New regulations regarding the transparency register – broad extensions of the notification obligations and the rights of inspection

Since the end of 2017, the so-called beneficial owners of companies and other associations (trusts, foundations, etc.) must be entered electronically unless they do already result from other public registers (e.g. the commercial register). Now, specifically on January 1, 2020, several new regulations in the German Money Laundering Act (GwG) came into force that relevantly affect the transparency register and the obligations of companies and shareholders in this regard.

Notification obligations for companies domiciled abroad

Until now, only companies with their registered office in Germany were obliged to notify the transparency register of their beneficial owners. With the change in the GwG since the beginning of this year, the reporting obligations also apply to companies domiciled abroad if they undertake to acquire real estate in Germany. They are only exempted from this requirement if they have already reported their beneficial owners to the transparency register in another EU member state.

Additional information on the beneficial owner and the companies / associations

If a beneficial owner is to be reported to the transparency register, the notification needs to indicate his or her first and last name, the date of birth, the place of residence, type or extent of the economic interest in the company and – since the beginning of this year – also its nationality. For companies that are not entered in public registers, there are even more extensive notifications obligations as they need additionally notify the transparency register of certain measures under company law (e.g. name changes, mergers or dissolution).

Extended notification obligations for shareholders and beneficial owners

The notification towards the transparency register is the duty of the company/association itself, i.e. usually of its management or specially appointed employees. However, the management often does not know who is the beneficial owner. To prevent such situations, the new GwG provides for a stricter notification system towards the companies and their management: both the shareholder(s) and the beneficial owner(s) of a company / association are obliged to notify the company / association of the beneficial owner(s) or any changes in this regard (under the previous conception of the GwG either the shareholder or the beneficial owner had such notification obligation). Still the notification obligation towards the company / association only applies if the beneficial owner of the company / association is not already known from public registers (e.g. a list of shareholders or a partnership agreement) or otherwise.

Duty of investigation for the management

The extended notification obligations for shareholders and beneficial owners are accompanied by a duty of investigation on the part of the management of the companies / associations. This means that – if they have not received any notifications or know the beneficial owner for other reasons – the managing directors are obliged to actively inquire whether there are beneficial owners (usually via questioning the shareholders). They are also obliged to document their respective researches.

Public availability of the transparency register

Up to now, the transparency register has mainly been accessible to law enforcement, other public authorities and persons with a "legitimate interest" (e.g. specialized journalists). This has changed fundamentally: after an electronic registration and for a processing fee of a few Euro, the transparency register now can be inspected by "all members of the public", i.e. by any person. This means that in particular other shareholders, competitors or simply curious individuals can obtain details of the beneficial owners from the transparency register. A restriction of the inspection is only possible in strictly exceptional cases (e.g. in the case of underage persons being the beneficial owner or if there is a relevant risk of a criminal offence in case that the beneficial owners are known).

Fines and sanctions

Violations of the notification obligations are still subject to fines for the companies themselves as well as for their shareholders / beneficial owners. They may also be published by the administrative and supervisory authorities (e.g. the Federal Office of Administration or the regional councils in Baden-Württemberg) on their respective websites. Therefore, compliance with the new regulations is no mere formality, but of great importance for all parties concerned in particular as the responsible public authorities have recently threatened to impose increased fines for late or missing notifications to the transparency register.