The new transparency register calls for more openness in 2018 as well

Since October 1, 2017, numerous companies have had to enter details of their ultimate beneficial owners in the new electronic transparency register. Failure to do so could result in high fines. From December 27, 2017 on, certain persons are now able to inspect the register.

Since June 2017, the German Money Laundering Act stipulates that companies registered in Germany must provide details of their ultimate beneficial owners in the new electronic transparency register. This should make it easier to keep track of control structures and prevent abuse such as money laundering or terrorist financing. Many companies are still worried about the new “transparent register,” however, and some are faced with questions. For example, some notifications have not been made at all or have not yet been completed. The question that many companies are asking: Who has to report what exactly?

Adapting internal organizational structures to the requirements of the transparency register

Since October 1, 2017, the management of corporations, commercial partnerships, professional partnerships, cooperatives, associations, and foundations must ensure that information on the names, dates of birth, places of residence, and types of economic interest of their ultimate beneficial owners is entered in the new electronic transparency register. This information must always be kept up to date. Otherwise, sanctions will be imposed. The central question is always: Who is considered to be the ultimate beneficial owner?

The ultimate beneficial owner is any natural person who directly or indirectly holds more than 25% of the shares or voting rights of the entity subject to the reporting requirement. If this natural person cannot be identified, the legal representative must be entered in the transparency register as the ultimate beneficial owner. In the case of a foundation, these are all board members and beneficiaries.

There are also exceptions to the reporting requirement. For example, companies are exempted from the obligation if all necessary information is already contained in other registers, such as the commercial register or the association register. One thing becomes clear: numerous companies have to check whether they have to comply with their reporting obligations in individual cases.

From December 27, 2017 on, certain persons are able to consult the new register. In addition to the supervisory and law enforcement authorities, this group of persons includes all those obligated under the Money Laundering Act. In addition, all persons who have a legitimate interest in the information contained therein, such as specialized journalists, may also inspect the register.

Many companies are anxiously awaiting registration and the inspection options that will be available from 2018 onwards. The new transparency register causes the headaches. General managers find themselves in a conflict of loyalty between the obligation to report and the interest of shareholders in confidentiality. In other constellations, legal structures were chosen to preserve anonymity for understandable and legal reasons.

Due to the high level of sanctions (there is a threat of fines of up to EUR 100,000 per infringement), companies should, despite all concerns, set up and maintain internal organizational structures in 2018 in order to meet the reporting requirements in the transparency register and keep them up to date.

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Your contacts are the experts of the White Collar & Criminal Compliance Practice Group. Dr. André-M. Szesny and Dr. Susanne Stauder specialize in advising and defending companies and individuals in all areas of white collar, tax, and corporate criminal law.