Corporate Law: Introduction of the Transparency Register

In implementation of an EU Directive, the Federal Government of Germany has created an electronic transparency register, to combat money laundering and the financing of terrorism, which is to be managed through the site www.transparenzregister.de. As of October 1, stock corporations (“AG”), limited liability companies (“GmbH”), general partnerships (“OHG”) and limited partnerships (“KG”), among others, are required to provide the register with information about their economic beneficiaries. Economic beneficiaries are all natural persons that hold or control, directly or indirectly more than 25% of shares. Such control can, for example, be the result of a contract that binds voting rights, or come from an indirect participation. Beneficiaries of foundations (“Stiftungen”) that hold investments in companies are also economic beneficiaries, and are therefore also obliged to register. Name, birth date and place of residence are to be notified, as well as the type and scope of their entitlement. Notification can be omitted in so far as the information is already available in another register, such as the commercial register, for example. In the case of GmbHs, the relevant information is, as a rule, evident from the list of shareholders in the commercial register: it is therefore sufficient when the shareholder list is kept up-to-date.

The financial penalties provided for in the respective legislation make it advisable for stock corporations and commercial partnerships to find out about their reporting requirements, as information about their company structures is not fully available from public registers. The same is true for cases where the control structure cannot be fully understood from the commercial register; such as when a foreign company is an economic beneficiary, or where the economic beneficiary results from the aggregation of several holdings as the result of a voting rights contract. The financial penalties will be levied against both the economic beneficiaries that fail to notify their participation to the company, and against the company itself, should they fail to register their information.

The transparency register is not a public register, and the information can only be seen by law enforcement, taxation and police authorities. Moreover, access may be granted to parties who are able to demonstrate a legitimate interest in inspecting the register. Referred to first and foremost here are non-governmental organizations that have committed themselves to fighting against money laundering and terrorism financing. Accordingly, confidentiality of the respective information remains ensured in principle, as in the case of fiduciary relationships or voting trust agreements.