[Last updated: 1 January 2024, unless otherwise noted]
The continuing obligations of a company depend very much on whether it is listed on the Regulated Market.
Regulated Market
Any company whose securities are listed on the Regulated Market must treat all holders of the same securities equally. All information needed for the exercise of the rights of a security holder must be made available in Germany. Security holder data must be protected. With each invitation to a general meeting, shareholders must receive a proxy form.
In addition, companies listed on the Regulated Market (General and Prime Standard) are subject to a number of continuing reporting obligations, some of which are periodic, while others are event-driven. They include the obligation to publish notices of general meetings and certain related information, dividend distributions, the issuance of new shares and the agreement or exercise of exchange or conversion rights, warrants, redemption and subscription rights. These obligations apply if Germany is the home state of the company, as well as to non-EEA companies whose shares are only listed in Germany (or, in case of dual listings within the EEA, if Germany was the state of the first listing). In the case of companies whose home state is another EEA country, substantially similar obligations will apply under the law of that country, since all obligations are based on EU directives.
A listed company whose home state is Germany must also publish details of directors' dealings in its shares. The members of the management board (or comparable senior executives) and members of the supervisory board (or a comparable body) are covered by this obligation. They must report their own trades, as well as trades by certain relatives and entities controlled by them. Directors are subject to blackout periods in which they cannot trade ahead of the publication of financial figures.
Such companies must also publish all threshold notices received from their shareholders. Relevant shareholding reporting thresholds for voting shares are 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%. Investors are also obliged to report holdings in instruments which entitle or enable them to achieve a respective shareholding (above thresholds, except for the 3% threshold). This obligation will cover (among other items) call options, securities lending and repossession transactions, cash-settled instruments and the writing of put options. The definition also covers cash-settled instruments, if these have an equivalent economic effect. Finally, shareholders must also report the crossing of the above thresholds (other than 3%) for the combination of holdings of shares and instruments. Companies must then publish this information.
Companies listed in the Regulated Market must promptly publish any changes in the number of voting rights as a result of capital increases or decreases to enable shareholders and holders of instruments to calculate their shareholding percentage and make the appropriate notifications.
A company must also report holdings of treasury shares if the 5% or 10% threshold is reached or crossed, and it must report the total number of voting shares at the end of every month in which the number of voting shares has changed.
Shareholders who cross the 10% threshold or a higher threshold must inform the company about their objectives in making their investment and the sources of their funds. The company must publish the statement received from the shareholder or must disclose the fact that the company did not timely receive such a statement.
A Prime Standard company must publish a corporate action timetable with the most important events in the company's calendar, as well as holding at least one generally accessible analyst meeting in addition to the annual financial press conference.
Scale Segment
For the Scale Segment, the issuer must:
- Publish certain financial information (see below).
- Publish and update a company profile and a company calendar that contains certain key events, such as the annual meeting, dividend payment, analyst conferences and the publication dates of financial information.
- Provide the Research Provider commissioned by DBAG with all the information requested by the Research Provider and necessary for the preparation of Research Report Updates within the term determined by the Research Provider.
- Conduct an information event for analysts and investors at least once a year.
- Maintain a support agreement with a Capital Market Partner for support in the compliance with post-inclusion obligations.
- Notify DBAG of:
- Changes of data such as renaming, change of registered office, change of address, change of financial year, change or transfer of the operative business, change of designated sponsor or specialist.
- Corporate actions.
- Termination of agreement with the Capital Market Partner and entry into a new agreement with a Capital Market Partner.
- Change of contact person.
The issuer is responsible vis-à-vis the stock exchange for the due compliance with these obligations, and must agree to pay a penalty of up to €100,000 (approximately US$110,500) for each violation. The maximum penalties for intentional violations depend on the type of violation. The highest maximum penalty applies for failure to publish annual financial statements. For negligent violations, the maximum penalty is half of the maximum for willful misconduct.
Inside information
Besides the events listed above, there is a general obligation for a company on the Regulated Market or on MTFs (which include, for example, Scale and the Quotation Board), provided the relevant company has actively requested the listing on the MTF, to publish all inside information that affects the company without undue delay.
Broadly, inside information is information which:
- Is of a precise nature (that is, it deals with circumstances that exist or may reasonably be expected to come into existence and is specific enough to make conclusions as to the possible effect on price).
- Is not generally public.
- Is likely to have a significant effect on price if made public.
This definition includes all material non-public information that is price sensitive, including major agreements, acquisitions or divestitures, major losses, insolvencies and loss of key personnel. Under certain circumstances, a company may self-exempt itself from these obligations temporarily, such as in the case of pending negotiations. Also, interim steps in a protracted process can be inside information.
Financial information
The obligation to publish financial information again depends on the market segment.
Regulated Market. A company that is admitted to the General or Prime Standard and is a domestic issuer for purposes of the WpHG (the German Securities Trading Act) must publish its annual financial statements within four months after the end of the financial year. A company whose home state is Germany must also notify the public in advance of the publication date and provide the internet address where the annual financial statements will be available.
