Amendment of the GwG: introduction of a transparency register and amended requirements for the list of shareholders of a GmbH
The German Act implementing the Fourth EU Money Laundering Directive, executing the EU Wire Transfer Regulation and reorganising the Financial Intelligence Unit [Gesetz zur Umsetzung der Vierten EU-Geldwäscherichtlinie, zur Ausführung der EU-Geldtransferverordnung und zur Neuorganisation der Zentralstelle für Finanztransaktionsuntersuchungen] dated 23 June 2017 (Federal Law Gazette [Bundesgesetzblatt, BGBl.] I 2017, p. 1822) has now (essentially) entered into force. Besides the revision of the Money Laundering Act, which gives the Directive its name, and which particularly increases the compliance requirements to be met by the parties concerned for preventing money laundering and terrorist funding, on the basis of this Act an electronic transparency register is being introduced and the requirements for the list of shareholders of a GmbH are being amended.
The revision will trigger an immediate need for action at many enterprises. Failure to act can lead to sensitive fines.
A. Transparency Register
The information to be notified to the new Transparency Register which has been set up at the publisher of the Federal Gazette [Bundesanzeiger-Verlag] (www.transparenzregister.de) is the natural persons who are the economic beneficiaries behind private legal entities and registered partnerships. Virtually all German legal forms are affected by this. The required information must already be notified to the Transparency Register by 1 October 2017. As of 27 December 2017 certain persons will be able to inspect the Transparency Register. The same applies in the other European Member States (and has already been implemented, for example, in Austria, France, Spain, Italy and the United Kingdom).
- Who is fundamentally obliged to make a notification?
Domestic private legal entities and registered partnerships are obliged to file a notification. Besides the corporate forms AG (stock corporation), SE (societas europaea), KGaA (partnership limited by shares), GmbH (limited liability company) and the partnership forms OHG (general partnership) and KG (limited partnership), foundations with legal capacity, associations, partnership companies and cooperatives are also under this obligation. Administrators of trusts, trustees of foundations without legal capacity serving private interests as well as trustees of similar structures bear a notification obligation if the place of residence or seat of the administrator (trustee) is located in Germany. For GbR (civil law partnerships), in contrast, no transparency obligations exist.
The notification obligation also affects shareholders who are economic beneficiaries or directly controlled by the economic beneficiary.
- Who is the economic beneficiary?
The economic beneficiary is the natural person who owns or controls the association. This includes (except in case of foundations) all natural persons who directly or indirectly hold more than 25 percent of the capital shares, or who control or exercise control in a comparable way over more than 25 percent of the voting rights. If the economic beneficiary cannot be determined with absolute certainty, the legal representatives, managing partners or partners of the association are deemed the economic beneficiaries. Irrespective of their legal form or shareholding quota, actual companies cannot be economic beneficiaries. In case of foundations and foundation-like structures with legal capacity, the economic beneficiaries are, inter alia, all natural persons who act as trustors, administrators of trusts (trustees), are members of the board, have been designated the beneficiary, or who in some other way exercise a direct or indirect controlling influence over the asset or yield management. If the natural person to benefit from the managed assets has not yet been designated, the group of natural persons to whose benefit the assets are being managed or distributed is the economic beneficiary.
- Information to be notified
The association must provide the Transparency Register with the economic beneficiary’s first name and surname, date of birth, place of residence as well as the nature and scope of the economic interest. “Nature and scope” means that the concrete basis from which the economic beneficiary’s position arises must be evident, e.g. the precise amount of the capital shares or any voting trust agreements or trustee agreements. The shareholders are obliged to provide the association with the corresponding information, i.e. they must examine whether they themselves, as natural persons, are economic beneficiaries of the association or whether they are directly controlled by a natural person who is the economic beneficiary. The information obtained by the association on the economic beneficiaries must be stored, kept up-to-date and notified to the Register without undue delay. This creates new compliance requirements for enterprises.
