the candidate for floatation and the syndicate manager the communication processes with the important external target groups as well as the business and financial press media . An IPO centres the company into the focus of the capital market. As a result extensive requirements regarding the communication with investors, analysts and other participants of the capital market have to be met. The communication activities aim to increase the company’s awareness level on the capital market, to present the business activities into the context of market and competition and to position convincing arguments for a share investment. In doing so, the PR-counsel, in coordination with the company and the issuing bank, assumes the following functions:

• development of a communication strategy,
• participation in the development of an Equity Story
• preparation of a presentation for the road show,
• assistance of the company in press releases and ad hoc disclosures regarding the IPO,
• individual preparation of the management for appointments with media and investors,
• organization of an IPO-press conference,
• conception and implementation of a company’s investor relation-website,
• preparation of the company regarding an obligatory communication and the investor relationship work after floatation.

The PR-counsels offer also further services. For instance, they often support the company in the active media relations work as well as the coordination of management interviews with journalists, up to the complete organization of IPO marketing campaigns. Some PR-counsels offer the company’s public or investor relations services after the IPO has been concluded.

For selecting the adequate IPO-underwriters, Deutsche Börse AG offers a network of experienced capital market experts, who can be recognized as Deutsche Börse Capital Market Partner. On the websites of Deutsche Börse AG you will find an up-to-date list of all Deutsche Börse Capital Market Partner, that are active in connection with admissions to the Regulated Market.

Issuer-Hotline

E-Mail: issuerservices@deutsche-boerse.com

Telefon: +49-(0) 69-2 11-1 88 88

Fax: +49-(0) 69-2 11-1 43 33

•     Bundesanstalt für Finanzdienstleistungsaufsicht [German Federal Agency for Financial Market Supervision]
•     Verordnung (EG) Nr. 809/2004 [Resolution (EC) No. 809/2004]
•     IPO-Services of Deutsche Börse AG
•     Deutsche Börse Capital Markets Partners
•     Wertpapierprospektgesetz [WpPG, German Securities Prospectus Act]

• Apply for an ISIN
• Provide your master data

The ISIN is an international securities identification number (International Securities Identification Number) for stock and certificates representing stock as well as for bonds, options and futures. It consists of a twelve-digit combination of letters and numbers which clearly identifies each security. In cross-border securities trading, the ISIN functions, in a way, like the number inside an identity card which technically allows for both national and international tradability and settlement of securities transactions as well as securities custody.

The ISINs are allocated by central national agencies, the so-called “national numbering agencies“, In Germany the “Herausgebergemeinschaft WERTPAPIER-MITTEILUNGEN Keppler, Lehmann GmbH & Co. KG (“WM“) assumes the task of the national agency for allocation of securities identification numbers. The WM is a service company providing information for the financial world with its registered offices in Frankfurt am Main. Within the scope of their task as numbering agency, WM also performs the administration of securities identification numbers and data by means of a publicly accessible securities register containing any and all data existing at WM on issuers and their financial instruments.

WM Datenservice
Düsseldorfer Straße 16
60329 Frankfurt am Main

Tel: +49/69 2732 480

An ISIN may be applied for by the issuer as well as by the syndicate bank. The ISIN is allocated in compliance with the ISO Standard 6166. This standard, for one, sets forth composition and structure of an ISIN, but, for another, also the requirements for allocation of an identification number. According to this standard, the allocation of an ISIN requires, among other things, certain minimum information on the issuer and the security; domestic issuers, for instance, have to provide an up-to-date excerpt from the commercial register and their current articles of association.

An iSIN is allocated upon respective application:

• as fax message to WM-WKN-Service: (0) 69/25 00 66 or (0) 69/24 24 84 76
• as Email to wkn-isin-de@wmdaten.com or wkn-isin-intl@wmdaten.com

The relevant application form for an ISIN can be found at the websites of WM Datenservice.

Pursuant to ISO Standard 6166, the ISIN consists of 12 digits in total. Two letters at the front serve as national code (see ISO Standard 3166). German ISINs start with the national code “DE“. Next is a nine-digit alpha-numeric combination which may consist of the capital letters A to Z (without mutated vowels, umlauts) as well as the numbers from 0 to 9. At the end there is a check digit calculated according to a determined algorithm.

As a rule, the ISIN will be allocated by the numbering agency according to a certain scheme. However, like selecting a special automobile number plate, it is also possible to apply for a favourite ISIN. In this case the core of the ISIN, the nine-digit basic number, will be allocated according to a sequence of numbers or letters or a combination of both individually selected by the applicant. The general rules for allocation, however, apply to this case also. WM Datenservice retains the right to deny without giving reasons the application for a favourite ISIN.

Details regarding this issue as well as the costs connected to it may be inquired directly at WM-Datenservice..
Contact: Help-desk@wm-daten.com, Tel: +49-(0) 69-27 32 480, catchword “Issuers Code”

The necessary data collected in the course of allocating an identification number which, similar to the particulars in a passport, serve the purpose of identifying the security are called master data. When applying for an ISIN, the applicant has to provide the numbering agency with all relevant master data referring to the security. Depending on the kind of security (e. g. stock or bond), these are, above all:

• ISIN/securities identification number
• issuer
• category
• stock market where the security is being traded
• state of origin
• currency.

These data will be collected by the numbering agency WM-Datenservice and provided in a publicly accessible register (WM-Wertpapier-Register [WM Securities Register]). When applying for an ISIN, the applicant also has to furnish the numbering agency with a copy of a current excerpt from the commercial register accompanied by a copy of the articles of association. In the time to follow, IWM Datenservice will need further information on circumstances following the issuance, like information on approaching general shareholders meetings, distribution of dividends or intended corporate actions. WM Datenservice will demand such data from the company based on the publications in the Bundesanzeiger [BANZ, German electronic Federal Gazette]; however, up-front information is considered very helpful.

Contact: Help-desk@wm-daten.com, Tel: +49-(0) 69-27 32 480

History

Since 1955 up to the implementation of the ISIN in April 2003, six-digit numeric securities identification numbers were issued in Germany for the identification of national securities. When in the middle of the 1980s more and more investors began to conclude securities transactions reaching across national as well as continental borders, frequent conversion of securities identification numbers to the securities identification used in the respective state became necessary.

In 1992 the organisation ANNA (Association of National Numbering Agencies) was founded by 22 national numbering agencies in order to further the option of issuing ISIN-numbers which already existed, however hardly were employed at that time. In this context, only three years later an electronic platform (GIAM = Global ISIN Access Mechanism) was created which provided for the exchange of ISIN-relevant data. The data base served the broader spread of the ISIN. After an expansion of the data platform in 1999, the platform served the purpose of bringing together worldwide data regarding ISIN-identification and making them accessible to other data suppliers.

In January 2000, the competent authorities in Germany decided to successively implement the ISIN as the new obligatory securities identification number. From the time of implementation on, already existing securities identification numbers either were continued additionally or transferred to an ISIN.

Calculation of the ISIN check digit

The check digit of the ISIN is calculated by means of a standardized algorithm (Modulus 10 Double-Add-Double):

• All the letters contained in the iSIN are replaced by numbers. For this purpose, the respective letter’s position within the alphabet is increased by nine. Thus A turns into the number 10, B into 11...and letter Z turns into number 35. All the numbers, however, remain unchanged. Therefore DE000ENAG99, for instance, turns into the digit sequence13140001423101699 and DE000BAY001 turns into the digit sequence 1314000111034001.
• Starting with the last digit, every second digit is multiplied by two and replaced by the cross total. Thus 13140001423101699 turns into the digit sequence 23240001826101399 and1314000111034001 into the digit sequence 1618000212064002.
• The digits of the resulting digit sequence are added up, i.e. their cross total is generated and the difference to the next higher number of tens is determined. This difference, if smaller than 10, will be the actual check digit or will result, should it equal 10, in a check digit 0. Therefore, for DE000ENAG99 or 13140001423101699, respectively, the cross total will be 51 and their ISIN-check digit will be 9 and for DE000BAY001 or. 1314000111034001, respectively, the cross total will be 33 and, thus, their ISIN-check digit will be 7.

Basic information for issuers

Please find information regarding the legal basis, the components, wording and further matters concerning the topic ISIN/ master data compiled under ”Basic Information”.

•     ANNA - Association of National Numbering Agencies
•     WM Gruppe [WM Group]
•     WM-Datenservice
•     WM-Wertpapier-Register [WM Securities Register]
•     Ländercode-Liste [List of National Codes]

• Prepare a prospectus in cooperation with the issuing bank and, if need be, legal counsels and certified accountants
• Submit the prospectus at “Bundesanstalt für Finanzdienstleistungsaufsicht“ [German Federal Agency for Financial Market Supervision] for approval
• Publish the approved prospectus prior to the start of the public offering or the admission to stock exchange trading, respectively

As a rule, pursuant to the regulations of the Wertpapierprospektgesetz [WpPG, German Securities Prospectus Act] and the Börsengesetz [BörsG, German Stock Exchange Act] public offerings of securities or the admission of securities to trading on an organized market require a prospectus. Existing exemptions from this obligation, which the regulations provide for, are specifically described in the respective law and mean the exception from the rule. The prospectus is an information document and has to contain the legally regulated information which is necessary to put the investors in a position where they can form a true opinion about the securities they are offered and, above all, about the risks connected to these securities.

The legal basis for requiring a prospectus for public offerings can be found in Sect. 3 WpPG for securities offered to the domestic public (Paragraph 1) or for securities to be admitted to trading at a domestic organized market (Paragraph 3). Pursuant to Sect. 2 No. 4 WpPG any communication to the public, irrespective of its form or the kind or way it is communicated, is considered a public offer as long as such communication contains adequate information about the offer conditions and the offered securities, so that an investor may be put in the position to decide on the purchase of or subscription for these securities. The exemptions set forth in the WpPG which do not require the publication of a prospectus are of merely minor importance for practical use as well as for the case of a classical IPO as described here; they may, however, be important for future corporate actions.

Regarding the admission of securities to trading on a Regulated Market Sect. 32 Paragraph 3 Börsengesetz (BörsG) refers to the WpPG and demands submission of a prospectus which was approved of pursuant to the regulations of the Wertpapierprospektgesetz (WpPG).

The competent authority for the approval of the prospectus is the Bundesanstalt für Finanzdienstleistungsaufsicht [BaFin, German Federal Agency for Financial Market Supervision].

Bundesanstalt für Finanzdienstleistungsaufsicht
Lurgiallee 12
D-60439 Frankfurt am Main
Telephone: +49 (0) 2 28-41 08-0
Fax: +49 (0) 2 28-41 08-15 50
Email: poststelle-ffm@bafin.de

The prospectus has to be submitted to the agency in single execution as original document bearing signature and accompanied by an application letter. If the approval of the document is not applied for by the company itself, the application letter has to be accompanied by an adequate power of attorney. More detailed information on the application letter’s contents and additional necessary records you can find, for instance, in the brochure “Der Wertpapierprospekt“ [“The Securities Prospectus”] published by the BaFin.

The supervisory authority will decide on the prospectus’ approval after having completed an integrity review of the prospectus, including a review on the coherence and comprehensibility of the submitted information, Sect. 13 Paragraph1 WpPG. The integrity has to be answered to the positive if the prospectus contains the minimum data required by the Prospektverordnung [Prospectus Resolution (EC)] as well as further components required by law (e. g. certain warning notices in the summary). However, the BaFin does not perform any checks on the prospectus’ contents in excess of the aforementioned reviews; therefore, a prospectus approved of by BaFin may be erroneous all the same. This means that claims arising from prospectus liability pursuant to Sect. 21 WpPG may be enforced in spite of the approval.

As provided by law, the BaFin has to decide on the application for approval within ten working days following receipt of the prospectus, Sect. 13 Paragraphs 2, 3 WpPG. The period of time is prolonged to twenty days, if the public offer refers to securities of an issuer whose securities have not yet been admitted to trading on an organized market situated in a state of the European Economic Area and if the issuer has never before made a public offering of securities by means of an IPO. According to the wording of the respective regulation, the time periods described above will start no sooner than upon submittal of a complete prospectus.

In practice, the issuer and the issuing bank or cooperating law firms usually will receive about two to three weeks after the first submittal of the prospectus remarks by the BaFin regarding the submitted version of the prospectus. After the document has been revised and a second version has been submitted to the approval authority, there might be further comments of the BaFin. Thus, the actual processing time at the BaFin largely depends upon the quality of the document submitted as well as upon the complexity of the circumstances concerned. It seems advisable to contact the approval authority already at an early stage in the course of the IPO-time schedule, in case of ambiguities regarding the necessary contents of the prospectus even prior to the preparation of the document.

After the approval, the prospectus has to be deposited at the BaFin and has to be published prior to the start of public offering, see Sect. 14 WpPG. The publication of the prospectus is a requirement for the legitimacy of the public offer. Additionally, the publication of the prospectus also is a requirement for the securities being admitted to the Regulated Market.

There are various options for publishing the prospectus, Sect. 14 WpPG. The prospectus may be printed in a newspaper which meets the requirements of Sect. 14 Paragraph 2 No. 1 WpPG; however, in view of the complexity of such document this option does not appear actually feasible. Alternatively, the prospectus may be kept as hard copy for free-of-charge distribution either at the stock exchange where the respective securities are to be admitted at the issuer’s offices, at the issuing bank or at the paying agents. Another option is the publication of the prospectus on the websites of the issuer, the issuing banks or the paying agents or on the homepage of the stock exchange, where the securities are to be admitted for trading. In case of a publication on the internet the issuer or issuing bank has to provide a free-of-costs hard copy upon request. The issuer has to communicate place and date of the publication immediately to the BaFin.

The necessary minimum contents of the prospectus is determined exactly by the EU-Directive on Prospectuses 2003/71/EC, the Regulation EC No. 809/2004 (Prospectuses Regulation) and the WpPG. Pursuant to the general provision of Sect. 5 Paragraph 1 WpPG the prospectus has to be written in an easily analysable und comprehensible manner and has to contain any information regarding the issuer and the securities required by the investing public to gain a true opinion on assets and liabilities, the financial situation, profits and losses, the issuer’s prospects for the future as well as the rights connected to the securities. The choice of wording has to allow for an easy understanding and evaluating of the information given on the issuer and the securities. The chart below gives an example for the composition and corresponding bulletins of a prospectus prepared in the course of an IPO:

Table of Contents

Prospectus Summary

Risk Factors

General Information

The Offer

• Reasons for the Offer
• Application of Issuing Proceeds
• Issuing Cost
• Third-Party Interests in the Issue

Information on Securities

• Income and Dividend per Share Performance
• Dividend Policies
• Dilution

Information on the Issuer’s Financial Situation

• Capital Resources, Debt Position and External Financing Requirements
• Selected Financial Information
• Explanation and Analysis of the Property, Financial and Profit Situation

Information on the Issuer’s Business Situation

• Market and Industry Survey
• Regulatory Environment
• Business Activities

General Information on the Company

• Information on the Company’s Assets and other Significant Provisions from its Articles of Association
• Company Bodies and Employees
• Shareholders Structure (prior to and after Performing the Offer)
• Transactions with and Legal Relationships to Associated Persons

Taxation in the Federal Republic of Germany

Financial Part

Glossary

Latest Development and Prospects

In practice, the prospectus for stock issue consists of one single document. The contents of some of the bulletins above will be explained briefly below. Please note that the following description shall serve merely for simplistic orientation and is by no means appropriate as only base for preparing a prospectus. In any case, details should be discussed with the competent department at the BaFin.

• Summary:
  The summary contains all the core statements in abbreviated form including the risk factors.
• Risk Factors:
  Here the relevant risks have to be explained which relate to the issuer, the issuer’s industry and the securities to be offered and/or admitted to trading.
• Information on the Issuer and the Securities:
  The information on the issuer and the securities form the focus of the prospectus. Their actual description depends on the company’s individual particularities. In case of a holding or a start-up company, for example, the structure needs to be considered, above all, in the explanation of the actively operating group companies or the company history.
  Regarding the issuer, in addition to a description of its corporate circumstances (information from the commercial register including equity in subsidiaries and articles of association) also the company’s bodies and their members as well as information on the employees have to be included in the prospectus. The statements on business activities encompass a description of the core activities displaying significant products and services with indication of the sales volume, which has to be itemized in a certain manner; they also encompass important tangible assets as well as the dependency on patents, licences or significant contracts. Also, the market and market environment and the competitor environment of the company are explained. Finally the group of companies as a whole is described. Statements on the issuer’s capital resources, debt position and external financing requirements have also to be disclosed in the prospectus; the same applies to information about its existing shareholders, the shareholder structure (prior to and after the securities offer) and the existing controlling relationships, if any. In addition, statements on the income and dividend per share performance as well as the issuer’s dividend policy have to be included. Information on transactions with associated persons has to be described in the prospectus. Besides the explanation of selected financial information, independent of the prospectus’ financial part (see historic financial information), the property, financial and profit situation of the latest three business years has to be discussed.
• Public Sales Offer:
  Information on the public sales offer, the reasons for such offer and the application of the issuing proceeds are to be included in the prospectus. Besides the time schedule for the public offer, among these are especially information regarding the number of offered stock, the nomination of the offering price or the price spread, respectively, as well as the offer period. The prospectus will also contain statements on the intended stock exchange listing and the expected start of quotation. There are statements on possible stabilisation measures, surplus or “greenshoe”-options. Finally market protection agreements, if any, have to be disclosed and a paying agent and a custodian have to be named.
• Historical Financial Information:
  The issuer’s Annual Financial Statements for the precedent three business years have to be printed in the prospectus. In addition, there might be the obligation to insert an interim report, if this is necessary in order to achieve meaningful financial information, so-called pro-forma financial information. German issuers might be under the obligation to insert, in addition to the Annual Consolidated Financial Statements prepared in compliance with international accounting principles, also their individual financial statement pursuant to HGB [German Commercial Code] in order to meet the requirements regarding information for the assessment of dividend distribution.
• Course of Business and Business Forecast:
  Here significant developments which took place since the latest historic financial information have to be described and a forecast on future business has to be given.
• Formalities:
  Generally, the prospectus contains a cover sheet and starts with the table of contents. Depending on the industry, it might be helpful to add a glossary to the prospectus listing the industry’s technical terms. Essential elements of the prospectus are the explanation of taxing matters and finally the signatures of representatives of the issuer and the issuing banks involved.

As a rule, the publication of an approved prospectus is a requirement for the admission of securities to the Regulated Market. This means that the approval and publication of the prospectus obligatorily has to take place prior to the decision on admitting the securities to the floor. The prospectus, stating the kind of its publication as well as the letter of approval by BaFin, has to be attached to the application for admission of securities to the Regulated Market.

The legal basis for this is set forth in sect. 32 paragraph 3 BörsG [German Stock Exchange Act], which refers to the WpPG [German Securities Trading Act] for the question of admitting securities to trading on a Regulated Market and demands submittal of a prospectus approved of and published pursuant to the regulations of the WpPG.

Formerly in Sect. 44 BörsG set out basis for claims resulting the prospectus liability is passed over to Sect. 21 WpPG; a simplified survey of the conditions leading to an application of this provision is given below:

The relevant fact causing this liability lies in the purchase of securities, which are admitted to stock trading, based upon an incorrect or incomplete prospectus.

As a rule, this liability is limited to those securities purchased as a result of the prospectus, which were admitted to trading, for example, in the course of the IPO. If other securities, which were not admitted due to the respective prospectus, can be distinguished by their features or in another way from those securities admitted due to the prospectus in question, there shall be no liability for these other securities from this prospectus, Sect 21 Paragraph 1 No. 2 Clause 3 BörsG.

The contractual purchase transaction has to be concluded within six months following the publication of the prospectus and the initial listing of the securities, irrespective of the fact if it is a first or a subsequent purchase.

The purchaser is entitled to reimbursement of the purchase price plus the usual costs connected to such purchase in turn for reassignment of the securities. If the purchaser does not hold the securities any longer, they may demand the difference amount between the purchase price and sales price including the costs usually connected with securities transactions. In both cases, the purchase price is limited by the initial offering price of the securities, Sect.21 Paragraph 2 Clause 1 WpPG.

As regards the characteristics “incorrect“ and “incomplete“, it has to be noted that the characteristic “incomplete“ is a subset of “incorrect”; therefore, an incomplete prospectus will always be incorrect, too. A prospectus is incomplete, if it fails to contain significant or mandatory information. Inclusion of all information required by the Prospectus Resolution does not mean, however, that the prospectus is actually complete. Rather, the prospectus will get close to these requirements if it allows the investing public, among other things, to gain a true opinion on the issuer and the securities, see Sect. 5 Paragraph 1 WpPG as well as the chapter „Contents of the Securities Prospectus“.

Pursuant to Sect. 21 Paragraph 1 WpPG, the incorrect or incomplete information has to be of significant importance for the evaluation of the securities. With consideration of Sect. 23 Paragraph 2 No. 2 WpPG significant information, by all means, is information which upon orderly inclusion in the prospectus would not have lead to a decrease of the securities’ stock exchange price.

However, the prospectus liability resulting from the BörsG does not apply, if the incorrectness or incompleteness of the prospectus was not caused by wilful intent or gross negligence, therefore, the faulty nature of the prospectus was not known and such absence of knowledge does not result from a specifically aggravated case of violation of due care, Sect. 23 Paragraph 1 WpPG. At this point, the competent IPO-underwriters gain importance who by means of prospectus preparation, submittal of legal and disclosure opinions by the legal counsels and comfort letters by the certified accountants will assist in building a legal defence and, if need be, contribute to a discharge from liability. As a rule, also the co-applicant of the application for the securities’ admission to the Regulated Market, who usually is among the IPO-underwriters, can be held liable within the scope of the prospectus liability resulting from the BörsG.

It needs to be observed that approval of the prospectus by the BaFin is no indication for correctness and completeness of the prospectus. In addition to the prospectus liability resulting from the BörsG, whose basic principles were explained above, further prospectus liabilities exist based upon the German Investment Act [Vermögensanlagegesetz – Kapitalanlagegesetz], the prospectus liability resulting from investment-related regulations and the prospectus liability provided by civil law. However, these kinds of prospectus liabilities shall not be discussed here.

Where can a prospectus be obtained?

The prospectus has to be published pursuant to Sect. 14 WpPG [German Securities Prospectus Act]. In most cases, it may be obtained as a hardcopy at the issuer or the issuing banks and as electronic document from the issuer’s website. In addition, the Bafin [German Federal Agency for Financial Market Supervision] maintains a data base („Hinterlegte Prospekte für Wertpapiere“ [Deposited Securities Prospectus]) from which prospectus’ may be accessed.

How long does a prospectus remain valid?

Pursuant to Sect.9 Paragraph1 WpPG a prospectus will be valid for a period of twelve months following its authorisation for public offers or admissions for trading at an organized market, if it is updated by necessary amendments, if any (Sect. 16 WpPG). In summary, the amendment serves the purpose of updating, however under certain circumstances also the purpose of correcting the prospectus by describing “any important new circumstance” or by correcting “any significant incorrectness”. In view of prospectus liability the amendment requirement ought to be checked diligently.

Basic information for issuers

Please find information regarding the legal basis, the components, wording and further matters concerning the topic prospectus compiled under ”Basic Information”.

BaFin Bundesanstalt für Finanzdienstleistungsaufsicht,Referat PRO1

Telephone: +49-(0) 228-41 08-0

• Börsengesetz [German Stock Exchange Act]
• Börsenzulassungs-Verordnung [German Stock Exchange Admission Regulation]
• Prospektverordnung EG Nr. 809/2004 [Prospectus Resolution (EC) No. 809/2004]
• Prospekt-Richtlinie [EU-Directive on Prospectuses]
• Bundesanstalt für Finanzdienstleistungsaufsicht [German Federal Agency for Financial Market Supervision]
• Wertpapierprospektgesetz [German Securities Prospectus Act]

• Preparation of an offer for sale
• Offering price determination
• Stock placement
• Allocation of stock to investors

A placement within the scope of an IPO (“Initial Public Offering“) means the execution of a first-time public offer for sale of securities on the capital market. Therefore, the placement is among the most important functions of the syndicate bank and is critical for going public successfully.

In the process it is the company’s objective to sell the complete amount of stock to be placed at a price attractive to both company and investors.

Prior to actual placement proceedings, an agreement on the takeover of the new securities for sales purposes (= takeover agreement) is concluded between the company and the banking syndicate, which is followed by the offering procedure. At the end of placement proceedings, the securities offered will be allocated to the future investors.

If the placement is not public, it is a private placement. In case of a private placement the stock to be placed is offered for sale exclusively to a limited circle of investors and the offering will not be communicated through public media.

For an IPO the stock is advertised in public and the company is presented, among other means in the course of road-shows, to the institutional investors. In order to provide investors with the information required for their investment decision, the company publishes a securities prospectus which has to be reviewed and approved of in advance by the Bundesanstalt für Finanzdienstleistungsaufsicht [BaFin, German Federal Agency for Financial Market Supervision].

The public offer for subscription and sale is directed both to the institutional investors and to the public (above all, to private investors); besides better sales potential, the public offer benefits from the fact that it will address a wide-spread investing public and will attract corresponding attention.

Thus, a sufficient free float of the securities is achieved, which is not only a requirement for the securities’ admittance for stock exchange trading on the Regulated Market, but also for well-functioning stock trading in general.

Price determination is among the most important steps in the course of a securities issue as the price will decide on the proceeds and, thus, on the success of the issue. The offering price can be determined as a fixed price prior to starting the offering (so-called fixed price procedure) or the price can be established openly during the offering procedure based upon the principle of supply and demand (tender procedure and book building procedure).

The determination of the offering price is based on a thorough analysis and evaluation of the company (due diligence) which has been performed in preparation of the price determination under consideration of the stock market valuation of similar companies (peer group) as well as the general market situation. Based upon the market price for shares in the company calculated in the aforementioned way (“fair value“), the price or a price range for the stock is determined. On the one hand, the sales price shall meet the company’s financial requirements, but shall also contain, on the other hand, potential for price increases in order to let investments in this security appear as an attractive option to possible investors.

Depending on their focus during the issue, the company will select one of the following methods for the offering price determination:

• fixed price procedure
• tender procedure
• book building procedure

When the fixed price procedure is chosen, the stock is placed at a fixed price, i. e. prior to the offering’s start, the company and the syndicate members will fix a sales price which forms the base for the public offering and will be communicated to the market in the course of publishing the offer conditions. This method of price determination bears the disadvantage that company and syndicate members will not be in the position to react to a changing market environment in the course of the offering. If the price is considered too high by market participants, there is an increasing risk that either not all of the securities might be placed or the price might need downwards adjustment, which would result in the issue revenue falling behind expectations and the success of the issue being jeopardized.

For placing a securities issue through the so-called tender or auction procedure, there will be no decisive sales price determined. The offering merely contains details regarding the security’s features, the issue volume and a minimum price as lower limit. During the subscription period, interested investors may enter a purchase bid at minimum price or above. At the end of the offer period the buyers will purchase a security, depending on prior determination, either at a standard price calculated for instance as the arithmetic mean of all bids submitted (so-called “Dutch procedure“) or at the purchase price as set forth in their individually submitted bid (so-called “American procedure”). This price determination method will determine the price according to the principle of supply and demand. The issue revenue and, therefore, also the success of the public offering will depend upon the market at the end of the day. As a consequence, investors need sufficient knowledge of the capital market and the current market situation in order to submit an adequate bid for the securities at sale when this price determination method is applied.

Finally, the book building procedure combines the advantages of the fixed price procedure with those of the auction procedure. During this past years, it has developed to become the most favoured price determination instrument especially for stock issue and, thus, will be explained in more detail below.
The book building procedure is divided into different stages:

For the classic book building procedure company and banking syndicate will jointly agree on a price spread prior to the start of the offer period. This spread will be ascertained in advance by the syndicate members based upon the due diligence performed in combination with a targeted investors’ survey. In the course of such survey, the banks inquire the interest of potential investors in the stock by asking, for instance, for non-binding purchase bids. Prior to the start of the actual offering stage, a price spread will be determined and published accompanied by any other Information regarding the securities offered.

At the same time as the discussions with investors for the price spread determination take place, the company will present itself accompanied by the banking syndicate at various finance venues to give interested investors an opportunity to collect in systematic manner information regarding the securities and the company. These so-called “road shows” aim at winning over potential investors by means of professional marketing, individual contact to certain investor groups and providing of transparency.

Upon start of the subscription period, all bids received within the allowed price spread are entered into a central order book. After the period’s expiration the offering price is determined according to the existing bids (closing). Purchase bids below this offering price will not be considered in the process of stock allocation. Investors offering a price higher than the final offering price will purchase the security at offering price. In case the number of purchase bids should exceed the number of stock to be issued by the company, allocation criteria will be determined. Thus, this kind of price determination leaves the company with the option to take influence on the kind and spreading of their future shareholders in the course of deciding on the sales price.

