Obligation for All to be registered in the Transparency Register
Tightening of the law from 1 August 2021

What is the Transparency Register?

On 26 June 2017, the Money Laundering Directive Implementation Act came into force. One of the essential components of the new Money Laundering Act (“Geldwäschegesetz”; hereafter “GwG”) was the introduction of a new register in which the ownership structures of companies, foundations and similar arrangements must be disclosed. For this purpose, the electronic transparency register was created, in which the beneficial owner of a company must be shown. Even though the transparency register is related to the revision of the“GwG”, it basically affects all German companies – regardless of their legal form and size.

Tightening of the law as of 1 August 2021

On 1 August 2021, the Transparency Register and Financial Information Act Money Laundering (TraFinG Gw) came into force. With this law, the transparency register has been transformed from a supplementary register into a full register. Due to the fictitious notification (Section 20 (2) “GwG”), the obligation to notify was waived in many cases until this new law came into force, namely whenever the information on the beneficial owner was already available from other public registers or sources and the documents were electronically retrievable there. This notification fiction was abolished by the legislator with effect from 1 August 2021. This means that all companies subject to transparency requirements are now obliged to identify their beneficial owner and to actively notify the transparency register for registration. This obligation also exists if the required information is already available in other electronically retrievable registers (such as the commercial, cooperative or partnership register). For companies that previously benefited from the notification fiction, the transitional periods described below apply.

Who is affected?

The transparency obligations affect “associations” within the meaning of Section 20 (1) ”GwG”, i.e. all legal persons under private law (including AG, GmbH, UG (haftungsbeschränkt), cooperatives, foundations, European Company (SE), KG aA), registered partnerships (including OHG, KG, partnerships, etc.). OHG, KG, partnerships) as well as “legal structures” within the meaning of Section 21 ”GwG”, i.e. certain trusts and trustees of non-legal foundations with a self-interested foundation purpose and legal structures that correspond to such foundations in their structure and function.

For associations, a notification fiction was created with the newly added Section 20a ”GwG”, so that this data is automatically transferred from the register of associations to the transparency register; notification obligations therefore only exist in exceptional constellations.

After the amendment of the ”GwG”, the transparency obligations also affect foreign associations if they undertake to acquire ownership of real estate located in Germany, unless they have already submitted the relevant information to a transparency register in another EU member state.

The headquarter of the association is generally to be based on the registered office. Therefore, the notification obligations also apply to German associations that have their administrative headquarters abroad.

Sole proprietors, registered traders (e.K.) and GbRs are generally not affected by the notification obligation. In the near future, however, GbRs will also be subject to registration in the transparency register, as an independent business register is being created for this form of company.

Who is required to notify?

The management of the companies concerned must determine the necessary information and any changes and submit it electronically to the Transparency Register.

By when must the entries be made?

The notifications had to be made for the first time by 1 October 2017. Companies that previously benefited from the notification fiction will have to register in the Transparency Register within the following transitional periods as of 01 August 2021 due to the new legal regulation:

• Stock corporation, SE, partnership limited by shares until 31 March 2022.
• limited liability company, cooperative, European cooperative or partnership until 30 June 2022
• in all other cases (e.g. registered partnerships) by 31 December 2022 at the latest.

What are the obligations?

Legal entities and registered partnerships must obtain information on the beneficial owner of these associations, retain it, keep it up to date and notify the register-keeping office electronically without delay. The transparency obligations are thus divided into two areas: the obligation to obtain information on beneficial owners and the resulting obligation to notify the transparency register.

Mirroring the duty of notification of the associations concerned, the beneficial owner is obliged to provide the associations with the information necessary for notification (so-called duty of disclosure, Section 20 (3) sentence 1 ”GwG”). The same obligation applies to shareholders who are either beneficial owners themselves or are directly controlled by the beneficial owner (Section 20 (3) sentence 2 ”GwG”).

Associations subject to the reporting obligation have a limited duty to investigate under Section 20 (3a) GwG. An association that has not received information from its beneficial owners is obliged to request information on the beneficial owners from its shareholders to a “reasonable extent” and to document these requests for information and the information obtained.

Shareholders who become aware that the beneficial owner of the association has changed must notify the association unless the association is already aware of the new information.

Furthermore, associations are obliged to notify if their name or legal form has changed or if they have been merged or dissolved.

Who is the beneficial owner?

The central term of the Transparency Register is the beneficial owner ( Section 3 ”GwG”).

These are (1.) exclusively natural persons who ultimately own or control the association or (2.) the natural person at whose instigation a transaction is ultimately carried out or a business relationship is ultimately established, Section 19 (2) in conjunction with Section 3 (1) and (2) GwG.

In the case of legal entities or other associations, any natural person who directly or indirectly (1.) holds more than 25 percent of the capital shares or (2.) controls more than 25 percent of the voting rights or (3.) exercises control in a comparable manner is the beneficial owner.

The beneficial owner is also the person who can exercise indirect control over the association. Indirect control exists in particular if corresponding shares are held by one or more associations which are in turn controlled by a natural person (section 3 (2) sentence 2 ”GwG”). Control exists in particular if the natural person can directly or indirectly exercise a controlling influence (section 290 (2) to (4) HGB) on the association under section 20 (1) GwG.

If no natural person can be identified as the beneficial owner, the legal representative or managing partner or partner of the contracting party will be deemed to be the beneficial owner (section 3 (2) sentence 5 ”GwG”).

What information must be provided to the Transparency Register?

The following information on the beneficial owner must be provided to the Transparency Register:

• First and last name,
• date of birth,
• place of residence and
• Nature and extent of the beneficial interest of the beneficial owner
• Nationality

The nature and extent of the beneficial interest must indicate the beneficial owner’s status.

What sanctions may be imposed?

Pursuant to Section 56 (1) No. 55 ”GwG”, violations of the transparency obligations, e.g. if reports to the transparency register are not made, not made on time or not made in full, are an administrative offence and can be punished with a fine. The amount of the fine is up to 150,000 euros, in cases of a serious violation up to one million euros and in special cases up to 5 million euros.

 

If you have any questions regarding the transparency register and the notification obligations, please do not hesitate to contact us. Of course, we can also carry out the notifications to the Transparency Register for you. In this case, please contact us by e-mail at

transparenzregister@ahlers-vogel.de.

We will then provide you with further information on registration and the associated costs.