Beneficial Ownership Information Reporting in Germany – Changes to Notifications

The notification fiction has now been eliminated. What does this change for reporting companies?

As in Poland, all companies in Germany must now declare their beneficial owners, even if no natural person holds more than 25% of the shares. In this case, the so-called "presumed" or "fictitious" beneficial owner should be declared.

In the case of so-called "fictitious" owners (Section 32 sentence 5 of the GwG), information about the management bodies, such as directors and board members, and any changes in these positions must be reported to the Transparency Register without delay.

Who are German entities with Polish shareholders obliged to report to the Transparency Register?

The new legislative changes have left the definition of the beneficial owner unchanged. According to § 3 GwG, the beneficial owner is the natural person who ultimately owns or controls the company in question. In the case of legal persons and registered partnerships, according to § 3 II of the GwG, a natural person is considered a UBO if he or she directly or indirectly

• holds more than 25% of the share capital,
• controls more than 25% of the voting rights, or
• exercises control in a comparable manner (e.g. as a general partner or through the right of veto)

The obligation to report exists regardless of the beneficiary's residential address. Foreign final beneficial owners must therefore also be declared.

If shares, voting rights or control are held or exercised by an association, the indirect beneficial owner is the person who controls the parent association within the meaning of Paragraph 3 II, paragraphs 2 to 4 of the GwG, in conjunction with Sections 290 II to IV of the German Commercial Code (HGB). As a general rule, control requires participations or voting rights of more than 50 percent.

In the event that no natural person meeting these requirements can be identified, the German company must declare its so-called presumptive beneficiaries, i.e. the managing director(s).

Germany has introduced new obligations regarding the notification of UBOs for foreign entities that are direct or indirect owners of German real estate. What should Polish shareholders pay attention to?

Under the previous regulations, foreign entities that acquired real estate in Germany (either directly or through the acquisition of shares in a company owning such real estate) were not obliged to report their beneficial owners to the Transparency Register if the acquisition of real estate took place before the entry into force of these regulations. However, the reporting obligation has now been extended by the Second Sanctions Enforcement Act (SDG II). Currently, if a Polish company owns real estate in Germany (also through a German company), it is obliged to declare a beneficiary, even if the acquisition took place many years ago.

In addition to the cases of acquisition of ownership of real estate currently, a Polish entrepreneur should report its beneficial owner to the Transparency Register if:

• acquired ownership of a German property before 1 January 2020.
• acquired shares within the meaning of Section 13 of the German Real Estate Tax Act (Grunderwerbsteuergesetz, GrEStG) in a company that owns German real estate before 1 August 2021, or
• has an economic interest within the meaning of § 1 (3a) of the GrEStG in the company which owns the German real estate acquired before 1 August 2021.

IMPORTANT!

The deadline for reporting beneficial owners in the case of already existing ownership was 30 June 2023, so in order to avoid penalties, entrepreneurs should file the notification immediately.

The new beneficiary notification obligations in the case of real estate ownership do not apply to those foreign entities that have already reported the relevant data on the ultimate beneficial owners to another UBO register in a Member State of the European Union. As in Poland there is no obligation to submit notifications in the case of ownership of real estate, this exception does not apply to entrepreneurs who have real estate in Polish.

Consequences of a breach

Since the introduction of the changes, compliance with the reporting obligation has become increasingly important in every acquisition of a company and in the course of due diligence processes. If a reporting company fails to report the required information to the Transparency Register, misses the deadline or fails to provide it in full, a fine of up to €150,000 may be imposed.

In the event of a serious, repeated or systematic violation, the company may be fined up to €1 million or twice the economic benefit of the violation.

Summary

In addition, the competent administrative authorities publish on their website non-appealable decisions on fines, indicating the nature of the infringement and the names of the persons responsible for the infringement. Advertisements remain public for a period of five years, which can cause serious reputational damage to entrepreneurs who are included in such a list.