The transparency register as “comprehensive register” and extended reporting obligations of foreign companies

Since the implementation of the German transparency register in October 2017, there is the obligation to identify and notify the beneficial owner(s) of companies to the transparency register. The purpose of the transparency register is to record ownership and control relationships in companies and make them accessible. Therefore, the information on the so-called "beneficial owner(s)" of a company required by the German Anti-Money Laundering Act (Geldwäschegesetz – GwG) must be reported to the transparency register.

The beneficial owner of a company according to the GwG is in particular any natural person who directly or indirectly holds more than 25 percent of the shares, controls more than 25 percent of the voting rights or exercises control in a comparable manner. If no natural person can be identified as the beneficial owner, the legal representatives of the company concerned are deemed to be the fictitious beneficial owners.

With effect from 1 August 2021, the transparency register was changed from a fall-back register to a comprehensive register. With the conversion to the comprehensive register, almost all domestic companies are now obliged to report their (fictitious) beneficial owners to the transparency register. The transitional periods for the notification of the (fictitious) beneficial owners granted in the course of the conversion have all expired by the end of 2022. By the end of 2023, all grace periods for the suspension of the prosecution of administrative offences in this context will also expire.

Under the GwG the companies are obliged to provide the following information on their beneficial owners:

• (full) first and last name,
• date of birth,
• place of residence,
• (now) all nationalities,
• nature and extent of the beneficial interest.

Companies with foreign seat have so far been obliged, in particular in connection with the acquisition of real estate in Germany (regulation entered into force with effect from 1 January 2020) and acquisitions or legal transactions pursuant to Section 1 subsec. 3 and subsec. 3a of the German Real Estate Transfer Tax Act (Grunderwerbssteuergesetz - GrEStG; regulation entered into force with effect from 1 August 2021) to report the above-mentioned information on their beneficial owners.

Since 28 December 2022, with the entry into force of the German Sanctions Enforcement Act II (Sanktionsdurchsetzungsgesetz II - SDG II) the reporting obligations for foreign companies have been extended. A reporting obligation now also exists for existing cases (Bestandsfälle) if the foreign companies:

• hold title to domestic property since a date prior to 1 January 2020, or

• unite shares within the meaning of Section 1 subsec. 3 GrEStG since a date prior to 1 August 2021 or hold an economic interest within the meaning of Section 1 subsec. 3a GrEStG by virtue of a legal transaction.

For the fulfilment of the reporting obligation in connection with such existing cases (Bestandsfälle) the legislative authority has granted a transitional period until 30 June 2023. The exemption from the reporting obligation remains unchanged for those foreign companies that have already filed the required information on their beneficial owners to another register of a Member State of the European Union. However, also in such cases it is recommended to check carefully whether the EU-foreign register fulfils the requirements demanded by the German legislator. This exemption does not apply to companies in third countries.

Finally, it should be noted that non-compliance with the legal obligations is punished by the Federal Administrative Office (Bundesverwaltunsamt). Fines of up to 150,000 euros - and higher fines in the case of serious, repeated and systematic violations - may be imposed. In addition, final decisions imposing fines are published on the website of the Federal Administrative Office, naming the company ("naming") and the administrative offense committed ("shaming").

We recommend that all companies check which reporting obligations their own company is subject to and whether any reports made to the transparency register are still up to date.

The obligation of a double-entry in the registers resulting from the modification of the transparency register to a comprehensive register must be taken into account in particular in the event of future changes to the fictitious beneficial owners of a company (e.g. change of managing directors of a GmbH). A notification must then be made to both the commercial register and the transparency register.

Our services at a glance

Take the amendment of the law as an opportunity to check your company's compliance with the requirements of the GwG. We will be happy to support you in this regard.

• Determination of beneficial owners, taking into account the control and ownership structures of companies
• Making notifications to and updating or correcting entries in the transparency register
• Support and advice in the event of discrepancy reports and fine proceedings

We will be happy to assist you with the implementation and answer any questions you may have.

Your contact persons at PwC Legal Munich and Stuttgart are: