Expanded reporting obligations for German entities affect ultimate beneficial owners
Germany’s Transparency Register and Financial Information Act, which applies as from 1 August 2021, significantly expands the reporting requirements for German companies and is designed in part to prevent money laundering and the financing of terrorism. The act affects most companies and entities in Germany, as well as their beneficial owners, including foreign owners. Foreign owners may be individuals and/or companies that directly or indirectly hold an interest in a German entity. As a result, non-German parent companies with German subsidiaries should be aware of the reporting requirements and understand their obligations.
In particular, the act overhauls the transparency register, which is used to identify the ultimate beneficial owners of companies/entities. The “notification fiction” for beneficial owners is eliminated, which companies and other legal entities previously could rely on if the information was included in other publicly accessible registers. For example, reporting in the transparency register was not required if the relevant information on beneficial owners was available electronically in certain other public registers.
Under the revised rules, all listed companies and companies/legal entities and registered partnerships with their registered office in Germany must submit details of their beneficial owners (as well as any changes) to the transparency register even if the information can be accessed in another register.
Covered companies/entities and information to be reported
The act requires ultimate beneficial owners that hold an interest in German entities or have control over such entities to be registered with the “transparency register.” Entities that fall within the scope of the registration requirement include German corporations, i.e., AGs (joint stock corporations), GmbHs (limited liability companies), SEs (European corporations) and German partnerships (KGaAs (partnership limited by shares), KGs (limited partnerships, etc.).
Information on ultimate beneficial owners to be registered with the transparency register includes the following:
- Name of the ultimate beneficial owner;
- Date of birth;
- Residential address;
- Interest / control in the German entity; and
The above data generally would be provided through the German entity.
Transition rules apply for reporting beneficial owners of legal entities that previously did not have a reporting obligation. The transition rules provide for registration deadlines of 31 March, 30 June and 31 December 2022, depending on the type of entity. It should be noted that the transition provisions do not apply to legal entities established after 1 August 2021 or entities that previously were unable to invoke the notification fiction (e.g., because the shareholder list could not be retrieved electronically or the list was not up to date). In the latter case, an immediate reporting obligation already applied. For foreign parent companies with German subsidiaries, the reporting must take place immediately—the transition rules do not apply to foreign parent companies because the shareholders of such parent companies would not appear in any of the relevant registers in Germany.
Failure to comply with the applicable reporting obligation can result in fines of up to EUR 150,000.
Dr. Olga Engelking