The annual financial statements should consist of the balance sheet including the income statement, the notes to the consolidated financial statements and the management report. For the presentation of the annual financial statements, the commercial law or the national requirements apply.
A company admitted to the Prime Standard must also submit its annual financial statements and quarterly financial releases (Finanzmitteilungen) to the FSE.
Furthermore, a company listed under the General Standard or Prime Standard is required to publish half-yearly financial reports, which consist of short-form financial statements, an interim company report and a certification by the management.
If the company is a parent undertaking, the annual financial statements must also be compiled at the consolidated company level.
Scale Segment. A company whose shares are listed on the Scale Segment must publish its audited consolidated annual financial statements and an interim financial report covering the six months since the last balance sheet date.
Reporting standards. For the Regulated Market, IFRS reporting standards must be followed, or for non-EEA companies, certain other recognized national GAAP such as US-GAAP and Japanese GAAP are also permitted. For the Scale, additional national GAAP (only for EEA-based issuers) or German GAAP are permitted reporting standards. Normally, audited annual financial statements are required, while interim reports need not be audited.
Timing. For the Regulated Market, the annual financial statements must be provided within four months after the end of a fiscal year. Interim reports must be provided within three months from the end of the relevant period for which they were prepared. If the issuer is a German AG or SE and adheres to the German Corporate Governance Code, these periods are shortened to 90 days for the annual financial statements and 45 days for interim reports.
For the Scale Segment, the periods for publication are six months and four months, respectively.
Insider dealing and market manipulation
After being listed on the exchange, the company's securities become subject to prohibitions on insider dealing and market manipulation. These prohibitions apply in all segments, not only the Regulated Market. Also, there is no geographical scope of application.
Any person in possession of inside information (defined above) is not allowed to purchase or sell the relevant securities for his or her own account (or for the account, or on behalf, of a third person) by using his or her knowledge of inside information. Relevant securities also includes derivative transactions. Nor is it permitted to amend or cancel an order for the purchase or sale of the relevant securities while in the possession of inside information. Further, he or she may not unlawfully disclose inside information to another person, make a buy or sell recommendation based on this information or otherwise cause a third party to trade in insider securities. A disclosure is not unlawful if made in the normal exercise of an employment, a profession or duties.
European law also prohibits market manipulation by means of false information or misleading statements about circumstances that have a substantial influence on the market valuation of financial instruments, if the information is used to influence the market value or the market price. False or misleading information, in this sense, covers not only statements about hard facts, but also forecasts and evaluations, as long as they are based on facts.
The prohibition also covers the execution of dealings or the placement of buy or sell orders which are likely to give false or misleading signals regarding the offer, demand or exchange or market price of financial instruments or are likely to create an artificial price level. Further, any deceptive act which can influence the fair market value of a financial instrument on a regulated market in Germany or the EU is prohibited. Both willful and negligent breaches of the prohibition may be punished.
Short selling prohibition and reporting requirement
EU-Regulation No. 236/2012 stipulates a prohibition of "naked" short selling that—among other financial instruments—covers all stocks admitted to trading on a Regulated Market or other trading venues, including primary listings on the Scale or on other unofficial markets (Freiverkehr or "Open Market") in Germany. There is no explicit geographical limitation on this prohibition. A naked short position is one where the seller is not the owner of the securities he or she has sold and does not have an absolutely enforceable claim for the transfer of a sufficient number of securities and does neither have any "locate" agreement in place with a third party which allows a reasonable expectation that the short sale can be settled when due. Contrary to the German predecessor regime, intraday naked short positions are no longer permitted. It is immaterial whether the short position is manipulative or deceptive. However, manipulative or deceptive practices in connection with (naked or covered) short selling could constitute a punishable market manipulation. There is also a European reporting regime for net short positions. The reporting thresholds are 0.1% and each further increment of 0.1%. The position must be reported to the BaFin. If the short position reaches, exceeds or undercuts 0.5% and any higher increments of 0.1%, the size of the short position must not only be reported, but also published in the Electronic Federal Gazette (Elektronischer Bundesanzeiger).
The following table summarizes the principal post-listing transparency obligations.
Most post-listing requirements under German law apply to foreign companies only in certain instances, namely when the company is a "domestic issuer" or (in other cases) where the company's home state is Germany. In simplified terms, this is usually the case if the foreign company's primary listing venue is in Germany. Where German law does not apply, the European harmonized regime under the Transparency Directive makes sure that similar obligations would apply under the law of the EEA country where the company is domiciled or where its shares are listed.
A company from the EEA must follow IFRS for its financial reporting. A non-EEA company from a country whose national GAAP has been recognized by the EU (Japan, US, Canada, China, South Korea or India) may be able to report its financial results in that country's national GAAP instead of IFRS.
