Based on the Fourth EU Money Laundering Directive (Directive (EU) 2015/849), Germany implemented the transparency register by an amendment to the Money Laundering Act (Geldwäschegesetz) that became effective in June 2017. Most of the German companies have to submit to the transparency register specific information about their beneficial owner. The deadline for submitting these information to the transparency register for the first time is 1 October 2017.
Obligated Legal Entities
The reporting obligation vis-à-vis the transparency register exists, in particular, for all German legal entities under private law (e.g., GmbH, AG, SE, KGaA) and for all registered partnerships (e.g., KG, OHG). The BGB company (GbR) is not affected by the reporting obligation.
For purposes of the transparency register, a beneficial owner is a natural person who ultimately owns or controls an obligated entity. This is the case if the natural person, directly or indirectly,
- holds more than 25% of the shares in the obligated entity, or
- controls more than 25% of the voting rights in the obligated entity, or
- exercises control over the obligated entity in a comparable way (in particular, but not exclusively, such control can arise from arrangements (Absprachen) between the shareholders or between a third party and a shareholder, or from the power (Befugnis) to appoint legal representatives or other body members).
The natural person’s nationality or place of residence has no impact on his qualification as beneficial owner and on the related reporting obligations vis-à-vis the transparency register.
Indirect Ownership or Control
In case of indirect ownership or control, a natural person is the beneficial owner if this person controls intermediary entities within the shareholding chain which hold together more than 25% of the shares in the obligated entity. A natural person controls an intermediary entity if this person can, directly or indirectly, exercise controlling influence over the intermediary entity.
Obligations in Connection with the Identification of the Beneficial Owner
The obligated entity shall not be obliged to conduct thorough investigation but shall gather the relevant information about its beneficial owner and keep the information up-to-date. The exact scope of such obligation to identify the beneficial owner, however, is unclear. If the obligated entity cannot identify a natural person being its beneficial owner (either because no such beneficial owner exists or because the structure does not enable the obligated entity to identify the beneficial owner) or if it is doubtful whether the natural person identified is in fact the beneficial owner, the legal representative of the obligated entity is considered as its beneficial owner.
Apart from the obligated entity’s reporting obligations vis-à-vis the transparency register, each direct shareholder of the obligated entity has a corresponding obligation to provide the obligated entity with the relevant information if the direct shareholder is itself the beneficial owner or directly controlled by the beneficial owner. If the direct shareholder is indirectly controlled by the beneficial owner, the beneficial owner is obliged to provide the obligated entity with the relevant information.
Information to be Submitted to the Transparency Register
The following information about the beneficial owner needs to be submitted to the transparency register: full name, date of birth, place of residence, nature and extent of the beneficial owner’s economic interest in the reporting entity.
The transparency register is maintained by the Bundesanzeiger Verlag. The relevant information must be submitted electronically via an online form (see www.transparenzregister.de).
Exemptions from the Reporting Obligations
If the obligated entity is a listed company whose shares are traded on an organized market within the meaning of the Securities Trading Act (Wertpapierhandelsgesetz) or which is subject to comparable European or international transparency obligations, its reporting obligations vis-à-vis the transparency register are always deemed to be fulfilled. A separate notification to the transparency register is not required. With respect to other obligated entities, the reporting obligations will only be deemed to be fulfilled if all required information about the beneficial owner is electronically retrievable from other, publicly available, registers such as the commercial register.
The transparency register is not publicly available. Access rights exist for certain supervisory and prosecution authorities as well as for parties specifically obliged to prevent money laundering and terrorist financing, such as financial institutions. Apart from that, everyone who can demonstrate to have a legitimate interest to see the information in the transparency register (such as, for example, non-governmental organizations that are committed to the fight against money laundering and terrorist financing, or specialized journalists doing research in this field) will be granted access. Under certain circumstances, the beneficial owner may apply for a restriction of the access rights of these persons.
Any intentional or negligent non-compliance with the reporting obligations is an administrative offence and can therefore result in a fine. The fine amounts to a maximum of EUR 100,000. In case of a severe violation, the fine amounts to a maximum of EUR 1 million or the double of the economic advantage resulting from the violation. The fine will usually be imposed on the obligated entity. However, under certain circumstances, the shareholder or the beneficial owner can be fined as well. This is at least the case, if they breach their own obligation to provide the obligated entity with the relevant information to be submitted to the transparency register.
In light of the deadline for the first submission to the transparency register on 1 October 2017, German companies should assess the following points:
- Is the company subject to reporting obligations vis-à-vis the transparency register?
- Can the company invoke an exemption from the reporting obligations?
- Is the beneficial owner known to the company or can the company identify the beneficial owner?
- Are all relevant information about the beneficial owner available to the company?
- Has the company informed its direct (and indirect) shareholders of the reporting obligations in connection with the transparency register?