BaFin Provides Guidance on Accelerated Review of Equity Prospectuses

In line with broader efforts to remove procedural deterrents from issuers engaging in securities offerings, for about the past year, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – "BaFin") has been implementing an abridged timeframe for its review of prospectuses for offers and listings of shares. It has also rolled out a pilot with shortened review periods for certain debt prospectuses.

On 11 September 2024, the BaFin added specific guidance on the accelerated process on its website (currently available in German only).

Shortened review period

As shown in the following table providing an overview of accelerated review timeframes for each of three usual submissions, compared to those prescribed by the EU Prospectus Regulation, the relatively lengthy time it ordinarily takes for the review of initial public offering ("IPO") prospectuses can be significantly reduced, by seven days for the initial submission and five working days for the third and last submission. For practical purposes, this means that the procedure usually taking 10 to 12 weeks may be completed in six to eight weeks, which is a substantial improvement from the perspective of issuers.

Requirements for accelerated reviews

Accelerated reviews require a preliminary discussion between the issuer and the BaFin (this preliminary discussion should always happen in practice), during which a tentative submission schedule is set. This discussion should take place about three months before the initial prospectus submission.

The BaFin has underscored that the prospectus filed as a part of the initial submission must be as complete as possible – all requisite auxiliary documents such as cross-reference checklists must be included in the submission and, if at all possible, the prospectus should already include complete historic financial information. The submission should also fully reflect any matters that were previously agreed upon with the BaFin.

In addition, the BaFin reserves the right to revert to the regulatory timeframe if the issuer substantially deviates from the schedule or other agreed points, or if the quality of the submission so warrants.

Preliminary discussion checklist

Prior to contacting the BaFin for the preliminary discussion, the issuer is advised to review and prepare answers to the following questions included in a voluntary checklist (currently available in German only):

1. Should an EU growth prospectus for SMEs be used?
2. Should a secondary market prospectus be used?
3. Will there be a public offer, listing or both?
4. Which persons will offer the securities or otherwise participate in the transaction?
5. Is the issuer a consolidated group or a group with a complex structure?
6. Which annual and interim financial statements have already been prepared?
7. Which historic financial information is intended to be included in the prospectus?
8. Does the historic financial information reflect the issuer’s business or is additional disclosure necessary?
9. Are alternative performance measures (non-GAAP financial information) planned to be included in the prospectus and what added value do they have for investors?
10. Does the issuer fall under one of the following categories of specialist issuers requiring additional specified disclosures?
    • Property (real estate) companies
    • Mineral companies
    • Investment companies
    • Scientific research based companies
    • Start-up companies
    • Shipping companies
11. Will the issuer be able to give a clean working capital statement in the prospectus?
12. What is the anticipated timeframe for the prospectus approval?

The breadth of themes to be tackled in the preliminary discussion strongly suggests that, in order to avail themselves of a shortened review period, issuers should thoroughly prepare for this discussion and have a specific transaction structure and timeframe in mind.

Conclusion

The EU Capital Markets Union and Listing Act package, along with other recent regulatory and market developments, have catalysed the process of making public markets more attractive for EU companies and facilitating access to capital by reducing regulatory and compliance costs. In this vein, the BaFin’s heightened focus on significantly shortening the time it takes to review prospectuses (in particular those for equity securities) is an effective, practical step in the direction of saving issuers more time and resources, thus increasing the appeal of public offers.

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