As a variation of the classic book building procedure, the so-called “decoupled book building” has developed. For this method the subscription period is shortened to a few days and the price spread is published only a short while prior to opening the order book. At this moment, the road show usually has been finished. Therefore, the marketing of the securities is decoupled from the determination of the price spread and offering price. In doing so, the risk that the issuing price might be getting under pressure e.g. from public opinion is limited to the stage of the shortened subscription period.

The submission of a purchase bid or an order for subscription of securities does not create a title to purchase such securities at all or at a certain price. Such title requires an allocation. In the course of the allocation the company and the syndicate manager decide if and how many stock an investor shall receive based on the bid they submitted. For this allocation decision the intended shareholder structure will be the central criterion. Here thoughts might be considered, if, for instance, a broader spreading of stock should be aimed for, if more private investors or institutional investors are wanted as shareholders or if international shareholding is desirable.

In case of oversubscription of securities, when the number of purchase bids exceeds the number of stock actually issued by the issuer, the company and the syndicate manager will set forth allocation criteria according to which the stock will be assigned. The investors may receive only a part of the requested securities based upon a calculated quota resulting from the allocation criteria.

Some companies use the option to reserve part of the securities offered to the public for employees of their company or of affiliated or partner companies of the issuer and to allocate stock preferably to these investor groups in the scope of “friends and family”- programs.

Generally the allocation takes place already in the evening of the last day of the placement period directly following the closing and is published through electronic media on the same day. Securities launched for public subscription can be introduced into stock exchange trading only after the allocation has ended.

In order to transfer the placement risk, depending on the company’s interests and willingness to assume risks partially, or wholly to the banking syndicate, the company and the issuing syndicate, as a rule, will conclude a takeover agreement prior to the start of the public offering. There are various options for risk distribution.

If the parties choose the form of an underwriting syndicate, the syndicate banks will purchase the intended number of issued stock (syndicate share) at a fixed price in order to sell it afterwards on the capital market in their own name. The placement risk (sales and price risk) lies with the banks. Remainder of stock not placed at the end of the offering and allocation proceedings will remain for the time being in proprietary possession of the syndicate members.

In the converse case, the banks will function as mere selling group. The banks act as commission agents for the initial placement of the securities. They may provide the company, if need be, with a standing of the underwriter for pre-financing the securities launch and place the securities on behalf and in the name of the company. In this case the complete placement risk regarding the price for the securities offered as well as the number of sold stock lies with the issuer.

In practical use, a combination of both variations has developed, the underwriting and selling group. This form combines the takeover of securities by the syndicate banks with the intention of leaving the performance and placement risk in adequate extent with the candidates for flotation. This may be achieved, for example, by setting the time for purchase or takeover to a date near the end of the subscription period or by determining the purchase or takeover price to the legal minimum amount. With an underwriting and selling group, there are options for the company to make arrangements regarding the decision on the eventual size of the capital increase and the determination of the launch time. In this connection “greenshoe options” or opt-out clauses agreed upon for certain circumstances may also serve the purpose of equal risk distribution.

At a private placement the newly created stock of a company is not offered to the public, but exclusively to a selected circle of investors. The banks and the company jointly will systematically approach potential investors whom they are in permanent intensive contact with. As a rule, these will be institutional investors or major investors.

This form of placement is an option, for example, for smaller domestic issues. Above all, the advantage lies in the fact that pursuant to the provisions of the Wertpapierprospektgesetz [German Securities Prospectus Act] the company will be relieved from the obligation to draw-up and publish a securities prospectus for an offering which is directed to less than 100 investors in each state of the European Economic Area. This will save both costs and time.

The introduction at the stock exchange will also be possible in the course of a private placement, if all other requirements for admitting the stock to trading, especially the requirements regarding the stock in free float, have been met and an approved securities prospectus has been published. In this connection, a private placement may also be considered as supplement to a domestic public placement. This may grant the option to sell part of the securities internationally without having to bear with the international regulations for offerings, like the respective prospectus publishing requirements.

Issuer Hotline

E-Mail: issuerrelations@deutsche-boerse.com

Telephone: +49-(0) 69-2 11-1 88 88

Fax: +49-(0) 69-2 11-1 43 33

• Federal Financial Supervisory Authority (BaFin) - www.bafin.de
• Wertpapierprospektgesetz [German Securities Prospectus Act]

• Prepare a legally valid securities certificate
• Cause the certificate’s depositing at the securities clearing and deposit bank
• Name a principal paying agent

The admission of a company’s stock to trading at the Regulated Market is subject to the free tradability of such stock, see Sect. 5 Börsenzulassungs-Verordnung [BörsZulV, German Stock Exchange Admission Regulation]. Pursuant to EU-law (Art. 35 Verordnung 1287/2006) [Commission Regulation (EC) No. 1287/2006] free tradability requires that securities may be traded and afterwards transferred between the parties of a transaction and that all securities are fungible within the same class. In order to provide for the required transferability, the stock has to be certificated and deposited in form of a document at a central depository, a securities clearing and deposit bank. A securities clearing and deposit bank is a credit institution which assumes the central depositing of securities and which was recognized for this task by the competent official body, see Sect. 1 Depotgesetz [DepotG, German Securities Deposit Act]. At the moment, there is only one officially recognized securities clearing and deposit bank in Germany which is the Clearstream Banking AG, Frankfurt am Main (“Clearstream“). The inclusion of stock of German companies in the Open Market at Frankfurt Stock Exchange also requires depositing a securities certificate with the CBF.

There are various options for the certification of securities as well as for their depositing. In the scope of an IPO, the issuing house will usually submit the stock in form of a permanent global certificate for the issuer at Clearstream for collective custody. Please learn below what exactly this procedure means and how it works:

Securities may be certificated as separate or global certificates. According to the security’s historic concept the buyer obtains a certificate embodying the issuer’s undertaking to pay or the membership right, respectively, which the holder may take home to keep it safe at their own place. This case refers to a so-called separate certificate bearing a certain value whose sole owner and holder is the buyer of the right.

The separate securities certificates (= physical securities) consist of a corpus, which is the master document embodying the ownership right in the company, of a coupon sheet with up to 20 coupons and a renewal coupon. The coupon sheet is the so-called ancillary document and the individual coupons have to be submitted to the competent paying agents in order to claim rights deriving from the document, e.g. subscription rights for newly issued stock. This requires presentation of the coupon sheet as evidence for ownership; the corpus, however, does not need to be presented. After all coupons have been used up, the renewal coupon may be turned in at a paying agent to request a new coupon sheet. This procedure also does not require the presentation of the master document. The renewal coupon in itself is the title-evidencing instrument for the shareholder.

The (principal) paying agent of the company is a bank or credit institution responsible and specifically authorized by the company for the settlement of any corporate actions connected to the securities (like e.g. dividend payments). Often the issuing house or one of the underwriting syndicate banks will assume this function. The investor may learn the institution assuming the function as payment agent from the securities prospectus, for instance.

For separate certificates of stock to be admitted for stock exchange trading, there are precise requirements regarding their format, composition, layout and print mode. These are determined in the “Gemeinsame Grundsätze der deutschen Wertpapierbörsen für den Druck von Wertpapieren” [Mutual Principles of Stock Exchanges in Germany for the Printing of Securities]. According to regulations of stock corporation law, the certificate has to be signed by the issuer, see Sect. 13 Aktiengesetz [AktG, German Companies Act].

As the certification of securities rights as separate certificates nowadays, in view of the circulation of securities, would result in enormous costs for material and transfer and cause major delays in the assignment of documents, the issuance of securities in form of a global certificate has become the normal case.

Pursuant to Sect. 9a DepotG a global certificate is an individual security in central custody certificating a complete issue or parts of it. There are three different kinds of global certificates: the global bond certificate, the temporary or interim global certificate and the permanent global certificate.
Normally, only part of an issue will be issued as global bond certificates. In addition, separate certificates exist in order to fulfil possible shareholders’ claims to delivery. This form of certification saves the company costs because there is no need to have separate certificates printed for each company share; it also saves space and effort for the depositing credit institutions in custody and management of these securities.
The form of a temporary global certificate often is selected at the beginning of a stock offering. The global certificate is deposited at a securities clearing and deposit bank in order to bridge the time to the existence of a permanent global certificate and, thus, to obtain the admission to stock exchange trading as soon as possible. After closing the IPO (“Initial Public Offering“) this interim certificate will be exchanged for a permanent global certificate.
The characteristic of these two global certificates is the fact that the right to claim a separate certificate stays with the shareholder; as a consequence, companies have to provide separate certificates upon request, see Sect. 9a Paragraph 3 Clause 1 DepotG. Pursuant to Sect. 10 Paragraph 5 AktG the claim of the shareholder for separate certificates may be excluded in the company’s articles of association. In this case, the securities will be issued as permanent global certificates.
This kind of global certificate certificates a complete issue or even any and all stock issued by a company, potentially for the whole duration of the securities. The shareholder’s right to demand physical separate certificates is excluded.

In practice, stock certificates usually are left at banks conducting securities accounts or at a securities clearing and deposit bank to be held in custody, which allows for a non-physical transfer of securities. The Depotgesetz contains specific details regarding the persons authorized to keep securities in safe custody for others, the various custody options and the detailed organization of custody. Securities certificates may be held in different forms of safe custody.

German law on safe custody knows three legally different kinds of custody:

• the segregated or jacket custody,
• the collective custody and
• the credit for safekeeping of securities abroad.

Securities listed at a stock exchange are usually kept in collective custody at a securities clearing and deposit bank.

