Expanded reporting obligations for German entities affect ultimate U.S. beneficial owners

Germany’s Transparency Register and Financial Information Act, which applies as from August 1, 2021, significantly expands the reporting requirements for German companies and is designed in part to prevent money laundering and terrorist financing. The act affects most companies and entities in Germany, as well as their beneficial owners, including U.S. owners. U.S. owners may be individuals and/or companies that directly or indirectly hold an interest in a German entity. As a result, U.S. parent companies with German subsidiaries should be aware of the reporting requirements and understand their obligations.
In particular, the act overhauls the transparency register, which is used to identify the ultimate beneficial owners of companies/entities. The new rule eliminates the “notification fiction” for beneficial owners, which companies and other legal entities previously could rely on if the information was included in other publicly accessible registers. For example, reporting in the transparency register was not required if the relevant information on beneficial owners was available electronically in certain other public registers.
Under the revised rules, all listed companies and companies/legal entities and registered partnerships with their registered office in Germany must submit details of their beneficial owners (as well as any changes) to the transparency register even if the information can be accessed in another register. Penalties will be imposed for noncompliance.

Covered companies/entities and information to be reported

The act requires ultimate beneficial owners (individuals) that hold an interest in German entities or have control over such entities to be registered with the “transparency register.” Entities that fall within the scope of the registration requirement include German corporations, i.e., AGs (joint stock corporations), GmbHs (limited liability companies), SEs (European corporations) and German partnerships (KGaA (partnership limited by shares), KGs (limited partnerships, etc.).
Information on ultimate beneficial owners to be registered with the transparency register includes the following:

  • Name of the ultimate beneficial owner
  • Date of birth
  • Residential address
  • Interest / control in the German entity
  • Nationality

The above data generally would be provided through the German entity.

Transition rules

The law includes transition rules for reporting beneficial owners of legal entities that previously did not have a reporting obligation. The transition rules provide for registration deadlines of March 31, June 30 and December 31, 2022, depending on the type of entity. It should be noted that the transition provisions do not apply to legal entities established after August 1, 2021 or entities that previously were unable to invoke the notification fiction (e.g., because the shareholder list could not be retrieved electronically or the list was not up to date). In the latter case, an immediate reporting obligation already applied. For U.S. parent companies with German subsidiaries, the reporting must take place immediately—the transition rules do not apply to U.S. parent companies because the shareholders of such parent companies would not appear in any of the relevant registers in Germany.
Failure to comply with the applicable reporting obligation can result in fines of up to EUR 150,000.