Changes to the Transparency Register: What changes will there now be for foreign companies?
>The Act on the European Interconnection of Transparency Registers and the Use of Financial Information to Combat Money Laundering, Terrorist Financing and Other Serious Criminal Offences (Transparency and Financial Information Act on Money Laundering, or TraFinG-Gw), which came into force on 1 August 2021, there are also changes affecting foreign companies, which they must take into account in future when acquiring land and shares.
1. Reporting obligations of foreign companies when acquiring land
Under the previous legal framework, foreign companies were (and are) still required to provide details of their beneficial owners to the transparency register, provided that the foreign company acquires a property situated in Germany. In this regard, section 20(1), second sentence, of the German Money Laundering Act (GWG) stipulates that foreign companies must provide details of their beneficial owners if they oblige, to acquire ownership of a property situated in Germany.
The obligation to register therefore arises at the time the property purchase agreement is notarised (binding transaction) and not only when the foreign company is entered in the land register as the owner (acquisition of ownership). The TraFinG-Gw does not, in principle, alter this and does not provide for any changes in this regard.
Foreign companies therefore remain obliged to notify the authorities when they acquire direct ownership of a property. However, under the TraFinG-Gw, the notification requirements are extended beyond the direct acquisition of property to include, under certain conditions, the indirect acquisition of property by foreign companies:
2. New reporting requirements for foreign companies in share deals
In future, foreign companies will also be required to register with the transparency register even if they acquire the property not directly but indirectly through the acquisition of shares – that is, if the company to be acquired itself holds a property situated in Germany.
However, an indirect acquisition that triggers the obligation to report to the transparency register only occurs in the case of a so-called „share deal“: Section 20(1), second sentence, of the TraFinG-Gw (as amended) stipulates that a foreign company is subject to the reporting obligation if shares in the company, within the meaning of Section 1(3) of the Land Transfer Tax Act, are to be transferred – generally, therefore, only if 90% of the shares are acquired by the foreign company in the company in question.
The TraFinG-Gw, on the other hand, does not specify at what point the reporting obligation arises – whether upon conclusion of the share purchase agreement or upon registration of the foreign company as the new owner in the land register. Given that, in the case of the direct acquisition of land by a foreign company, the conclusion of the land purchase agreement is the decisive factor, there is a strong case to be made that the reporting obligations also arise in the case of indirect acquisition as soon as the relevant purchase agreement is concluded.
3. Exception: Registration in a foreign transparency register
However, foreign companies are exempt from their reporting obligations to the German transparency register if they have already provided details of their beneficial owners to a transparency register in another EU Member State – this applies to both direct and indirect acquisitions of land.
We would be happy to advise you on this matter and handle the necessary notifications to the Transparency Register on your behalf.
—
We can advise you on matters relating to management consultancy, company law, businesses, GmbHs, KGs, GmbH & Co. KGs, liability, obligations and compliance:
Please feel free to Contact us Join us.