Changes to the Transparency Register: Who needs to register now?
With effect from 1 August 2021, the new 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) has come into force.
As a result of the legislative reform, the Transparency Register has evolved from a „catch-all register“ into a comprehensive register. This means that, in principle, all companies are obliged to report their beneficial owners to the Transparency Register. The TraFinG-Gw introduces a number of changes to the previous regulations governing the transparency register, which you, as a business owner, should now be aware of.
Under the previous legal framework, companies were not required to provide information to the transparency register if the beneficial owners could be identified from other public German registers accessible electronically, such as the commercial register. In such cases, the requirement to notify the transparency register pursuant to section 20(2) of the previous version of the Money Laundering Act (GWG) was deemed to have been met (deemed notification).
1. Abolition of the presumption of notification
This has now changed fundamentally. The TraFinG-Gw has repealed Section 20(2) of the GWG (previous version) – and with it the presumption of notification – without replacing it. In future, therefore, companies will be obliged to report to the transparency register even if unsolicited to disclose its beneficial owners where these are listed in the commercial register or other electronic registers.
In principle, all legal entities governed by private law – that is, public limited companies, limited liability companies (GmbHs) and simplified limited liability companies (UGs) – as well as registered partnerships are subject to this requirement. In addition to registered general partnerships and limited partnerships, this includes, in particular, associations, co-operatives and professional partnerships.
Conversely, this means that civil-law partnerships (GbRs) and not General partnerships (OHGs) entered in the Commercial Register are not required to register with the Transparency Register. As a registered trader (e.K.) is not a partnership, a sole trader is also not required to provide details of the beneficial owner.
2. A grace period until 2022 for new registrants?
However, there is also some good news for companies and associations of individuals which, as a result of the new provisions of the TraFinG-Gw, are required to report to the transparency register for the first time:
Due to the flood of initial reports resulting from the legislative reform, the TraFinG-Gw provides for generous transitional arrangements, under which initial reports generally do not need to be submitted until 2022. Depending on their respective legal form, obliged entities must provide the following information to the transparency register:
- AG, SE or KGaA until 31 March 2022;
- a limited liability company (GmbH), a co-operative, a European co-operative or a partnership until 30 June 2022; and
- all others until 31 December 2022
Information for new business founders: Pursuant to Section 59(8) of the GWG (as amended), the transitional provisions apply exclusively to legal persons governed by private law and registered partnerships whose obligation to make a declaration to the transparency register was deemed to have been fulfilled by 31 July 2021 on the basis of the deemed notification under Section 20(2) of the GWG (previous version)!
This means that only those companies that are required to report their beneficial owners to the transparency register for the first time – because the presumption of notification has been abolished by the legislative reform – will be eligible for the grace period.
Conversely, therefore, new founders who establish or have established their company with effect from 1 August 2021 (in a legal form subject to the notification requirement) must be listed in the transparency register without delay Provide information regarding the beneficial owners.
Companies, and in particular their managing directors, should keep an eye on the reporting deadlines that apply to them, not least because breaches of reporting obligations continue to be punishable by substantial fines.
We would be happy to advise you on this matter and handle the necessary notifications to the Transparency Register on your behalf.
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