Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USAGermanyGermany1. Securities law1.1 Offer of securities: 1 The Prospectus Directive was implemented in Germany bythe Securities Prospectus Act (Wertpapierprospektgesetz) (WpPG) 2 . Generally,the principles referred to in paragraph 2 on pages 1-3 of this guide will apply.Some possible exceptions to those principles are outlined below:• The German Federal Financial Services Supervisory Authority 3 (BaFin)takes the view that non-transferable options do not qualify as securitieswithin the meaning of the WpPG. However, in case of options beingoffered under employee participation plans, the BaFin takes into accountnot only the option but also the exercise of the option and the subsequentdelivery of the underlying securities when deciding whether, and at whatpoint, a "public offer of securities" is made which triggers the prospectusrequirements. The decisive factor is whether the underlying security isdelivered automatically or whether the option has to be exercised bysubmitting a notice etc.Where a physically-settled option directly results in the acquisition ofshares in the relevant company on the maturity date (i.e. there are nointermediate steps such as the requirement to submit an exercise noticeetc.), BaFin considers the offer of the options to be a public offer ofsecurities. Where the offer requires an exercise, it will depend on thecircumstances of the case as to whether the acquisition of the underlyingsecurities is to be considered as a public offer of securities within themeaning of the WpPG.• The wording of the employee share plans exemption as implemented intothe WpPG could potentially be construed as not covering the offer of1 The offer of participation in the form of closed-end funds, trust structures and other pooled vehicles inwhich participation is granted other than by way of an issue of transferable securities may be subject toprospectus requirements under the German Sales Act (Verkaufsprospektgesetz). However, where this isthe case, various exemptions may apply.In addition, there exists a general civil law-based liability for offers and marketing material used in thecontext of offering securities and financial instruments where no approved prospectus is used. Underthis concept of civil law-based liability, the offeror of securities may be held liable for misleading andincomplete marketing material on the basis of which it offers such products to investors.23The WpPG forms part of the Act implementing the Prospectus Directive ("Prospektrichtlinie-Umsetzungsgesetz") of 22 June 2005, BGBl. I 2005, p. 1698.Bundersanstalt für Finanzdienstleistungsaufsicht.UK/1729295/03 77 September 2010