In segregated custody the separate certificates are deposited at a bank or an institution conducting securities accounts in such a manner that pursuant to Sect. 2 DepotG a separation from the custodian’s own holdings and third-party holdings is externally visible, e. g. by means of so-called jacket custody. This kind of custody safeguards that the securities account holder (= depositor), at the time the certificates are taken from safe custody, will be returned exactly the same physical certificates that had been deposited by them. Due to the separation, the depositor’s sole ownership in the respective physical securities certificate remains unaffected.
The jacket custody owes its name to the individually marked paper ties which serve the purpose of distinguishing the individual certificates and separating them from the holdings of other shareholders in safe custody. In earlier times, the jacket contained the holder’s name and account number, the securities class, securities amount and securities number as particulars for individualizing the certificates. Today the certificate numbers of the securities deposited for jacket custody are registered and the certificates are kept separated from other certificates of the same class.
A variation of the segregated custody is the third-party custody ship; in this case the institution conducting securities accounts functions as intermediate custodian and transfers the holdings in its own name to a third-party custodian, e. g. the Clearstream, to be kept there in safe custody, see Sect. 3 DepotG.

There is also the option of collective custody. The securities deposited are no longer kept separate for each depositor, but are combined to a uniform holding insofar as they belong to the same class. Instead of sole ownership of a separate certificate, the shareholders own in co-ownership an imaginary fraction of the total holdings which is credited to a securities account, see Sects. 5 et seq. DepotG. This allows for a quick and efficient non-physical securities transfer (= giro collective custody), for the transfer of rights in or from the securities is performed solely by means of entering money to accounts (so-called securities clearing transactions).

In these collective holdings, the shareholders (= depositors) hold co-ownership at a fraction corresponding to the number of securities deposited by them. The ownership is legally valid towards anybody and for the assignment of securities in collective custody the general civil law principles apply, i. e. seller and recipient have to agree on the transfer of right and a transfer action (= securities account entry) is required. If the depositor may claim for the delivery of separate certificates and makes use of such claim they will be provided with stock corresponding in kind and nature to the stock handed in by the depositor to the collective holding.
If the company decides to issue its stock as a permanent global certificate, such certificate has to be kept for custody pursuant to Sect. 9a Paragraph 1 DepotG at a securities clearing and deposit bank, unless the issuer demands separate custody. As central custodian in Germany, Clearstream assumes part of the custodian banks’ functions. The benefit lies in the fact that securities transactions involving various custodian banks may be settled centrally through the securities clearing and deposit bank and do not require numerous technical connections among the various custodian banks. Thus, the central collective custody serves the purpose of facilitating custodial services and saving costs in the course of securities custody and management. Therefore it is the kind of custody which is generally selected by publicly quoted companies.

The custodian banks as clients of CBF and as intermediate custodians and CBF as securities clearing and deposit bank function as bailors for the depositor, thus by means of constructive possession of chattels based on agreement [Besitzmittlungsverhältnis] legally arranging for the depositor’s possession of the securities in custody. As custodians they do not own the stock. Within the assignment of securities co-ownership shares, the constructive possession of chattels based on agreement is shifted with each securities purchase or sale on every custody level from the selling to the acquiring depositor or their respective custodian banks. For securities deposited at CBF by a custodian bank in its function as intermediate custodian the non-property presumption pursuant to Sect. 4 Paragraph 1 DepotG, applies, i. e. the custodian bank, as a rule, is not deemed the owner of the securities it deposited.

The custody and settlement in securities rights (WR), the so-called fiduciary book entry transfers, has been provided for only rudimental in the German Securities Deposit Act. It is a special kind of securities custody which is employed, for instance, when foreign securities are purchased. If the client instructs the bank to acquire foreign securities, the bank will procure these securities as commission agent abroad. In doing so the bank, according to their dutiful discretion with adequate regard to the client’s interests, will obtain the securities’ ownership or co-ownership or another, similar legally valid position commonly accepted in the state the stock is kept safe and will hold this legal position in fiduciary manner for the client. The investor will receive a credit for safekeeping of securities abroad (= WR-credit) stating the foreign state where the securities are kept safe. Towards the custodian bank acting as fiduciary for them, the client merely possesses a contractual claim to restitution regarding this legal position as well as authority to give directives resulting from the fiduciary relationship. The domestic transfer of this legal position is performed according to law of obligations principles by debiting and crediting of accounts.

Certificates to be kept in custody by CBF have to undergo a special admission procedure in view of their ability to be kept in collective custody.

An underwriting bank who maintains an account at Clearstream will submit at CBF the securities certificate, which has been signed in legally valid manner by the company, alongside with an application for admission to collective custody and additional documents. The signatures of the persons signing the admission application have to be deposited at CBF to allow a review of the authorization of the persons acting for the issuing house. Pursuant to A) Chapter II Paragraph 1 of the Allgemeinen Geschäftsbedingungen der Clearstream [General Terms and Conditions of Clearstream] any legal entity that CBF enters into a business relationship with may be a client.

Generally these will be:

• credit institutions operating custody activities,
• brokerage houses either operating third-party or their own stock exchange transactions,
• securities clearing and deposit banks from abroad,
• foreign institutions settling securities transactions, e. g. Clearstream Banking S.A., Luxemburg and
• securities trading houses from abroad.

The application letter has to be directed to

Clearstream Banking AG
Schalterhalle
Neue Börsenstraße 8
D-60487 Frankfurt am Main/Hausen

and has to contain the iSIN, dividend entitlement as well as the competent paying agent. If the function of paying agent is not assumed by the applicant themselves, another bank exercising this function has to be named. A paying agent who is not the applicant also has to maintain an account at CBF and has to confirm in writing that they assumed the paying agent function. Moreover, the application has to contain the confirmation of the legal validity of the signatures borne by the submitted global certificates, i. e. the submitting issuing house has to declare in legally binding manner that the certificate has been signed by members of the issuer authorized to give such signature. The securities certificate and the application for admission to collective custody have to be accompanied by the company’s legally valid, current articles of association as well as a certified, up-to-date excerpt from the commercial register to give evidence of the actually paid-in stock capital.

CBF reviews the submitted securities with regard to their authenticity, completeness, deliverability and their further ability for being kept safe in collective custody. Above all, at the submission of physical securities, Clearstream will check the following:

In addition, CBF will check upon deposit of securities with the help of the announcements contained in the Bundesanzeiger [German Federal Gazette] if there are any notices of loss, payment stops or public notification procedures (procedure for invalidation of certificates) with regard to these securities.

When securities are admitted for collective custody. CBF will publish the admission via the WSS Wertpapier Service System [WSS Securities Service System] (WSS online) which can be accessed by the underwriting banks as registered members. WSS is an electronic information system of Deutsche Börse AG providing its registered members with all information relevant for securities settlement. The data provided include within a single online-application master data as well as maturity data and quotation data generated, among others, from trading data at Frankfurt Stock Exchange and the WM-data. Subsequently, the stock is entered by CBF according to its value into the account of the applying issuing house through the stock exchange-owned settlement system CASCADE (abbreviation for Central Application for Settlement, Clearing And Depository Expansion). The issuing house, on the other hand, distributes the book entry securities of the stock to the shareholders through their custodian banks. The securities certificate itself is deposited and kept inside the about 6000 sq.m. large vault of CBF until the certificate will be replaced or the stock certificated in it is no longer existent.

The legal framework for the admission of securities for collective custody have been set forth in the Allgemeinen Geschäftsbedingungen der Clearstream Banking AG, [General Terms and Conditions of Clearstream Banking AG] Frankfurt am Main.

In case of questions please contact the “General Customer Support“ of CBF
under telephone number+49-(0) 69-2 11-1 11 77
or via telefax message under number +49-(0) 69-2 11-61 11 77
or via email under csdomestic@clearstream.com.

General Customer Support

E-Mail: csdomestic@clearstream.com

Telephone: +49-(0) 69-2 11-1 11 77

Fax: +49-(0) 69-2 11-61 11 77

Clearstream Banking

WM Group

Depotgesetz [German Securities Deposit Act]

Aktiengesetz [German Companies Act]

Börsenzulassungs-Verordnung [German Stock Exchange Admission Regulation]

Bundesanzeiger [German Federal Gazette]

Commission Regulation (EC) No. 1287/2006

• Compose the necessary documents for admission
• Contact the Frankfurter Wertpapierbörse in order to discuss the admission procedure
• Submit the application for admission of the securities and
• Submit the required admission documents at the stock exchange

Pursuant to Sect.32 Börsengesetz [BörsG, German Stock Exchange Act], securities to be traded at a stock exchange on a Regulated Market have to be admitted to listing or included by the management board of the respective stock exchange. The admission is an authorization under public law granting the right to use the stock trading systems. Therefore the admission procedure is governed by public law and the admission to trading on the Regulated Market is an administrative act.

Pursuant to Sect. 32 Paragraph 3 BörsG the company is entitled to the admission to its stock, if such stock meets the requirements set forth in Article 35 of the Regulation (EC) No. 1287/2006 and complies with the provisions serving the purposes of investors’ protection and safeguarding of orderly stock exchange trading pursuant to Sect. 34 BörsG; an additional requirement is the publication of a prospectus approved or certified pursuant to the rules of the Wertpapierprospektgesetz [WpPG, German Securities Prospectus Act].Article 35 of the Regulation (EC) No. 1287/2006 provides for the free tradability of stock and defines whether a security is considered tradable in a fair, orderly and efficient manner. This is the case if, among other facts, the securities are sufficiently wide-spread and if information for their evaluation is available. These aforementioned and additional requirements are reviewed pursuant to the Börsenzulassungs-Verordnung [BörsZulV, German Stock Exchange Admission Regulation]. Employing the legal authorization contained in Sect. 34 BörsG, the regulator determined in detail the requirements for admission to the Regulated Market in the Stock Exchange Admission Regulation. The following aspects, above all, are checked according to the BörsZulV in the course of the admission procedure:

• minimum amount and minimum quantity of securities
• duration of the issuer’s existence
• legal basis of the securities
• tradability of the securities
• denomination of the securities
• obligation for admission of all securities of the same category or issue
• print layout of the securities
• sufficient spreading of the stock.

