Future Financing Act: Federal Cabinet adopts package of measures to strengthen start-ups and growth companies

The Federal Cabinet has passed the Future Financing Act in order to strengthen Germany as a financial location and offer start-ups and growth companies better conditions. The measures are aimed at easier access to the capital market, improved employee capital participation and modernized financial market law.

Berlin - The Federal Cabinet today took a significant step towards promoting innovation and economic growth by adopting the draft Future Financing Act. This draft law is intended to help strengthen Germany as a financial center and improve the framework conditions for start-ups, growth companies and small and medium-sized enterprises (SMEs).

Easier access to the capital market for start-ups and growth companies

A central aspect of the Future Financing Act is the facilitation of market-based financing on the German capital market. This not only strengthens the competitiveness of Germany as a financial center, but also provides economic impetus. It will be easier for start-ups and growth companies in particular to raise new capital for investments. This will help to promote innovative developments and technological progress in the country.

We are giving future industries an additional boost. After all, it will be easier for start-ups and growth companies in particular to mobilize private capital for investments and drive innovative developments forward.

Christian Lindner, Federal Minister of Finance

Specific measures to facilitate access to the capital market include

• Allowing stock exchanges to admit parts of the regulated market without co-applicants for IPOs, which can reduce the cost of IPOs.
• The reduction of the minimum market capitalization for IPOs from 1.25 million euros to 1 million euros in order to facilitate access to the capital market for smaller companies.
• The introduction of multi-voting shares with voting rights of up to 10:1, allowing founders to retain influence over the company while raising capital.
• The creation of a shell company (BMAG), which offers start-ups and growth companies an alternative route to the capital market without having to go through the complex IPO process.

Promotion of employee share ownership

The Future Financing Act also contains regulations to strengthen employee capital participation, which is of great importance for start-ups, growth companies and SMEs. These regulations are intended to support companies in attracting and retaining qualified employees. Some of the changes include:

• An increase in the tax-free allowance for employee share ownership from the previous €1,440 per year to €5,000 to allow employees to participate more in the company's success.
• The possibility of also using the tax-free allowance by converting up to 2,000 euros per year in remuneration.
• An extension of the provision on deferred taxation in order to alleviate the so-called dry-income problem.

We have been waiting a long time for employee share ownership. It's great that we now have a first draft and can discuss it in Parliament.

The tense economic situation is causing problems for many founders and start-ups. With employee capital participation, we are creating an instrument to obtain capital and expertise from specialists for our start-ups.

Melis Sekmen, Member of the Bundestag, rapporteur for start-ups and start-ups

The "flat-rate taxation" for employee capital investments, which was also provided for in the draft bill, did not find a majority within the federal government. This was criticized in particular by the Startup Association.

This would have been a powerful instrument, especially in view of the international competition for talent. It is therefore all the more important that it is clarified in the further legislative process that the restricted shares commonly used in startup constellations are covered by the new regulations. Otherwise, there is a risk that the law will come to nothing.

Christian Miele, Chairman of the Board of the Startup Association

Modernization of financial market law

The Future Financing Act also contains various measures to modernize financial market law, which are intended to improve the framework conditions for financial services and investments. These include

• Easier capital increases for public limited companies and the introduction of a higher quota for simplified subscription rights.
• Creation of an exemption from judicial review of general terms and conditions for contracts between financial service providers.
• Introduction of electronic shares in electronic securities registers or crypto securities registers.
• Legally secure regulations for the segregation of crypto assets of customers in the insolvency of the crypto custodian.
• Improved regulations on liability for crowdfunding and simplifications for investment funds in the area of renewable energies.

We are opening up new opportunities for companies to generate capital by facilitating capital increases of public limited companies and the introduction of shell companies.

Dr. Marco Buschmann, Federal Minister of Justice

Tax adjustments for fair competitive conditions

In order to ensure a level playing field in Europe, the VAT exemption for the management of venture capital funds will be extended. In addition, administrative services provided by syndicate leaders for open syndicated loans will be exempt from VAT.

The Future Financing Act marks a significant step towards making Germany a stronger financial location and improving support for start-ups, growth companies and SMEs. The planned measures are aimed at facilitating access to the capital market, making employee capital participation more attractive and modernizing financial market law in line with the times.