Introduction of a Transparency Register in Germany

1 December 2017

Purpose and legal background

In order to fight money laundering and terror financing and prevent that criminals can hide behind corporate structures, like offshore companies, the German government introduced a transparency register in 2017.  Based on the Fourth Money Laundering Directive of the European Union it is now part of the updated German Anti-Money Laundering Act.

Who is generally concerned?

All legal persons governed by private law as well as registered commercial partnerships based in Germany. This comprises inter alia German limited liability companies (GmbH), stock corporations (AG), general partnerships (OHG) and limited partnerships (KG). Civil law partnerships pursuant to the German Civil Code (GbR) are not included, since they are not registered.

The obligation to communicate the necessary information to the transparency register applies to the legal representatives of the respective corporation or partnership.

In addition, custodians of trusts and trustees that have their place of residence or seat in Germany are obliged to file the required information relating to the ultimate beneficial owner of the trust to the Transparency Register.

The beneficial owners are obliged to disclose the necessary information to the legal representatives or custodians.

Who is a beneficial owner in this context?

A natural person that is the owner or who is in control of [the Organization], or who is in a position to grant permission to make financial transactions or constitute new partnerships. A natural person may be beneficial owner if it directly or indirectly

• holds more than 25% of the share capital
• controls more than 25% of the voting rights or
• controls the firm in a comparable way.

Exceptions to the obligation to notify

The obligation to notify is regarded as fulfilled when all the necessary information is already contained in documents and records from GERMAN public registers AND the data is available in electronical form. Such public registers are the commercial register, partnerships register, register of cooperatives, register of associations or business register.

Although your German company is entered in a German register reports to the transparency register especially must be filed if

• foreign corporations are shareholders as data on the private individual beneficial owners is not available in German registers
• vote pooling agreements make a private individual gain more than 25% of the voting rights
• trust agreements hide beneficial owners
• no changes of the shareholder list were reported to German register after 2007 and therefore data may not be available in electronic format in the register

Corporations whose shares are listed on an organised market per Section 2 chapter 5 of the German Securities Trading Law or having equivalent requirements with respect to transparency of voting rights are excluded from the obligation to submit information to the transparency register, due to the fact that they are already subject to the extensive disclosure requirements of the capital market. Details should be checked with a German corporate lawyer.

As of end of November 2017 there is still no clarity whether registered German branches of foreign companies must report to the transparency register.

What needs to be published?

Those concerned must obtain, hold, update and electronically submit the following information about their beneficial owners to the transparency register:

(1) first and surname,
(2) date of birth,
(3) address and
(4) nature and extent of the beneficial interest, which includes

• the amount of capital share or the number of voting rights,
• the exercise of control through other means, especially by agreement between a third party and a shareholder or between several shareholders,
• the position of the legal representative, managing partner or partner as such.

Please note that all changes of the beneficial owner or its data must be reported.

When does information need to be published?

The communication of information to the transparency register had to be made by 1 October 2017 for the first time. Any changes must be updated to the transparency register without delay. The transparency register is expected to be available online from 27 December 2017.

Who may access information from the Transparency Register?

The Transparency Register is generally not publicly accessible. Access will be granted to authorities, persons who are obliged to identify their contractual partner pursuant to German money laundering law and every person who is able to prove a “legitimate interest” in access to the register (e.g., journalists or NGOs engaged in anti-money laundering or terrorist financing research).

Consequences of the failure to notify

Those who intentionally or recklessly violate the obligations under the Anti-Money Laundering Act commit a regulatory offence. They can receive a high regulatory fine. Not only the failure to notify, but also the notification of false information as well as obtaining access to the transparency register by fraud under false pretences is sanctioned with a regulatory fine. The regulatory fines may amount to up to

• 100,000.00 EUR, or
• in case of a severe, repeated or systematic breach of the law,

– up to EUR 1,000,000 or to twice the amount of the benefit derived from the breach, or,
– for certain legal or natural persons within the financial sector, up to EUR 5,000,000 or to 10 percent of the total turnover.

Need for action?

The legal representatives of filing organizations should determine whether the required information can be accessed by publicly and electronically accessible registers. If this is not the case there is need for disclosure to the Transparency Register. In case of uncertainty we recommend to contact a German corporate lawyer. The disclosure notifications relating to ultimate beneficial owners to the Transparency Register can be made under www.transparenzregister.de.