Fines for grossly negligent infringement of the notification obligations towards the transparency register

If the notification obligations towards the transparency register are infringed intentionally or grossly negligent, a fine can be imposed to the person or company responsible for the infringement. Until now, it has been unclear in which situations a grossly negligent failure can be assumed. However, the Higher Regional Court (Oberlandesgericht, “OLG”) of Cologne has issued a first resolution (July 3, 2020, file no. 1 RBs 171/20) which as one of the first court decisions deals with the details of a grossly negligent infringement of the notification obligations towards the transparency register.

Background: Notification obligations regarding the transparency register since 2017

Any natural person who – directly or indirectly – holds more than 25% of the shares or voting rights in a company or who controls it in a comparable manner is –the beneficial owner of this company. Since 2017, these beneficial owners must be reported to the electronic transparency register. Exceptions do only apply if the beneficial owners can already be identified from other public electronic registers such as the commercial or company register.

Stock corporations and limited partnerships (or their managing bodies) are particularly affected by the notification obligations as these companies usually require the beneficial owners to be notified to the transparency register. In the case of limited liability companies ("GmbHs"), on the other hand, a notification to the transparency register usually is not necessary, provided that a shareholder list is provided for in the commercial register electronically and the beneficial ownership does not arise for reasons other than the mere position of a shareholder (e.g. from a trust or pooling agreement).

Fines for infringements of the notification obligations

In the case of violations of the notification obligations, strong fines can be imposed to the persons and companies responsible. Accordingly in the last months the Federal Administrative Office, which is in charge of the transparency register, has more and more imposed fines for late or omitted notifications concerning the transparency register. With regard to the amount of the fine, the degree of fault (intention or gross negligence) is an important factor as well as the economic circumstances of the company concerned and several other factors (cooperation with the public authorities, remedy of the infringement etc.). Often, the fines may easily reach four to five-figure amounts even in small and medium-sized enterprises.

The resolution of the OLG Cologne of July 3, 2020 (file no. 1 RBs 171/20)

As mentioned above, not every violation of the notification obligations towards the transparency register justifies a fine, but only intentional or grossly negligent violations. However, the Federal Office of Administration in the past has regularly assumed that gross negligence has been given in case of a notification infringement. The resolution of the OLG Cologne supports this view and made it clear: Anyone who deliberately turns a blind eye to the subject of "transparency register", who does not inform themselves on this subject or who does not take sufficient measures to meet the notification obligations towards the transparency register, is acting grossly negligent and must fear a fine.  

Outlook and recommendation

For practice, the OLG Cologne's resolution is a valuable guideline. It shows that anyone who has not yet dealt with the obligations regarding the transparency register should do so now, should assess the potentially existing notification obligations and – if notifications have been missed so far – make subsequently up for the necessary notifications as soon as possible. Particular caution should be exercised in this respect by those companies in which the legal compliance obligations, i.e. the obligation to regularly assess the legal provisions applicable to their company, are already very important (e.g. stock corporations and limited liability companies). The companies concerned from the notification obligations (not only stock corporations and limited liability companies, but also foundations, partnerships, limited partnerships and foreign companies acquiring real estate in Germany) are even obliged to actively investigate their beneficial owners since 2020 (https://www.fgvw.de/en/news/archive-2020/new-regulations-regarding-the-transparency-register-broad-extensions-of-the-notification-obligations-and-the-rights-of-inspection).