Update on the German Transparency Register: Reporting obligation for GmbH & Co. KG's due to the change in practice of the German Federal Office of Administration

Since October 2017, German law requires the so-called "beneficial owner" of a GmbH or partnership to be entered in the Transparency Register. The beneficial owner under the German Money Laundering Act is any natural person who directly or indirectly controls more than 25% of the capital shares or voting rights in a Company.

For GmbH & Co. KGs (German limited partnerships with a limited liability company as general partner), as well as for UG (German Entrepreneurial Company) & Co. KGs, it has not been assumed to date that there is an obligation to report to the Transparency Register as the information provided in respect of the limited partners, most of whom are beneficial owners, has presumably been derived from the commercial Register.

Now, however, the practice of the German Federal Office of Administration ("BVA") which monitors the fulfilment of obligations in connection with the Transparency Register and punishes non-compliance with fines has changed significantly.

In fact, the BVA has recently pointed out that in case of a GmbH & Co. KG, only the liability sum of the limited partners is recorded in the commercial register but not the mandatory contribution, which is decisive for determining the shareholding relationships. Since the amount of liability and the mandatory contribution can differ considerably, the amount of liability alone does not allow any conclusions to be drawn about the actual ownership structure.

According to the now revised opinion of the BVA, the information available from the commercial register is no longer sufficient to clarify whether and, if so, which limited partners actually are the beneficial owners of a GmbH & Co. KG.

Almost every GmbH & Co. KG is now obliged to report its beneficial owners to the Transparency Register.

If this reporting obligation is not fulfilled, the BVA can impose fines against the GmbH & Co. KG and against the managing director of the general partner of up to EUR 150,000 for simple violations and up to EUR 1 million for serious violations. The BVA has expressly pointed out that a late notification to the Transparency Register is punished much more leniently than a failure to report. According to the BVA's catalogue of fines, the fine is quintupled for those failing to Report.

If you have any questions on this topic and/or need support in reporting the beneficial owner of a GmbH & Co. KG to the German Transparency Register, feel free to contact Volker Szpak and Petra Bolle.