It seems advisable to contact the department Listing of Deutsche Börse AG at an early stage in advance of the IPO in order to coordinate the details of the admission procedure, also in view of the time schedule intended.

The admission procedure is initiated by a written application for admission to be jointly submitted by the company and the so-called “IPO-underwriter”. The IPO-underwriter as co-applicant has to be a credit institution or another enterprise operating pursuant to Sect. 53 Paragraph 1 Clause 1 or Sect. 53b Paragraph.1 Clause 1 Kreditwesengesetz [KWG, German Banking Act], which is authorized to participate in trading at a domestic stock exchange and can furnish evidence of liable equity in the equivalent of no less than €730,000 see Sect. 32 BörsG in conjunction with Sect. 45 Börsenordnung für die Frankfurter Wertpapierbörse [BörsO FWB, Exchange Rules for the FWB].

The application for admission has to be signed by all applicants, with proxy permissive, and supplemented by adequate documents/records to furnish necessary evidence. Sect. 48 Paragraph 1 BörsZulV explains the application’s necessary contents. It has to state name and registered offices of the company as well as class and amount of the securities to be admitted to trading. In view of the securities class, besides the admission of company shares in form of stock, in rare cases there is the option of admitting certificates representing stock. Certificates representing stock are securities which were issued instead of stock and entitle the holder to execute the rights connected to the stock represented by them.

The documents to be submitted are listed in Sect.48 Paragraph 2 BörsZulV. Therefore, the application for admission of stock to the Regulated Market has to be accompanied by an approved prospectus or, in case approval proceedings at the Bundesanstalt für Finanzdienstleistungsaufsicht [BaFin, German Federal Agency for Financial Market Supervision] have not been concluded yet, by a draft version of such prospectus; in addition, those documents allowing for the review of admission requirements also have to be attached. These are specifically:

• a certified current excerpt of the commercial register
• the current articles of association or shareholder's agreement
• the Annual Financial Statements and Management Reports covering the three business years preceding the application, including the audit certificates of the certified accountants
• evidence regarding the legal basis for the issue of securities (e. g. resolutions by the general shareholders meeting, the executive board or supervisory board)
• evidence on securitisation of stock.

If additional documents are necessary in order to assess whether the admission requirements are met, such further documents have to be provided to the Management Board of Frankfurter Wertpapierbörse upon request.

In order to assist the applicants, FWB created an application form which is deposited for download as a pdf-file on the websites of Deutsche Börse AG. This form provides columns to insert the generally necessary information as well as a checklist regarding the documents to be attached in the appendix and, thus, offers helpful assistance to the company and the co-applicant for preparing their application.

Simultaneously with the application for admission to the Regulated Market (General Standard), the admission to the Regulated Market’s sub segment bearing additional follow-up obligations arising from admission (Prime Standard) may be submitted. The Prime Standard is a segment of the Regulated Market where companies undertake to comply with transparency requirements exceeding those of the General Standard. The application for admission to the Prime Standard has to be answered to the positive, unless the Management Board has got knowledge of circumstances indicating that the company will not perform in orderly manner the additional follow-up obligations governing the Prime Standard. Such circumstances, for instance, generally will be assumed if the company’s assets become subject of an application for institution of insolvency proceedings.

Pursuant to Sect. 32 Paragraph 3 BörsG, the publication of a prospectus which has been approved of or attested according to the rules set forth in the Wertpapierprospektgesetz [WpPG, German Securities Act], is generally required for the admission of securities to trading, unless such publication may be abandoned pursuant to Sect. 1 Paragraph 2 or Sect. 4 Paragraph 2 WpPG. Therefore, the application for admission has to be accompanied by a draft version of the prospectus or by a prospectus approved of by the BaFin or the competent regulatory authority of another EEA-state; evidence for the publication of the prospectus also has to be furnished with the application.
The prospectus is a central admission document which is governed by exact statutory regulations regarding its contents. With the assistance of the details contained in the prospectus the interested investor may gain information on the company and its securities. Additional explanation on the prospectus are to be found under ”prospectus “.

In order to safeguard the formation of a liquid market in the stock to be admitted and, thus, to guarantee orderly trading, Sect. 2 Paragraph 1 BörsZulV sets forth a minimum amount for stock to be admitted. Pursuant to this provision, the expected market value of the stock to be admitted has to amount to €1,250,000 at least. This market value could be identified by multiplying the stock to be admitted with the amount at the lower end of the price spread which applies to the stock offering. If an assessment of the market value is not possible, the applicable criterion is a corresponding amount of equity capital of the company in the meaning of Sect. 266 Paragraph 3 letter A of the Handelsgesetzbuch [HGB, German Commercial Code].

In exceptional cases the management board may accept smaller amounts, if the management is convinced that an adequate market in the securities to be admitted will be established.

The admission to the Regulated Market requires the company to furnish evidence of a minimum term of existence and a corresponding publicity of its Annual Financial Statements. Pursuant to Sect. 3 Paragraph 1 BörsZulV the issuer of the stock to be admitted has to have existed for a minimum of three years and has to have disclosed its Annual Financial Statements covering the three business years preceding the application. However, the company does not necessarily have to have existed in the legal form of a joint stock company for all of this time. Therefore, a joint stock company existing for a year, which before has existed for no less than two yeas in the legal form of a limited liability company (German GmbH) will also meet this requirement. The decisive factor in this case is the fact, that for the three business years preceding the application the company has disclosed its Annual Financial Statements or Annual Consolidated Financial Statements in compliance with the regulations applying to the respective legal form of organization.

Given certain circumstances, the management board of the stock exchange may also admit stock of companies existing for less than three years, if such procedure serves the interests of the issuer and the investing public, see Sect. 3 Paragraph 2 BörsZulV.

Example for an Exception:

The company whose stock is to be admitted to stock trading has not existed for three years yet; however, it has a wholly-owned subsidiary which performs the significant part of the operative business and has existed for three years or more. Moreover, the issuer complied with its disclosure requirements for the time of its existence.

Pursuant to Sect. 4 BörsZulV the securities to be admitted have to be issued in compliance with the legal regulations the issuer is subject to and have to correspond to the legal provisions applying to the securities. This provision clarifies the fact that the securities to be admitted have to be issued in legally valid manner and have to be legally existent. Evidence may be provided in form of the respective resolutions by the company’s general shareholders meeting, executive board and supervisory board as well as a current certified excerpt from the commercial register.

Pursuant to Sect. 5 BörsZulV the stock to be admitted has to be freely tradable. This requirement shall secure transferability and, thus, a well-functioning settlement of stock exchange transactions. In the course of reviewing the existence of free tradability of securities merely statutory restrictions, but no contractual restrictions are decisive. Therefore restraints on alienation contractually agreed upon, so-called lock-up agreements, generally do not impede the admission to trading.

In addition, Sect. 5 Paragraph 2 BörsZulV specifically defines the conditions which are necessary so not fully paid-up stock or registered stock limited in transferability shall be considered freely tradable. According to this provision, stock may be admitted even if the corresponding capital contribution has not been fully provided yet under the conditions that, for one, measures have been taken to secure that there will be no limitations to tradability of these securities. For another, the facts relevant in this context, which means the wanting full capital contribution and the measures for ensuring free tradability, have to be announced to the investing public in adequate manner. Usually, this will be achieved by including this information in the prospectus which is submitted as evidence document to the stock exchange in the course of the admission procedure.

In practice, an application for admission of registered stock limited in transferability to stock exchange trading may be answered to the positive only subject to a written declaration of the issuer to the stock exchange, stating whether during the past three business years the consent to stock transfer had been denied. This statement could be worded as follows:

“During the last three business years, the company did not deny to give its consent to any transfer of stock.”

Additionally the issuer, while observing the corresponding provision in its articles of association, if need be, has to give a statement with the following contents:

“The consent to stock transfer and to stock purchase in execution of subscription rights will be denied exclusively for extraordinary reasons in the company’s interest with the respective reasons being communicated to the applicant.“

Pursuant to Sect. 7 BörsZulV an application for admission of stock has to encompass all stock of the same category so that price distortions as a result of shortage of the admitted stock can be prevented. Therefore this provision contains a ban on partial admission or rather the obligation for complete admission. Decisive for the definition of the term “category” is the legal definition in Sect. 11 Clause 2 Aktiengesetz [AktG, German Stock Companies Act] stating that a category is formed by stock bearing the same rights. In converse argument this means that e.g. the admission of an issuer’s ordinary stock does not need to include preferred stock of the same issuer.

However, the application to admission may be limited insofar as the stock not to be admitted belongs to a shareholding which serves the purpose of maintaining a controlling influence on the issuer or if the stock may not be traded for a certain time period, see Sect. 7 Paragraph 1 Clause 2 BörsZulV. In this case a partial admission of stock can be granted on the condition that purchasers are not expected to suffer any disadvantages resulting from such merely partial admission.

The existence of a controlling influence and the fact that the danger of price distortions due to a shortage of admitted stock or stock available to the market can be excluded, alone do not justify a limitation of the application for admission. Rather it is necessary that this controlling influence shall be maintained for a longer period of time. This may be possible, for instance, in case a “family company“ is going public while the parties wish for the controlling influence to continue. On the other hand, a short-term purchase of a large share block merely for investment purposes gives no reason for a partial admission.

Generally, the application for admission of stock may also be limited due to a lock-up agreement under private law, on the condition that purchasers are not expected to suffer any disadvantages resulting from such merely partial admission. Above all, existing investors and major investors undertake to conclude such lock-up agreements to demonstrate, for example, their solidarity with the issuer and their trust in the issuer’s business model. Moreover, this measures strives to achieve the greatest possible price stability as for a determined period of time no additional stock will be entered into the market.
Prior to the listing order, the issuer has to publish the partial admission to listing of a securities category by including this information in the prospectus, see Sect. 7 Paragraph 1 Clause 3 BörsZulV.

