Germany Update: From catchment to full register – is your company ready for the new transparency register?

On August 1, 2021, the new Transparency Register and Financial Information Act, which the Bundestag passed on June 10, 2021, comes into force. In future, all companies that are required to register must identify their beneficial owners and report them to the transparency register. The transparency register thus becomes an independent register (full register), which no longer derives its information from other registers. According to its own estimates, the legislature assumes around 2.3 million companies in Germany that are obliged to report.

End of the communication fiction

Most companies have so far invoked the so-called notification fiction under Section 20 (2) of the Money Laundering Act. According to this, the notification to the transparency register was considered fulfilled if the information required to determine the beneficial owner was already obtained from another electronically accessible register. This includes the commercial register, but also the association, cooperative or partnership register. This communication fiction is now abolished. As a result, most companies have to make a notification to the transparency register.

Transitional periods to be observed

In order to implement this notification obligation, the legislature provides for certain transition periods by which the companies concerned must make the notification:

However, these transition periods only apply to those companies that were able to invoke the notification fiction prior to the change. These transition periods therefore do not apply to companies founded after August 1, 2021. Unfortunately, the legislature does not answer the question of whether changes that occur after August 1, 2021 lead to a loss of the transition periods and therefore these changes must be communicated immediately.

• Aktiengesellschaft, SE as well as partnership limited by shares until March 31, 2022;
• GmbH, (European) cooperative or partnership until June 30, 2022 ;
• in the remaining cases by December 31, 2022 .

Fines for disregard

Fines for failing to notify can be imposed no earlier than one year after the respective deadline. In individual cases, the fines can amount to up to five million euros or 10 percent of total annual sales. From experience since the introduction of the transparency register in 2017, companies should know and observe the deadlines. The responsible authorities surprisingly imposed the first fines shortly after the obligation to notify had expired. In the explanatory memorandum for the law, the legislature also predicts an increase in administrative offense proceedings due to disregard of the notification obligation.

Conclusion

The sense and purpose of the transparency register and its expansion into a full register can be debated. Whether and to what extent criminal offenses are prevented or detected by the transparency register may not be able to assess for a few years. Due to the elimination of the fictitious message, many companies need to act. Despite the sometimes long transition periods, we recommend that you handle the issue with foresight and create a clear internal distribution of responsibility for identifying and notifying the beneficial owner. We will be happy to answer any questions you may have about the new transparency register. In addition to determining your individual reporting obligations, we will also be happy to support you with a message about the transparency register.

By Lennart Hoffmann and Michael Usselmann, MELCHERS, Germany, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact germany@transatlanticlaw.com

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