The Federal Office of Administration is currently threatening increased fines for failure to register in the Transparency Register. The law implementing the Fourth EU Anti-Money Laundering Directive (in response to the "Panama Papers") came into force in 2017, reforming the Money Laundering Act and introducing the Transparency Register. This centrally maintained electronic register is intended to provide comprehensive information about the "true beneficial owners" of companies, foundations, trusts, and similar entities. Business owners and shareholders often remain uncertain as to whether registration in the Transparency Register is even required and whether they, too, could be subject to a fine.
Who is affected by the obligation to register in the transparency register?
The transparency register contains information about the actual "beneficial owner" (name, date of birth, place of residence, type and extent of the beneficial interest, e.g., voting rights, and, newly added, 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, controls more than 25% of the voting rights, or exercises control in a comparable manner. This also applies to complex corporate structures. If no such natural person exists, 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 in other public registers, such as the commercial register. Consequently, for a "classic" limited liability company (GmbH), there is no reporting obligation if the aforementioned information is available electronically and the list of shareholders does not cover the entire period since the reporting obligation began (October 01, 2017) or a later date of incorporation. For non-listed stock corporations, there is no comparable list of shareholders to be submitted to the commercial register or any other public register, so a registration obligation exists. The same applies to legally constituted foundations. Registration in the foundation register is insufficient. Whether registration is required in most cases for a limited partnership (KG) and thus also for a company in the form of a GmbH & Co. KG (limited partnership with a limited liability company as general partner) has not yet been definitively clarified. The Federal Office of Administration currently holds the view that, with few exceptions, registration is mandatory for a limited partnership (KG), since the liability amount of a limited partner to be entered in the commercial register does not allow any conclusions to be drawn about their capital contribution and thus their capital share. It is currently disputed whether, in trust cases, the settlor and trustee must be entered in the transparency register. The Federal Office of Administration affirms this, while experts in the field reject it for compelling 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
