“Clarification” of the External Ownership Ban – Bundestag Passes Tightening, Bundesrat Halts Legislation for Now
The intensive debate in recent months regarding the permissibility of investments by financial investors in tax advisory firms which do not have the respective professional qualifications (we reported) has taken a significant turn in the legislative process.
While the original ministerial draft and the cabinet draft were still considered comparatively restrained, the German Bundestag has now followed the recommendation of the Finance Committee and adopted an explicit “clarification” of the external ownership ban.
Despite the Bundestag’s approval, the legislative process is currently blocked. The Bundesrat unexpectedly rejected the draft legislation on 8 May 2026. However, the background was not the new regulation on the external ownership ban itself. Rather, the decisive factor was a tax-free relief premium for employees that had been incorporated into the law at short notice, intended as a response to the increased cost of living resulting from the Iran conflict. As the federal states saw significant tax revenue losses for themselves and the municipalities and there was no adequate offsetting financing, the Bundesrat refused to approve the law as a whole. The legislative process has thus been halted for the time being; in particular, convening the Mediation Committee now appears possible. In substantive terms, however, there is much to suggest that the professional law amendments regarding the external ownership ban will remain largely unchanged in the further proceedings.
I. The New Regulation: Look-Through Across All Levels of Participation
At the core of the reform of the external ownership ban is the new Section 55a(1) sentence 3 of the German Tax Advisory Act (StBerG). Under this provision, in the future not only directly participating auditing or bookkeeping firms will be required to meet the professional law recognition requirements. Rather, this is expressly intended to apply to all indirectly participating entities within multi-tiered participation structures.
The new regulation thus directly targets the private equity structures via foreign auditing firms that have been widespread to date. The external ownership ban is effectively extended to the entire chain of participation.
Notably, the legislature has characterised this as a mere “clarification” rather than the closing of a previously existing regulatory gap. The legislature is thus clearly pursuing the objective of retroactively providing a statutory basis for the existing restrictive administrative practice.
It is precisely this doctrinal construction that has significant practical consequences: the law contains neither transitional provisions nor explicit grandfathering protection for existing participation structures. According to the understanding set out in the legislative explanatory memorandum, even already implemented investor structures could become impermissible under professional law immediately upon entry into force.
In extreme cases, affected tax advisory firms could even face a revocation of their recognition.
II. Extended Transparency and Disclosure Obligations
Complementing the substantive tightening, the legislature is also significantly expanding regulatory transparency requirements. In the future, tax advisory firms will be required to notify the competent Chamber of Tax Advisors (Steuerberaterkammer) without delay of any changes to direct and indirect ownership interests. This applies in particular to participations by auditing or bookkeeping firms. In the case of changes at the indirect level, the entire participation structure up to the affected level must additionally be disclosed. Furthermore, indirect shareholders will in future already need to be declared during the recognition procedure.
The new regulation thus provides the chambers with significantly broader supervisory powers with respect to complex participation and platform structures.
III. Which Participation Structures Will Remain Permissible for Private Equity Investors?
Current developments already indicate how the market will react to the new statutory regulation. Numerous investors are currently considering whether to organise existing platform structures in the future via auditing firms (Wirtschaftsprüfungsgesellschaften) rather than tax advisory firms, or to restructure existing tax advisory platforms accordingly.
The background is that the tightening now envisaged is directly linked to tax advisory law, while the professional law governing auditors has not undergone a comparable reform. At the same time, auditors and auditing firms remain fully authorised to provide assistance in tax matters. Auditing firm structures are thus increasingly becoming the central alternative for investor-driven professional services platforms.
However, it remains to be seen whether this trend will prove sustainable in the long term. The legislative explanatory memorandum clearly shows that the legislature is taking an increasingly critical view of indirect influence by institutional investors. Should the market increasingly shift towards auditing firm structures in the future, it appears quite possible that the professional law governing auditors will also be subject to regulatory tightening in due course. On 23 April 2026, the board of the German Chamber of Public Accountants (Wirtschaftsprüferkammer) issued a statement clarifying that it continues to consider a private equity participation via an auditing firm to be permissible, provided that the independence of the auditing firm and the quality of the services are not called into question.
IV. Outlook
Legislative developments in this area remain dynamic. Market participants should regularly review the permissibility of their respective participation models and make adjustments as necessary to remain compliant.
