Every event in your bond's term starts with one question: which register entry applies when? The issuer pays interest and principal to the holders in the crypto securities register on the record date set in the terms. The register keeper changes entries only on instruction of the holder or another entitled party (§ 18 (1) eWpG). Amended terms take effect only once deposited (§ 5 eWpG).
75 percent
That is the minimum share of participating votes needed to extend the term or cut the interest of a German law bond, if the terms allow majority resolutions (§ 5 (4) SchVG). Otherwise every creditor must agree (§ 4 SchVG).
You will not find it in any token standard or smart contract. It is in the Bond Act (SchVG) and applies to tokenized bonds and global certificates alike. Technology changes how register and payment run. It does not change who decides about the bond.
Two systems carry the term
The lifecycle runs from first registration to repayment. A tokenized bond here is a bearer bond registered as a crypto security under the eWpG.
The register shows who owns the bond. The bank account shows whether you paid. With payments by bank transfer, every event must bring both together. Most manual work happens there.
- Issuer: owes interest and principal, amends terms, chooses the register (§ 793 (1) BGB; §§ 5, 21, 22 eWpG).
- Register keeper: changes entries on instruction, delivers extracts, keeps the terms accessible (§§ 5, 16, 18 eWpG).
- Paying agent: pays per the record date register.
- Custodian: holds for investors without a wallet.
- Investors: instruct transfers, vote (§ 25 eWpG; §§ 5 to 21 SchVG).
- Joint representative (optional): acts for all creditors (§§ 7 and 8 SchVG).
Every record date needs an extract the paying agent can process without queries.
How an interest date works
Interest goes to the holder registered on the record date. The terms set it before the payment date, so the paying agent has time to match the extract with bank details. Four steps: the register keeper produces the extract, the issuer funds the paying agent in time, the paying agent matches each holder to bank details (directly or via the custodian), then transfers.
Missing funding on the payment date puts the issuer in default toward all holders, however well everyone else worked. Between interest dates, buyer and seller settle accrued interest themselves; the issuer pays the full coupon to the record date holder.
Example: who gets which interest?
Illustrative figures: EUR 2,000,000 bond, EUR 1,000 denomination, 6.0 percent fixed, paid annually on January 1, actual/365, record date one business day before.
- Total interest: EUR 120,000. Coupon per bond: EUR 60.
- Investor A sells 50 bonds to B, transfer registered October 1, 273 days after the last interest date.
- Accrued interest B pays A: 50 x EUR 1,000 x 6.0 percent x 273 / 365 = EUR 2,243.84.
- Paying agent pays B on the interest date: 50 x EUR 60 = EUR 3,000.
- B keeps EUR 756.16 for 92 days.
Registered after the record date, the same transfer sends the EUR 3,000 to A, and B must claim it back. The register worked. The instruction came too late.
Amending the terms
Only by creditor resolution or all creditors' consent, effective only on deposit with the register keeper (§ 5 eWpG).
- Changes apply equally to all creditors (§ 4 SchVG).
- Majority resolutions are possible only if the terms provide for them (§ 5 (1) SchVG).
- Material changes, such as maturity, interest or ranking, then need at least 75 percent of participating votes (§ 5 (4) SchVG).
- Meetings are called at least 14 days ahead (§ 10 (1) SchVG); a vote without meeting runs at least 72 hours (§ 18 (3) SchVG).
- Resolutions can be challenged within one month (§ 20 SchVG).
Then deposit the amended terms, changes traceable (§ 5 eWpG). Any smart contract mapping interest or term follows the deposited change. With euro payments by bank transfer, it does not itself pay interest. During a running public offer, a significant new factor also requires an updated securities information sheet (§ 4 (8) WpPG) or a prospectus supplement (Art. 23 Regulation (EU) 2017/1129).
Tap issues and buybacks
A tap issue raises the volume of the same bond; a buyback reduces bonds outstanding. Both change register data, since the register records issue volume and nominal amount (§ 17 eWpG).
A tap needs the terms to allow it, or it becomes a new bond with its own terms. New bonds are registered and earn from the next record date. A buyback runs like a transfer to the issuer; bonds not reissued are deleted.
Early termination and maturity
Both end with repayment on the redemption record date and deletion. Maturity is fixed; termination follows a right in the terms.
An issuer call exists only if the terms provide it, with notice period and amount. Creditor rights also come from the terms, for example on payment default; the terms can require joint termination by at most 25 percent of bonds outstanding (§ 5 (5) SchVG). For the paying agent, termination is early maturity: extract, funding, transfer, deletion.
Changing register keeper or register
You may replace the register keeper without holders' consent, unless the terms say otherwise (§ 16 (2) eWpG). The register itself changes only with consent of all holders or the supervisory authority (§ 22 eWpG).
A new provider on the same register is a contract matter. Moving to another blockchain or a central register is hardly possible without BaFin when holders are widely spread. If the register keeper fails the legal requirements, the issuer must fix it within a reasonable time, or BaFin can require a transfer (§ 21 (2) eWpG).
The costliest mistakes
- No record date in the terms: dispute over the coupon. Fix it when drafting.
- Extract not in the paying agent's format: manual matching, misdirected payments. Fix it in the paying agent contract before the first subscription.
- No majority clause: one investor can block a term extension (§ 4 SchVG). A majority clause and a joint representative can make decisions workable with many investors.
- Smart contract changed before deposit: register and terms contradict. Deposit first.
- Investors without bank details: payment stuck, issuer still owes. Fix it at allotment.
When this does not apply
This covers German law bearer bonds as crypto securities. Central register securities are kept and settled by a central securities depository or custodian. The SchVG does not apply to bonds under foreign law (§ 1 (1) SchVG). Subordinated loans and registered bonds fall outside the eWpG (§ 1 eWpG).
Your next step
Check whether your terms set a record date, a majority clause and a register exit. Then compare which duties stay with the issuer.