Significant changes to notification obligations to the German transparency register on ultimate beneficial owners

To create the data requirements for the connection of the European transparency registers on ultimate beneficial owners, the German legislator has introduced fundamental changes to the German Anti-Money Laundering Act (Geldwäschegesetz) that affect the obligations to file information on ultimate beneficial owners with the German transparency register by way of the Transparency Register and Financial Information Act (Gesetz zur europäischen Vernetzung der Transparenzregister und zur Umsetzung der Richtlinie 2019/1153 des Europäischen Parlaments und des Rates vom 20. Juni 2019 zur Nutzung von Finanzinformationen für die Bekämpfung von Geldwäsche, Terrorismusfinanzierung und sonstigen schweren Straftaten). This will result in an expansion of the notification obligations for all legal entities.

The Act will enter into force on 1 August 2021. In certain cases, however, transitional periods will apply.

Transparency Register will become a full register

Since October 2017 all German private legal entities and registered partnerships are obliged to file information on their ultimate beneficial owners to the German transparency register. Unlike in various other EU Member States, in Germany certain exemptions from this filing obligation were implemented to avoid double filings with the various company registers or publication platforms. Under the current regime – applicable until 31 July 2021 – no filings are required, if the necessary information on ultimate beneficial owners is available in certain publicly accessible electronic registers or on publication platforms (eg shareholders’ list or excerpt of the commercial register). Thus, for the time being, many German companies – in particular those who have not identified an ultimate beneficial owner among their direct or indirect shareholder(s) or whose ultimate beneficial owner is registered in the shareholders’ list – benefit from this privilege.

This privilege, however, will be eliminated in future. Thus, without exception all legal entities and registered partnerships in Germany will be obliged to file details of their ultimate beneficial owner(s) or any changes thereof to the German transparency register without undue delay.

General qualification of ultimate beneficial owners of legal entities

The general definition of ultimate beneficial owners in German legal entities remains essentially unchanged. In the case of legal entities (other than foundations with legal capacity) and other companies which are not listed on an organised market pursuant to Section 2 para. 11 of the German Securities Trading Act (Wertpapierhandelsgesetz) and which are not subject to transparency requirements in respect of voting rights in accordance with EU law or to equivalent international standards, ultimate beneficial owners shall include any natural person who directly or indirectly:

• holds more than 25% of the share capital;
• controls more than 25% of the voting rights; or
• exercises control in a comparable manner.

With the elimination of the privilege to rely on filings made to certain other publicly accessible registers or platforms, the privilege for listed companies has also been withdrawn. However, as by the letter of the law the definition of ultimate beneficial owners of legal entities shall not apply to listed companies, the criteria to determine ultimate beneficial owners of listed companies and corresponding filing obligations remain unclear. Thus, it remains to be seen how this will be applied by the German Office of Administration (Bundesverwaltungsamt).

Information to be filed on ultimate beneficial owners

Currently, the information to be filed with the German transparency register include:

• first and last name
• date of birth
• place of residence
• type and scope of the economic interest
• the nationality

In future all nationalities have to be filed with the German transparency register.

New filing obligation in real estate transactions

Under the current regime, foreign entities are obliged to file information on their ultimate beneficial owners to the German transparency register if the foreign entity undertakes to acquire real estate in Germany by way of an asset deal. In the case of a share deal involving a foreign entity acquiring a relevant stake in a German company, only the general obligation of the ultimate beneficial owner(s) or a shareholder being directly controlled by an ultimate beneficial owner to notify the German legal entity applies.

In future, foreign entities are also obliged to collect, keep up-to-date and to file information on their ultimate beneficial owners with the German transparency register, if they indirectly acquire German real estate by way of a share deal or other transaction structures triggering German real estate transfer tax in accordance with Section 1 para. 3 and para. 3a German Real Estate Transfer Tax Act (Grunderwerbsteuergesetz). Thus, in future the obligation of foreign entities to file information of their ultimate beneficial owners with the German transparency register will not only apply in the case of investments in real estate located in Germany (asset deal), but in particular also if:

• a foreign entity directly or indirectly acquires at least 90% of the capital of a company holding real estate located in Germany (Section 1 para. 3 German Real Estate Transfer Tax Act (Grunderwerbsteuergesetz)); or
• a foreign entity directly or indirectly acquires a beneficial interest of at least 90% of the capital of a company holding real estate located in Germany (Section 1 para. 3a German Real Estate Transfer Tax Act (Grunderwerbsteuergesetz)).

However, exemptions from the filing obligations of foreign entities in the case of real estate transactions apply, if the foreign entity has already filed the relevant information on their ultimate beneficial owner(s) with a register on ultimate beneficial owners in another EU Member State.

Enforcement and transitional periods

The legislation will come into force on 1 August 2021, so from then onwards all legal entities subject to the notification and disclosure obligations will generally be obliged to file the information on their ultimate beneficial owner to the German transparency register in accordance with the new regulations.

Transitional periods, however, will only apply to the benefit of German legal entities and registered partnerships which were privileged from filing information on their ultimate beneficial owner(s) with the transparency register until and including 31 July 2021. If a German company is privileged to abstain from filing information on their ultimate beneficial owners to the German transparency register until and including 31 July 2021, the following transitional periods apply with the following differentiation specified by legal form:

• for stock corporations (Aktiengesellschaft – AG), European stock corporation (Societas Europaea – SE) and limited partnership limited by shares (Kommanditgesellschaft auf Aktien – KGaA) until 31 March 2022;
• for limited liability companies (Gesellschaft mit beschränkter Haftung – GmbH), cooperatives (Genossenschaft), European cooperatives (Europäische Genossenschaft) and partnerships (Partnerschaft) until 30 June 2022; and
• in all other cases no later than 31 December 2022.

It should be noted, however, that the periods only apply as long as the status quo existing and duly registered on 31 July 2021 remains unchanged.

This means, for example: if a natural person cannot be identified as an ultimate beneficial owner, the managing directors or executive board members of the legal entity are deemed to be ultimate beneficial owners. If the managing directors/executive board members are entered in the commercial register with the required information up to and including 31 July 2021, transitional periods specific to the legal form will initially apply. From 1 August 2021, however, every new appointment of a managing director or executive board member, change in the management or executive board (if already registered with the German transparency register) or every change in relevant data (eg change in place of residence) of an ultimate beneficial owner will have to be filed with the German transparency register notwithstanding additional filing obligations with the German commercial register.

Similarly, private legal entities and registered partnerships which are newly established after 1 August 2021 must report its ultimate beneficial owners to the transparency register without delay and cannot rely on the transitional rules.

Next steps and implications

All companies and legal entities should check whether information on ultimate beneficial owners must be filed with the transparency register in accordance with the new legislation.

Possible further explanations and interpretations in the FAQ published by the Federal Office of Administration (Bundesverwaltungsamt) and continuously updated (most recently on 9 February 2021) should also be taken into account.