Update on the Transparency Register

The Transparency Register is becoming a full register. This results in new notification obligations for many companies - registration in another public register is now no longer sufficient to also fulfil the notification obligations to the Transparency Register. At the same time, many other privileges are being abolished, for example for listed stock corporations or for share deals. Affected companies should review their notification obligations in the near future. If there is no beneficial owner, the legal representatives have to be entered (fictitious beneficial owners).  

On 25 June 2021, the Bundesrat approved the German Transparency Register and Financial Information Act [Transparenzregister- und Finanzinformationsgesetz -TraFinG], which was passed by the Bundestag on 10 June 2021. The Act implements the requirements of European law for preventing the financing of terrorism and money laundering. Furthermore, the Transparency Register is changing from a catch-all register to a full register. At the same time, the existing privileged treatment of listed stock corporations is also being abolished. Foreign associations wishing to acquire real property in Germany will also have to register in future if the real property is acquired indirectly via shares in a company holding the real property (share deal) and the acquisition would be subject to real estate transfer tax.

A consequence of the Transparency Register and Financial Information Act is that a large number of companies and other associations will be obliged to subsequently register with the Transparency Register. Ultimately, all private legal entities and all registered partnerships are now required to be registered there, even if the information to be registered is already available in other registers. Affected companies should check in good time whether and by when at the latest they must register. The Act comes into force on 1 August 2021. Due to the cancellation of the notification fiction, however, there will be transitional periods for the initial registration, which vary depending on the company’s legal form. 

The Transparency Register as a full register: deletion of the notification fiction

The Transparency Register and Financial Information Act is abolishing the previous notification fiction. According to the notification fiction, beneficial owners who are already identifiable from electronically retrievable documents in another public register (in particular the Commercial Register) are also deemed registered for purposes of the Transparency Register. A separate notification to the Transparency Register was not necessary in such cases to date. 

In future, beneficial owners must be notified to the Transparency Register, irrespective of whether the information required under the German Money Laundering Act [Geldwäschegesetz – GwG] is available in another register. The draft law thus converts the Transparency Register from a catch-all register to a full register. In future, affected companies will therefore have to keep several registers up to date or otherwise face fines.

As a result of this new regulation, all beneficial owners whose data was previously only available from other registers now have to be subsequently notified to the Transparency Register. If there are no beneficial owners who exercise control over an association (in particular because no more than 25% of the capital shares and voting rights are held in one hand), then the legal representatives have to be registered as fictitious beneficial owners. Transitional periods are provided for the subsequent notification, which vary depending on the type of company:

• Stock corporation (AG), societas europaea (SE) or limited partnership (KG): until 31 March 2022
• Limited liability companies (GmbH), (European) cooperatives or partnerships: until 30 June 2022
• in all other cases: until 31 December 2022.

The provisions on fines associated with the registration have also be temporarily suspended for breaches of the obligation to register for the first time. Accordingly, fines will only be incurred one year after the expiry of the respective transitional periods for the subsequent registration (i.e. for stock corporations, SEs or limited partnerships, not until 31 March 2023).

Discrepancy reports which third parties have to make to the register office within the scope of their due diligence obligations under the German Money Laundering Act are being suspended up to and including 31 July 2021, provided that a notification obligation did not exist under the old legal situation due to the notification fiction.

It is essential that the affected associations register in good time. The transitional provisions only apply if a notification obligation previously did not exist due to the notification fiction. If the association was actually already subject to a notification obligation, the notification should be made immediately in order to avoid, as far as possible, action by the registration authority and, in particular, fines.

Abolition of the privileged treatment for listed stock corporations

Also being abolished without replacement are the privileges for listed stock corporations (and, if applicable, for their subsidiaries), according to which the notification obligation vis-à-vis the Transparency Register was always deemed fulfilled due to the notification obligations under capital market law associated with the stock exchange listing. Therefore, like all other associations, a listed stock corporation (and its subsidiaries) will be obliged to register its beneficial owners in future and should do so in a timely manner.

Abolition of the privileged treatment for acquiring real estate by way of a share deal

The privileged treatment of real estate acquisitions by foreign associations by way of share deals is also being abolished. To date, foreign associations have only been required to register in the Transparency Register if they undertake to directly acquire real estate in Germany (asset deal). In future, the acquisition of shares in a company holding the real property will also fall under the notification obligation if so many shares are transferred that the transaction would be subject to real estate transfer tax. This is to be assumed in the case of an acquisition of at least 90%.

Registration of beneficial owners of civil law partners for the first time

The German Act on the Modernisation of the Law on Partnerships [Gesetz zur Modernisierung des Personengesellschaftsrechts – MoPeG], which was also recently passed (see our newsletter), means that many civil law partnerships (GbR), which were previously not subject to registration in the Transparency Register, will also have to disclose their beneficial owners in future. This is due to the fact that civil law partnerships also become obliged to register in the Transparency Register with their registration in the new Company Register.

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