As no structured data was previously available for most reporting entities in the German transparency register due to various exemptions, the register had to become a full register. This means that, with immediate effect, all reporting parties must report all data on their beneficial owners.
The expansion of the transparency register driven by European law continues to progress. On February 10, 2021, the German government passed a draft law amending the Money Laundering Act (Act on the European Interconnection of Transparency Registers and the Implementation of EU Directive 2019/1153 on the Use of Financial Information for Combating Money Laundering, Terrorist Financing and Other Serious Crimes - TraFinG). The background to this is the electronic networking of the transparency registers of all EU member states as intended by European law. Such networking is only possible if all relevant information are available digitally in the form of structured data records. As no structured data is currently available in the transparency register for a large proportion of the reporting entities due to various exemptions, the German transparency register shall become a full register, i.e., in the future all reporting entities have to report all data on their beneficial owners for entry in the register. The previous simplifications, in particular the notification fiction of Section 20 para. 2 of the Money Laundering Act (GwG), will be abolished without replacement.
According to the explanatory memorandum, around 2.3 million German companies are affected by the extended reporting requirements.
Collection register becomes a full register
Up to now, the transparency register has been structured as a collection register, i.e., in a large number of cases, the data on the beneficial owners is not directly available to the register itself due to exceptional circumstances, but is contained, for example, in the commercial, partnership, cooperative or association register. This is because a report to the transparency register has so far been dispensable in particular if all the required information on the beneficial owner are traceable by means of certain publicly accessible registers (so-called notification fiction).
According to the expressed intention of the German legislator, the notification fictions were intended to ensure that the administrative burden for those obliged to notify is kept within limits. The TraFinG is now making a U-turn. Apparently because it had to be recognized that the networking of the German registers envisaged at the time could not be realized in the near future and with reasonable effort due to the lack of structured data from the other public registers. The problem shall now be solved by removing these facilitations for the reporting parties and obligating them to transmit structured data to the transparency register. The reporting fiction becomes a reporting obligation for all, which ensures that all relevant information is available as structured data records in the transparency register for the purpose of Europe-wide networking.
Transitional periods for the subsequent notification of the beneficial owner
The TraFinG provides for a staggered transitional arrangement for the subsequent reporting of beneficial owners due to the discontinuing reporting facilitations. Accordingly, subsequent notifications have to be made
in case of a German stock corporation (AG), European stock corporation (SE) or a German partnership limited by shares (KGaA) until March 31, 2022,
in case of a German limited liability company (GmbH), a German cooperative company or a German partnership company until June 30, 2022 and
in all other cases until December 31, 2022.
Enforcement of the provisions on fines for violations against the obligation to report the beneficial owner for the first time as a result of the new regulations will be suspended
in case of a German stock corporation (AG), European stock corporation (SE) or a German partnership limited by shares (KGaA), until March 31, 2023,
in case of a German limited liability company (GmbH), a German cooperative company or a German partnership company until June 30, 2023 and
in all other cases until December 31, 2023.
Additionally new: Indication of all nationalities
The TraFinG also stipulates that in future all nationalities of the beneficial owner must be reported to the transparency register. Previously, it was sufficient to report one of several nationalities. However, according to the explanatory memorandum to the Act, subsequent reporting is only required if the associations subject to the reporting obligation "update the information on the beneficial owner [in the transparency register] on a regular basis". What the legislator means by regular updates, however, remains unclear.
Also new: Reporting obligations for share deals of foreign companies and extension of the prohibition of notarization for notaries
Even under the current legal situation, foreign companies are obliged to report their beneficial owner to the transparency register if they undertake to acquire ownership of real estate located in Germany and they are not entered in a transparency register of another EU member state (Sec. 20 para. 1 sentences 2, 3 of the German Money Laundering Act (GwG)).
The current regulation only covers the case when a foreign company directly acquires ownership of a domestic property. The TraFinG clarifies that a foreign company is also obliged to report its beneficial owner to the German transparency register if it acquires shares in a company that holds domestic real estate property (so-called share deal) in accordance with Sec. 1 para. 3 of the Real Estate Transfer Tax Act (GrEStG). These requirements are met, e.g., if a foreign company acquires at least 95 % of the shares in a German limited liability company (GmbH), which in turn, owns real estate in Germany.
Accordingly, the prohibition on notarization in Sec. 10 para. 9 sentence 4 of the German Money Laundering Act (GwG) is also extended to such share deals. According to this extended provision, the notary may now only perform a notarization involving a foreign company which is obliged to report its beneficial owner to the transparency register, even as a share deal, if the latter has complied with its reporting obligations.
Conclusion and outlook
The increasing importance of the transparency register is not only reflected in the effort that the full register character now demands from the reporting parties, but also in the long-term simplification that goes hand in hand with the full register character of the transparency register, or rather is supposed to go hand in hand with it.
Whether the benefits of the transparency register's status as a full register outweigh the expense for all involved will probably only become evident in the next few years, among other things when it has been statistically determined how many serious crimes have been detected by the transparency register and the information contained therein.
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