The print layout of the securities in printed individual certificates (so-called physical securities) has to offer adequate protection against counterfeiting and allow for a safe and simple settlement of securities transactions, Sect. 8 BörsZulV. This provision applies to those exceptional cases where individual certificates as physical securities are printed instead of global certificates. Details can be found in the “Gemeinsamen Grundsätzen der deutschen Wertpapierbörsen für den Druck von Wertpapieren“ [Mutual Principles of German Stock Exchanges for the Print of Securities] issued by the stock exchanges in Germany, which apply to any securities admitted to trading on a German stock exchange.

Pursuant to the regulation in Sect. 9 BörsZulV the stock to be admitted has to be adequately wide-spread within the market participants of one or several EU Member States or one or several EEC Member States. This regulation shall ensure that the market is provided with a sufficient number of circulating stock as this is necessary for representative trading as a requirement for orderly price determination.

The spread is considered adequate if the free floating rate amounts to at least 25 % of the quantity of stock to be admitted. The decisive moment for assessing the necessary spread is the issue of the listing order, so that a corresponding confirmation regarding the adequate spread has to be provided by the company prior to the listing order. Stock to be issued at a later point in time (e. g. from a “greenshoe”- option) will not be taken into account when calculating the free floating stock.

Deviating from the 25%-principle, a smaller percentage may be sufficient given certain circumstances, if the existence of a large number of stock of the same category and its wide spreading among the investing public safeguard orderly stock exchange trading. In this case, the total of stock to be admitted and the expected market capitalization of the free floating part of the stock to be admitted are taken into consideration.

The following minimum requirements have to be considered:

• total number of stock to be admitted for listing: 1,250,000 shares
• number of stock to be admitted belonging to the free float: 125,000 shares
• market capitalization of free floating stock (“Free float Market Cap“): €1,250,000.

As general requirement the company shares have to be held by at least 100 shareholders, which has to be confirmed, if need be.

Sect. 9 Paragraph 2 BörsZulV provides for exceptions to the free float requirements which in the past were not applied by the Management Board of FWB in the course of deciding on stock admissions. According to this provision, stock may be admitted, among other facts, if an adequate spreading of the stock shall be achieved by means of stock exchange trading and the management board of the stock exchange is convinced that this spreading will be achieved shortly after the stock’s listing, Sect. 9 Paragraph 2 No. 1 BörsZulV. Such a case may be possible, for instance, if the underwriting banking syndicate in the course of stock placement in fixed price offering takes over the complete issue as underwriting syndicate at a fixed price and after the public offer not all stock could be placed, so that an adequate spreading has not been achieved. The banks will then try to offer the stock in the course of trading in smaller units on the market in order to achieve a wider spread in this manner. In the course of the procedure for admission to stock trading, the placement concept as well as the exact time schedule for achieving the adequate spread of the stock has to be explained to the management board of the stock exchange for the management board’s decision on a possible exception in the meaning of Sect. 9 Paragraph 2 No. 1 BörsZulV.

Like the regulations on the spread of stock, the provision regarding an adequate denomination of stock shall mainly serve the purpose of a better and simpler stock distribution and the furthering of a well-functioning and vivid stock trading. Pursuant to Sect. 6 BörsZulV the denomination of stock as well as the number of stock issued in this denomination has to correspond to the demands of stock trading and the investing public without violating the requirements resulting from corporate law. Since introduction of the non par value share by the so-called “Stückaktiengesetz” [German Law on No-Par Value Shares] in 1998 and the decrease of the minimum par value for stock to 1.00 Euro, see Sect. 8 Paragraph 2 Clause 1 Aktiengesetz (AktG) [German Stock Companies Act], many companies have made use of these options provided for by stock-related legal regulations.

Is there a Standard Form to be used for the Application for Admission of Securities to the Regulated Market?

The application for admission has to be filed in writing and has to contain, above all, the data provided for by Sect. 48 Paragraph 1 BörsZulV [German Stock Exchange Admission Regulation]. To simplify matters we recommend the use of the standardized application form which can be obtained as pdf-file on the homepage of Deutsche Börse AG. The submission of the completely filled in application will generally secure that all necessary data have been filed.

How long will the Admission Procedure normally take?

Pursuant to Sect. 50 BörsZulV the admission may take place no earlier than on the trading day following the filing of the application for admission with the management board. However, this minimum time period is merely a statutory requirement irrelevant for an IPO. In case of an IPO, the application’s processing, depending on its volume, may take up to ten business days, if all the required documents have been filed with the application and all admission prerequisites are met.

Is another Application required for Listing the Securities for Trading?

The stock does not only need to be admitted to trading but also requires as a further step to be listed at the stock exchange. This Introduction, meaning the start of listing of admitted securities on the Regulated Market, is a procedure initiated upon application; information on such procedure is provided here. The application for listing of admitted securities, depending on the time schedule for the IPO, may be filed also in the course of the admission procedure already.

What Documents have to be filed with the Application?

The documents which the application to admission has to be accompanied by are listed in exemplary manner in Sect. 48 Paragraph 2 BörsZulV and may also be learned from the admission application form. The most important of these documents are the following:

• prospectus,
• certified current excerpt from the commercial register in original,
• the current articles of association in original,
• Financial Statements and Annual Reports covering the three business years prior to the application,
• resolutions by general shareholders meeting, executive board and supervisory board regarding the issuance of securities,
• copy of the global certificate
• if need be, an authorization by the issuer to the co-applicant for filing the application.

In addition, immediately after the prospectus has been approved of by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) [German Federal Agency for Financial Market Supervision], the approval certificate as well as evidence on the prospectus’ publication has to be forwarded. The admission of securities issued by issuers from abroad, as a rule, will require a legal opinion regarding, for example, the valid establishment of the company, the legal base of the securities issuance or the securities’ tradability.

This list above is not necessarily final. Depending on the review of the particular case, submission of further documents may be required.

Who may sign the Application for Admission?

The application for admission of securities to the Regulated Market has to be signed by the securities’ issuer and the underwriting institution pursuant to Sect. 32 Paragraph 2 Börsengesetz (BörsG) [German Stock Exchange Act], see legal basis for admission to listing at the stock exchange. Upon submission of an authorization by the issuer, the underwriting institution may sign the application for admission on their own as well as on the issuer’s behalf.

Does the Admission to the Prime Standard require the Filing of a Separate Application?

The application for admission to the sub segment of the Regulated Market bearing follow-up obligations resulting from admission (Prime Standard) may be filed alongside with the application for admission to the Regulated Market (General Standard), Sect. 48 of the Börsenordnung für die Frankfurter Wertpapierbörse (BörsO FWB) [Exchange Rules of Frankfurt Stock Exchange]. The application form provides an adequate column to apply for the admission to the Prime Standard.

What are the Significant Points to be observed when Applying for the Admission of Certificates Representing Stock?

Certificates representing stock become especially relevant for the secondary securitisation of mostly foreign stock, if the original stock can not be admitted to listing in Germany and, therefore, a securitisation form representing the original stock is required. The reason why this stock can not be admitted to listing will often result from the fact that the original stock lacks free tradability, because it is, for example, deposited with a central custodian abroad and for want of technical connection a settlement of stock trades through the German central securities depositary Clearstream Banking AG is not possible. Pursuant to their offering terms, the certificates contractually convey to their holders any right vested in the original foreign stock. In case of American Depository Receipts (ADR) the certificates will usually be issued by US-American depositary banks.

Even if the application for admission refers to the certificates representing shares, the admission procedure is pursued still by the original stock’s issuer. Pursuant to Sect. 12 BörsZulV, three prerequisites need to be met for the admission to listing of certificates representing stock:

The application for admission has to be signed by the issuer of the represented stock as well as the issuer of the certificates and the underwriting institute. Moreover, the issuer of the represented stock has to be established in an orderly manner and the minimum amount of securities to be admitted has to comply with the requirements set forth in Sect. 2 BörsZulV; pursuant to Sect. 3 BörsZulV the issuer of the represented stock also must have existed as an enterprise for three years and must have published its Financial Statements during this period. Additionally the issuer of the represented stock has to declare to the stock exchange in writing that they will meet the follow-up obligations resulting from admission pursuant to Sects. 39-41 BörsG. This concerns the obligation to file an application for admission of stock of the same category, which might be issued at a later point in time, within one year after the respective issue and to render information to the stock exchange Management Board on matters connected to admission and listing of certificates representing stock.
Secondly, the certificates to be admitted have to meet the prerequisites set forth in Sects. 4 to 10 BörsZulV and, thirdly, the issuer has guarantee the performance of their obligations towards the certificate holders. The latter prerequisite means that the certificate issuer has to provide the certificate holders with conditions that allow the certificate holders to execute their rights from the original stock (e. g. dividend entitlement, voting rights and subscription rights) which are vested in the certificates to be admitted for listing.

Due to the special complexity in case of the intended admission of certificates representing stock we would recommend to contact the Deutsche Börse AG, Department Listing & Issuer Services at an early stage.

Who is the Contact for Questions concerning Stock Securitisation ?

In case of questions regarding securitisation and deliverability of stock, please contact the Clearstream Banking AG, Frankfurt am Main, under telephone number +49 (0)69 – 211 1 1177.

Basic Information for Issuers

Please find information regarding the legal basis, the components, wording and further matters concerning the admission procedure under “Basic Information”.

Contact Person

Listing Hotline

E-Mail: listing@deutsche-boerse.com

Telephone: +49-(0) 69-2 11-1 39 90

Listing Hotline

E-Mail: listing@deutsche-boerse.com

Telephone: +49-(0) 69-2 11-1 39 90

Fax: +49-(0) 69-2 11-1 39 91

• Börsengesetz [German Stock Exchange Act]
• Kreditwesengesetz [German Banking Act]
• Exchange Rules for the Frankfurter Wertpapierbörse
• Börsenzulassungs-Verordnung [German Stock Exchange Admission Regulation]
• Handelsgesetzbuch [German Commercial Code]
• Handelsregister
• Wertpapierprospektgesetz [German Securities Prospectus Act]
• Aktiengesetz [German Stock Companies Act]

Simultaneously to the application for the securities’ admission to stock exchange trading, you have to submit at the stock exchange an application for introduction of listing and prepare the necessary documents/evidence.

