Transparency Register and Financial Information Act (TraFinG)
On 01.08.2021, the Transparency Register and Financial Information Act, TraFinG for short, came into force and leads to fundamental changes in the design of the transparency register. The reason for this is the implementation of the EU Financial Information Directive (RL 2019/1153) and the 5th EU Money Laundering Directive (RL 2018/843). The aim is to interconnect the transparency registers of the individual EU member states and to improve the associated fight against money laundering and terrorist financing as well as other criminal offenses.
The amendment affects more than two million companies in Germany. We have summarized the central innovations for you so that you are informed about the current developments and can implement the upcoming implementations in your company in good time.
According to Advocate General Szpunar, the obligation of national courts to no longer apply the minimum and maximum rates in old cases as well results from the special character of the provisions of the Services Directive concretizing the freedom of establishment enshrined in the Treaty as well as from the required respect for the fundamental right of freedom of contract guaranteed in the Charter of Fundamental Rights of the EU.
- Duty to notify instead of notification fiction
The most important change: In the future (see 7.), they will be obliged to actively report their beneficial owners to the Bundesanzeiger Verlag via www.transparenzregister.de for entry in the transparency register. The previous notification fiction, which made a separate notification of the beneficial owner to the transparency register unnecessary, is no longer applicable. It is therefore no longer possible to fall back on information that is already available from other registers, such as the commercial register. This is due to the conversion of the transparency register from a catch-all register to a full register. This means double register management for you.
- Are you affected by the new reporting requirement?
All legal entities under private law and registered partnerships, as well as foundations without legal capacity, trusts and comparable legal structures are obliged to notify the Bundesanzeiger Verlag of their beneficial owners. An exception exists only for registered associations. As a rule, the office keeping the register automatically makes the entry for them.
Increased attention is currently required in particular for foundations, non-profit organizations and GbRs.
For foundations, there is another reporting obligation in addition to the entry in the transparency register. With the reform of the foundation law, a nationwide and publicly accessible foundation register will be introduced on January 1, 2026. Among other things, information on members of the Board of Management and special representatives, as well as their respective powers of representation, must be entered and documents relating to the appointment and the Articles of Association must be enclosed. All other innovations associated with the reform of foundation law with regard to amendments to the articles of association, foundation assets, the constitution of governing bodies and liability, as well as the termination of foundations, will already come into force with the Act on July 1, 2023.
In addition, a beneficiary register for non-profit organizations (associations, foundations, limited liability companies and other corporate entities) maintained by the Federal Central Tax Office (BZSt) will be introduced with effect from January 1, 2024. This is freely available to the public and, for the first time, reveals an organization’s status under charitable law and its eligibility to issue donation receipts.
GbRs are currently not yet “registered” partnerships. As a result of the company register introduced as of 01.01.2024, they will – if the shareholders decide to register – become an association subject to transparency requirements and will thus presumably also be subject to the obligation to report to the transparency register.
Note
The obligation to notify the beneficial owner also applies to municipal companies if they are organized as a legal entity under private law.
- How do you determine your beneficial owner?
In the case of legal entities under private law and registered partnerships, § 3 para. 2 GwG natural person as beneficial owner who directly or indirectly
- are owners of more than 25% of the capital,
- control more than 25% of the voting rights or
- exercise control in a comparable manner (e.g. as a general partner or through a veto right).
Note:
In the case of municipal enterprises, there is no indirect beneficial owner. However, they are therefore not exempt from the reporting requirement. If only legal entities under public law are involved, the legal representative is always deemed to be the notional beneficial owner. (§ 3 Abs.2 S.5 GWG)
- What information do you need to submit about the beneficial owner?
The information on the beneficial owner now also includes all nationalities. Previously, reporting a nationality was sufficient.
- Extended reporting obligation
The reporting obligation for foreign acquirers of German real estate and for trusts now includes not only acquisitions through asset deals, but also share deals.
- Actuality of the data
You are responsible for keeping the information up to date in case of changes. In addition to information on the beneficial owners, this also applies to changes in your name or registered office, as well as in the case of mergers or dissolutions and changes in legal form.
- When do you need to take action?
The notification of the beneficial owner is subject to different transition periods depending on the legal entity. Need to become active:
- until March 31, 2022: AG, SE, partnership limited by shares
- until June 30, 2022: limited liability company, cooperative society or European cooperative society
- by no later than December 31, 2022 in all other cases
However, the transition periods do not apply to new establishments from 01.08.2021. Moreover, not even for those who were already required to register in the Transparency Register prior to the change in the law and not even in cases where registration is explicitly required (e.g. in the case of bridging assistance).
The fines will be suspended for an additional year in each case, effectively leading to a longer transition period. Also the discrepancy reports are not to be submitted in case of missing entries until 01.04.2023.
At a glance: What steps do you need to implement now?
- Determine their actual/actual beneficial owners and report them to the Bundesanzeiger Verlag for entry in the transparency register or check whether beneficial owners have already been reported accurately and updates are required.
- The identification of the beneficial owner may prove to be complex in individual cases. Therefore, take advantage of the transition periods granted by law and thereby avoid potential fines and negative publicity.
- You are responsible for the ongoing accuracy and timeliness of the data. Establish internal company structures that ensure ongoing review of the new reporting requirements.
- Make a request to protect their personal information, if necessary, to restrict all or part of the inspection and transfer of the data.
- In future business relationships, as part of the identification of business partners, carry out a comparison of the information you have with the transparency register. If you find any discrepancies, you are required to submit a discrepancy report.
- Always consider the current BVA-FAQs of the Federal Office of Administration.
More information can also be found here https://kpmg-law.de/rechtsgebiete/transparenzregister/.