- Exception from the notification obligation – imputed notification
The obligation to notify the Transparency Register “is deemed fulfilled” to the extent the information on the economic beneficiary can be derived from other electronically retrievable documents and entries in public registers (e.g. German Commercial Register [Handelsregister]). This is the case, for example, for GmbH, OHG and KG, but only insofar as the economic beneficiary (i.e. this must be a natural person) is evident from the size of the shareholding entered in the register or list of shareholders. If this is based on relations not available for inspection, (e.g. escrow, voting obligations), then the economic beneficiary must be notified to the Transparency Register. Moreover, an imputed notification can be ruled out in the majority of cases of indirect participation, especially in case of corporate group situations, since intermediate holding companies are not economic beneficiaries. For listed companies the notification obligation is “always deemed fulfilled”. Despite the imputed notification, a notification is necessary if, following registration in the Transparency Register, the economic beneficiary can be derived for the first time from another public register (e.g. in case of the retransfer to the trustor).
For example: The natural person A holds 100% of the shares in the unlisted company B-AG. B-AG holds all shares in C-GmbH and this in turn all shares in D-GmbH.
• A must notify B of its economic entitlement. B must obtain corresponding information.
• B must notify C that is directly controlled by A.
• B and C must notify information on A to the Transparency Register. There is no imputed notification because B’s share register is not public and no economic beneficiary is stated on C’s list of shareholders (rather, just B).
• C does not have to make any notification to D. D has to check who the economic beneficiary is. If it has this knowledge (as can be assumed in group situations), it must make the corresponding notification to the Transparency Register. If not, the managing director of D-GmbH is then deemed the economic beneficiary. This does not need to be notified to the Transparency Register, however, since this is already evident from the Commercial Register.
- Inspection of the Transparency Register
An inspection of the Transparency Register is primarily granted in the interests of the state. In order to fulfil their statutory duties, authorities (e.g. supervisory, criminal justice and fiscal authorities) are entitled to full access. Third parties may inspect the Register if they can prove a “legitimate interest”. According to the grounds of the Act, such interest exists if the third party “seriously and specifically” pursues the prevention or combating of money laundering and corruption. To what extent these minimal requirements can counteract abusive access to the Register remains open.
At the application of the economic beneficiary, access can be partially or completely restricted subject to strict requirements to the extent this is supported by prevailing, protectable interests. This is the case, inter alia, if there is the risk that the economic beneficiary can fall victim to certain criminal offences or if he is underage.
- What are the consequences of breaches?
Breaches of transparency obligations are subject to fines as administrative offences. Simple breaches can be fined with up to 100,000 euros. In case of serious, repeated or systematic breaches, fines of up to 1 million euros or double the economic advantage gained through the breach are possible. Furthermore, non-appealable decisions imposing fines that name the responsible person and the nature and character of the breach are published for at least five years on the website of the supervisory authority (German Federal Office of Administration [Bundesverwaltungsamt]) (“naming and shaming”).
B. Requirements for the list of shareholders
In future, the list of shareholders of a GmbH must state separately for each share the percentage share in the nominal capital represented by the respective nominal value of the share. Insofar as a shareholder holds several shares in the company in question, this shareholder’s overall interest in the nominal capital must also be stated. If a registered company is the shareholder of a GmbH, its company name, seat, Register court and Register number are to be stated in the list of shareholders. If unregistered companies (such as GbR) are the shareholders of a GmbH, their respective shareholders are to be entered in the list of shareholders under a combined designation giving their surname, first name, date of birth and place of residence. In case of lists of shareholders already entered in the Commercial Register, the new provisions first have to be taken into consideration in the event of changes. Since the shareholders of non-registered companies must also be listed in the new list of shareholders, in the event of a change in the shareholder situation there is now also the need to submit an updated list of shareholders of the GmbH in question.
Dr. Axel Wenzel, LL.M.
Telephone: +49 221 2091 455
Telefax: +49 221 2091 333
Austria, Bulgaria, Croatia, Czech Republic, Hungary, Liechtenstein, Romania, Slovakia, Slovenia, Switzerland
Dr. Günter Seulen
Telephone: +49 221 2091 405
Telefax: +49 221 2091 333
CIS, Poland, Russia