Update transparency register – current topics and outlook legislative procedure

The Transparency Register – an organizational challenge

Legal entities under private law, registered partnerships, trusts and comparable legal structures must report information on their beneficial owners to the transparency register. I.e. in particular the common legal forms GmbH, Kommanditgesellschaft/GmbH & Co. KG and Aktiengesellschaft have a need for examination and action.

Beneficial owner – who is it?

The beneficial owner is the person who

– more than 25% of the capital shares

– more than 25% of the voting rights

controlled, or

– exercises control in a comparable manner.

Particularly in the case of multi-level shareholding relationships, but also, for example, in the case of a GmbH & Co. KG, special features may have to be taken into account in determining the beneficial owner.

In addition, it must be examined whether voting agreements, voting pools or comparable special rules have been agreed between the shareholders that lead to a deviation from the “paper situation”.

In addition, the Federal Administrative Office responsible for the Transparency Register has recently defined “control in a comparable manner” also as so-called negative control. I.e. if an individual shareholder (possibly at the level of the parent company) makes decisions of the shareholders’ meeting based on

– of its voting rights (requirement of certain majorities)

– Veto rights

– unanimity requirements

can prevent, he is also deemed to be the beneficial owner, even if his capital/voting rights are (far) below 25% (see also: Transparency Register – Update 2020 – Updated reporting requirements for “indirect shareholding structures).

Draft law: elimination of the so-called notification fiction planned

Up to now, many companies have been able to rely on the notification fiction of Section 20 para. 2 GwG, according to which the obligation to report to the transparency register does not apply if the information on the beneficial owner can be found in other registers, in particular the commercial register. In order to implement the requirements of EU law, the notification fiction of Section 20 (1) of the German Commercial Code is to be amended. 2 AMLA would cease to apply in the future, so that all legal entities would henceforth be obliged to actively and positively notify their beneficial owner to the transparency register for registration.

In this way, the legislator wants to change the transparency register from a catch-all register to a full register. The simplification that has existed up to now would be eliminated and would turn into an obligation to act. According to estimates by the Federal Ministry of Finance, 1.9 million business units would be affected by the changeover. These have to reckon with a considerable additional expense.

Increased probability of detection in case of incorrect/not completed messages

The topic is therefore explosive, as obligated parties are already required to obtain or check an extract from the transparency register as part of the identification of business partners under the MLA. If you find discrepancies with the information you have, you must submit so-called discrepancy reports.

In practice, banks, notaries, and industry in particular submit a not inconsiderable number of discrepancy reports in the event of anomalies or missing entries in the transparency register.

The discrepancy reports are checked by the Federal Office of Administration – if errors or non-reports are actually found, fines may be imposed. According to its fine catalog, the Federal Administrative Office uses a rule of three to calculate a turnover-based fine:

– Standard rate (100-500 EUR) *

– Factor I (1-2) subjective facts *

– Factor II (0.1-200) Sales *

– Factor III (1-10) Severity of the violation

If a GmbH with annual sales of 45 million carelessly violates reporting requirements and this is considered a medium violation, the fine (already!) amounts to:

500 EUR*1*45*3 = 67,500 EUR

Against the background of the de facto “outsourced” review of the completeness of the transparency register, it is particularly important to avoid violations and the associated financial and reputational risks here. In addition, there may simply be a risk of delays in operational processes: commercial banks (including those in other EU countries) have now taken to not opening accounts until they can provide evidence of proper filings with the transparency register.

Best positioned for you

KPMG Law has been involved in the issue of the transparency register since its introduction in 2017 and has broad professional expertise in identifying beneficial owners and providing defense advice in the context of fine proceedings.

Verification of the beneficial owner

– Preliminary examination to determine the beneficial owner, taking into account the particularities of certain legal forms as well as the current legal opinion of the BVA in each case.

– Advice and support in cases of negative control

Notification to the Transparency Register

– Reporting of the required information of the (fictitious) beneficial owner to the transparency register

Defense counseling in fine proceedings

For further information or questions, please do not hesitate to contact us. Contact us.