The legal basis for the listing order is to be found in Sect. 32 Börsengesetz [BörsG, German Stock Exchange Act] in conjunction with Sect. 45 Börsenordnung für die Frankfurter Wertpapierbörse [BörsO FWB, Exchange Rules for the Frankfurter Wertpapierbörse]. Pursuant to these provisions, securities to be traded on the Regulated Market of a stock exchange require the admission or inclusion by the Management Board of Frankfurter Wertpapierbörse (Management Board FWB), unless provided otherwise in another legal provision.

The listing introduction of admitted securities on the Regulated Market (so-called “Introduction”) is governed by Sect. 38 BörsG in conjunction with Sect. 58 BörsO FWB. Pursuant to these provisions, the Management Board of Frankfurter Wertpapierbörse decides upon the issuer’s application on the introduction of admitted securities on the Regulated Market at Frankfurter Wertpapierbörse (FWB).

The admission procedure is concluded with the listing order by the Management Board FWB. This order is the authorization under public law in the form of an administrative act to use the stock exchange facilities for trading in the admitted securities; moreover, the order is the prerequisites for introduction the securities.

The fact has to be observed that this admission to trading refers exclusively to the securities, not to their issuer. According to the principle of complete admission of stock, generally the complete registered capital of the issuer divided in stock will be admitted, unless, by means of an exception, the requirements for a partial admission are met. The principle of complete admission ever covers any stock issued by the issuer at a later point in time, so that upon issuance of this stock a renewed admission procedure has to be performed. Pursuant to Sect. 69 Börsenzulassungs-Verordnung (BörsZulV) [German Stock Exchange Admission Regulation] the admission to listing for the new stock has to be applied for no later than one year after issue of such stock; in case of stock under a restraint on alienation or serving the purpose of maintaining a controlling influence, the admission has to be applied for as soon as such stock becomes freely tradable.

After admission of the securities, a separate resolution (administrative act) is adopted in a second step by the FWB Management Board for the commencement of trading (listing).

An application for admission to listing may be submitted by the issuer or its designated authorised representative. Listing on the Frankfurt Stock Exchange, as well as admission, is applied for via the eListing platform. As part of the listing application, the applicant provides information on the requested date for introduction and information to enable the technical listing of the shares in the trading system. This includes important information for trading, such as the choice of trading venue (XETRA or XETRA Frankfurt 2) on which the first price discovery is to take place on the day of the IPO.

“XETRA“ and “XETRA Frankfurt 2“ are trading venues in the cash market. Technically they are back ends of the fully electronic trading system XETRA, where orders are matched in a central, fully electronic order book. This system enables participants from all over Europe a location-independent participation in trading at Frankfurter Wertpapierbörse. In order to increase the liquidity of a security traded on the “XETRA“ stock market, the issuer’s stock will be supported by a Designated Sponsor. The necessity of support depends on the liquidity of a security. If a security fails to show the necessary amount of liquidity, its inclusion in continuous trading requires the support of at least one Designated Sponsor. The Designated Sponsor is assigned by Deutsche Börse AG and the company concludes an individual agreement with this Designated Sponsor governing the services provided by and the remuneration paid to the Designated Sponsor.

The Functions of the Designated Sponsors in XETRA

In XETRA-trading the Designated Sponsors ensure a minimum liquidity of the stock by entering, permanently or upon request, immediately tradable purchase and sales offers (so-called quotes) for the securities they support. In doing so, they allow in continuous trading a continuous price determination by supply and demand. This is especially important for less liquid securities for which only little trading interest exists. This procedure means for investors that at any time they will be able to buy or sell supported stock at fair prices and that their securities positions will be evaluated at fair market value. In order to describe the services of the Designated Sponsors in transparent manner, Deutsche Börse AG prepares a quarterly rating of the Designated Sponsors. Included in this rating are the average quotation periods, the average spread and the sales volume of a Designated Sponsor. The evaluation reaches from “AA” as top rating to “DD” or no rating at all.

Any formerly floor-traded securities have been transferred to the market XETRA Frankfurt 2 implemented in May 2011 with its trading model “XETRA Frankfurt Specialist“ (“continuous auction with specialist“). Through this trading model market participants benefit during securities trading from Specialists providing liquidity.

The Function of the Specialist in XETRA Frankfurt 2

The Specialists authorized by Deutsche Börse AG secure liquidity and continuous tradability of securities traded in the “continuous auctions“ trading model: the Specialists undertake to allow trading ranges and refrain from economically unreasonable partial executions. Among their tasks is the preparation of indicative price information considering the current order book situation as well as the provision of additional liquidity. The prices will be determined based upon the current order book situation matching all existent purchase and sales orders as well as on the order book situation of defined reference markets, if any. Moreover, the Specialist is able to enter into the order book orders for other trading participants, if such orders regard securities assigned to that specialist. There is only one competent Specialist for each security. In order to review the high quality requirements, the so-called performance of the Specialists active at Frankfurter Wertpapierbörse is measured. This performance measurement examines various aspects of quotation and execution. The first refers to the speed and continuity of quotation and the size of bid/offer spread. The execution quality, among other things, measures the execution speed and checks if execution of orders is performed within the respective spread.

Further information and details on XETRA, XETRA Frankfurt 2 and the particular trading models you can find here.

After determination of the first stock exchange price on the selected market, see Sections 88 et seq. BörsO FWB, the price determination is performed on both markets.

The application for the listing introductionmay be submitted, depending on the company’s IPO-time schedule, simultaneously to the application for admission to listing.

Pursuant to Sect. 52 BörsZulV the securities may be introduced for trading no earlier than on the working day following the first publication of the prospectus. If a public offering was carried out for the securities and the securities to be listed have been issued for public subscription, listing introduction may start only after the end of allocation, Sect. 38 Paragraph 2 BörsG. This requirement shall ensure orderly trading from the first trading day onwards. The end of the allocation of the new stock has to be confirmed to the stock exchange. In practice, this takes place in the course of the admission procedure before the listing order is issued.

Exactly like the listing order, the decision on the introduction of the securities is an administrative act under public law.

The administrative acts listing order and decision on the listing introduction have to be announced to the applicant. The announcement is performed by means of a written notification to the applicant.

In addition to announcing the decision, pursuant to Sect. 51 BörsZulV the decision on the securities’ admission has to be published. This publication is caused by the Management Board of Frankfurter Wertpapierbörse at the applicant’s costs in the Bundesanzeiger [German Federal Gazette] and on the websites of Deutsche Börse AG under the column “FWB-Bekanntmachungen“ [FWB announcements].

The decision on introduction of the securities is also published. On the day before listing introduction, the Management Board of FWB publishes, free of costs for the issuer, a corresponding official announcement on the websites of Deutsche Börse AG, also under the column “FWB-Bekanntmachungen“.

How can I apply for the admission of admitted securities on the Frankfurt Stock Exchange?

Admissions and introductions must be applied for via the electronic platform ("eListing platform"), which is provided by FWB for this purpose. The electronic eListing platform offers users assistance and procedural transparency. Users are guided through the application process by displaying the information and documents required for the procedure.

When should the Application for Listing of Admitted Securities be filed?

The application for listing of admitted securities may be filed simultaneously with the application for admission. However, the completely filled in application should be filed with the stock exchange no later than five banking business days prior to the day of the intended first pricing (= the date of listing introduction).

What Additional Details are required for the Listing?

In addition to the description of the securities to be listed, the time intended for listing introduction as well as further details like the contact at the underwriting bank or the invoice recipient, the application also offers the option

• to select the stock market (XETRA Frankfurt 2 or XETRA) where the first pricing should take place (this refers exclusively to the first exchange price at start of trading) and
• to name a Specialist who will assist with the trading on XETRA Frankfurt 2, provide liquidity, if need be, and include reference markets.

What Documents have to be attached to the Application?

If complete documents have been submitted already in the course of admission procedure, no further records have to be filed in general. Please note in case of filing the application through a third party that such application for listing of admitted securities has to be accompanied by the issuer’s authorization of the respective third party.

Which Markets are covered by the Application?

The application for listing of admitted securities covers both stock markets XETRA Frankfurt 2 and XETRA.

Will the Issuer be invoiced with Fees even in case the IPO should be postponed of cancelled?

If a admission application is revoked, the Management Board of FWB in its equitable discretion will determine the admission fee according to the stage of proceedings; see Sect. 11 Paragraph 5 GebO FWB [Fee Regulations for the FWB]. This fee will vary, for instance, according to the extent to which the review of documents involved in the procedure has advanced already.

How long will the Admission Decision be valid?

Pursuant to Sect. 38 Paragraph 4 BörsG [German Stock Exchange Act] the admission to listing shall expire if the securities have not been listed within three months following publication of the admission decision. Upon request, the Management Board of FWG may extend this period adequately if the issuer of the admitted securities can substantiate a legitimate interest in such extension.

• Exchange Rules for the Frankfurter Wertpapierbörse
• Fee Regulations for the Frankfurter Wertpapierbörse

Listing Hotline

E-Mail: listing@deutsche-boerse.com

Telephone: +49-(0) 69-2 11-1 39 90

• Börsengesetz [German Stock Exchange Act]
• Börsenzulassungsverordnung [Stock Exchange Admission Regulation]
• Exchange Rules for the Frankfurter Wertpapierbörse
• FWB Announcements
• Bundesanzeiger [German Federal Gazette]
• Handelsregister