The Federal Office of Administration is currently threatening more and more fines for failure to register in the transparency register. The law implementing the fourth EU Money Laundering Directive (as a reaction to the "Panama Papers") came into force in 2017, which in particular reformed the Money Laundering Act and introduced the Transparency Register. As a centrally managed electronic register, this is intended to provide comprehensive information on the "true beneficial owners" of companies, foundations, trusts and similar structures. Entrepreneurs and shareholders often still have great uncertainty as to whether registration in the transparency register is even necessary and whether they could also be subject to a fine.
Who is affected by the obligation to register in the transparency register?
Information about the actual “beneficial owner” is entered in the transparency register (name, date of birth, place of residence, type and extent of economic interest, e.g. voting share, new: nationality). These are the natural persons who actually own or control a company. In the case of legal entities or other associations, this is any natural person who directly or indirectly holds more than 25% of the capital shares or controls more than 25% of the voting rights or exercises control in a similar way. This also applies to nested corporate structures. If there is no such natural person, not even at the end of this “chain”, the law assumes that the legal representative, e.g. the board of directors, is considered the fictitious beneficial owner.
There is no obligation to register if the information on the actual (or fictitious) beneficial owner is already available from other public registers, e.g. the commercial register. In the case of a “classic” GmbH, there is therefore no obligation to register if the above information can be accessed in electronic form and the list of shareholders does not cover the entire period since the start of the obligation to register (October 01, 2017) or a later date of the company’s founding. In the case of unlisted stock corporations, there is no comparable list of shareholders to be submitted to the commercial register or a public register, so there is an obligation to register. The same applies to foundations with legal capacity. Registration in the foundation register is not sufficient. It has not yet been conclusively clarified whether registration is required in most cases for a limited partnership and thus also for a company in the form of a GmbH & Co. KG. The Federal Office of Administration currently takes the view that, with a few exceptions, a limited partnership must be registered, as the liability amount of a limited partner to be entered in the commercial register does not allow any conclusions to be drawn about his contribution and thus his capital shares. It is currently disputed whether, in trust cases, the trustor and trustee must be entered in the transparency register. The Federal Office of Administration says this is the case, but voices in the specialist literature reject this for important reasons.
What are the risks if an entry in the transparency register is not made?
Failure to submit required information to the transparency register can result in a fine of up to EUR 100.000, or up to EUR 1.000.000 for repeated violations. A European amendment to the law is intended to make the transparency register partially accessible to the public from 2020. According to official information, the technical implementation will probably take place at the end of 2020. Furthermore, final fines for violations of the reporting obligation will be published on the Internet from January 2020.
The above information is intended only as initial information and to provide an overview of the topic. Depending on the individual case, the obligations and rights may change significantly. If you have any questions or need advice, please feel free to contact us.
Marc Conrad
Lawyer
E-Mail: Conrad@kmbpartner.de
Tel: 0621 4250890
