On 26 June 2017, the Act on the Implementation of the Fourth EU Anti Money Laundering (AML) Directive entered into force. It provides for the establishment of a central electronic Transparency Register, according to which all civil law legal entities, registered partnerships, trusts and trust-like legal formations must have their „beneficial owners“ disclosed.
Under the new law, register access (for the time being) is, among others, limited to supervisory authorities and prosecution agencies. In the case of a legitimate interest, however, other persons also have access rights. According to the explanatory memorandum to the new law, in particular, „non-governmental organizations and specialized journalists“ are named. In doing so, „the research needs to serve the preparation of a serious and factual analysis.“
According to the wording of the law, however, there is no limitation to these groups of persons, but access is granted to each person demonstrating to the registering authority that he/she has a legitimate interest to access. The concept of „legitimate interest“ is already used for the access to the land register. Furthermore in its decision of 2 June 2017 the German Federal Assembly (Bundesrat) has in general demanded that „public access to the Transparency Register is required“. It remains to be seen how things will develop.
The Transparency Register provides information on the first and last name, date of birth, place of residence and the nature and extent of the economic interest of the beneficial owner in respect of civil law legal entities, registered partnerships and certain trusts.
In the case of legal entities and partnerships, the beneficial owner is already an individual who directly or indirectly holds more than 25 per cent of the capital shares or controls more than 25 per cent of the voting rights, or controls them in a comparable manner. Control in any other way may also be „due to agreement between a third party and a shareholder or between several shareholders“. This may include shareholder, trustee and voting rights agreements. However, exceptions to legal entities that are listed on an organized market within the meaning of the German Securities Trading Act (Wertpapierhandelsgesetz) apply.
The register is a portal for retrieving documents from other publicly accessible electronic registers (especially the commercial register). A notification to the Transparency Register is required if the beneficial owner is not shown in other registers.
Civil law legal entities and registered partnerships must obtain, record, keep up-to-date the necessary information from the beneficial owners, and notify the electronic Transparency Register without delay. In the case of subsequent amendments, they must report again without delay. Trustees domiciled or with seat in Germany shall be subject to the same obligation. The obligation to notify corresponds with the obligation of the beneficial owners to provide the relevant information and any change without delay.
The notifications must be sent to the Transparency Register by 01 October 2017 at the latest for the first time. Anyone who intentionally or carelessly fails to comply with these obligations acts unlawfully, which can be fined of up to one million Euro or up to two times the economic advantage deriving from the infringement.
Conclusion: The introduction of the Transparency Register will in future cause German companies and their authorized representatives more worries and may lead to tensions between management and shareholders. For legitimate purposes, it may (previously) have been advisable to remain silent about economic interests and control rights internally. However, the management now has to „chase” their shareholders, so as not to risk themselves the violation of reporting obligations and an associated administrative offense.