Reform of the Transparency Register

On 25 June 2021, the Federal Council approved the draft law on the Transparency Register and Financial Information Act (TraFinG). The aim of the law is to enable the interconnection of European transparency registers in the fight against money laundering and terrorist financing. The law is to come into force as early as 01.08.2021.
Until now, notifications to the German transparency register were only required if the information on the beneficial owners did not result from other registers, such as the commercial register. Consequently, the transparency register was initially designed as a catch-all register. However, a full interconnection of the European transparency registers requires a so-called full register, i.e. a place where all information on beneficial owners can be retrieved in a uniform data format. Through the TraFinG, the German transparency register is now to be expanded into such a full register.
In future, almost all legal entities will thus be obliged to provide the transparency register with all information on their beneficial owners. This applies irrespective of the size of the company; both listed public limited companies (and their subsidiaries) and small “one-man limited liability companies” are obliged to submit their data. Only associations are initially excluded from the notification obligation. For them, a transfer of the association’s board members, who are usually the fictitious beneficial owners of the association according to Section 3 (3) sentence 5 AMLA, from the register of associations is provided for; thus, the association does not incur any additional bureaucratic expenses. In order to take into account the far-reaching practical consequences for all other persons required to report, the legislator has provided for transitional periods. These staggered transition periods require subsequent registration by:

  • 31.03.2022 für Aktiengesellschaften (AG), Kommanditgesellschaften auf Aktien (KGaA) und Societas Europea (SE)
  • 30.06.2022 for limited liability companies (GmbH), cooperatives and partnership companies
  • 31.12.2022 for all other companies subject to transparency requirements, e.g. GmbH & Co. KG.
    In addition, the corresponding fines do not take effect with the expiry of the transitional period. Here, too, the legal entities are granted a staggered grace period until the:
  • 31.03.2023 for the AG, SE or KGaA
  • 30.06.2023 for the GmbH, cooperative, partnership
  • 31.12.2023 in all other cases.

Another innovation concerns in particular those obliged under money laundering law, such as banks. Until now, they could not rely exclusively on the information in the transparency register. Durch das TraFinG ändert sich dies nun jedoch: Geldwäscherechtlich Verpflichtete sollen die Angaben zur Identifizierung des wirtschaftlich berechtigten Vertragspartners weiterhin selbstständig erheben. However, provided that this information then coincides with the transparency register, they have sufficiently fulfilled their duty of identification.
In this respect, the TraFinG entails a considerable additional effort for the entities required to register, but those obliged under money laundering law in particular benefit from bureaucratic savings.

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Reform of the law on private limited companies

The corporate partnership law, which in part dates back to the 19th century, is now to be adapted to today’s needs through a current reform project. In the meantime, the Federal Council has already commented on the government draft, so that implementation is likely as early as this autumn. However, a transitional period until the end of 2022 is planned; the law is therefore not to come into force until 01.01.2023. In the following, we inform you about the essential innovations of the government draft on the modernisation of partnership law (RegE MoPeG). The current legislative procedure on partnership law is available at: https://www.bmjv.de/SharedDocs/Gesetzgebungsverfahren/Dokumente/RegE_Personengesellschaftsrecht.pdf?__blob=publicationFile&v=3.

Innovations for the GbR

A large number of innovations of the MoPeG concern the civil law partnership. Firstly, the legal capacity of a GbR (acting externally) is enshrined in law for the first time; previously this had only been established by case law. Furthermore, §707 (1) BGB-E provides for the introduction of a company register for the GbR to be kept by the local courts.
Although registration is not to be compulsory, the acquisition of rights to be registered in public registers, such as the acquisition of real estate or trademark rights, as well as the position as a shareholder of another company, is to be linked to registration.
In addition, the GbR is to become convertible. GbRs can consequently participate in a demerger, merger or change of legal form under the Transformation Act in the future.

Innovations for the OHG

First, the gaps in the OHG’s resolution procedure law are at least partially closed. Up to now, the HGB only provided regulations on the unanimity principle for resolutions. If the articles of association stipulated other majority requirements, it was usually necessary to resort to the law of the GmbH. This is now to change through § 109 HGB-E: On the one hand, para. 1 now includes virtual meetings such as telephone or video conferences in addition to traditional face-to-face meetings. On the other hand, para. 4 standardises the requirements for the quorum of the meeting in the case of deviations from the unanimity principle (which should continue to be the basic model). Accordingly, the convened shareholders’ meeting shall constitute a quorum if the shareholders present or their representatives have the votes required for the adoption of a resolution, irrespective of their voting rights.
However, fundamental issues such as deadlines for meetings or voting prohibitions are still not regulated in this context. If the articles of association do not contain any provisions in this regard, the law governing limited liability companies will have to be applied.
Other changes relate to the determination and distribution of profits. Until now, the applicable law has been complicated and thus often impracticable. §Section 120 (1) sentence 1 HGB-E now initially assigns the competence to prepare annual financial statements to the partners with management authority. The annual financial statements are then adopted by resolution of the shareholders in accordance with §121 HGB-E. Pursuant to §120 (1) sentence 2 HGB-E, §709 (3) BGB-E, the distribution of profits and losses is to be based primarily on the share ratio. If no participation ratios are specified, the contribution rate shall be used as a basis. If neither participation nor contribution values can be determined, the head quota applies; each partner participates equally in the loss or profit. If a profit is determined, §122 HGB-E assumes the principle of full distribution. If this is not desired, corresponding regulations must be included in the articles of association.

Innovations for the KG

§162 (HGB) currently still provides for a secrecy privilege for limited partners; these are not named when the registration of the limited partnership is announced. This regulation is to be dropped in future. However, the amendment is unlikely to have any practical impact, as information on limited partners can already be obtained through excerpts from the commercial register.
Furthermore, the information rights of the limited partners are to be improved. Under the current regulations, the limited partner has only a very limited right to information. Pursuant to §166 HGB, it may demand inspection of the annual financial statements and the accounting records. However, in order to enforce his other extraordinary right to information, the limited partner requires a court order. The new §166 (1) sentence 2 HGB-E is intended to grant the limited partner a general right to information in the future. However, this right is also linked to the existence of an important reason. This is particularly the case if there is reason to assume dishonest management.
Furthermore, §176 HGB-E stipulates an increase in liability for the limited partner who has not yet been registered. Limited partners who have agreed to participate in legal transactions are liable for all liabilities of the limited partnership that were established until their registration as if they were personally liable partners. Up to now, limited partners have been able to escape this aggravation of liability if the creditors were aware of their position as limited partners. In the future, this relief from liability will no longer apply, so that it is essential to ensure that the limited partner declares his accession to the partnership subject to the condition precedent of the entry in the register.

We will keep you informed about developments in this regard!

Do you have questions about corporate partnership law? We would like to help you!

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Subsidy fraud through the use of Corona subsidies

Due to the Corona pandemic, many SMEs already benefiting as recipients of Corona bridging assistance from the non-repayable grants provided by the state additionally resorted to KfW entrepreneur loans. This gave many people hope that they would be able to survive the crisis better financially. For such entrepreneurs who recorded a turnover of no more than 50 million euros in the previous year and did not exceed a balance sheet total of 43 million euros, Corona bridging aid was granted for the second time. However, what many were not aware of when making additional use of KfW’s entrepreneurial loans are the applicable aid ceilings.
The amount of aid allowed is determined by the EU. In principle, the maximum amount allowed is 200,000 euros spread over a period of three tax years. On the occasion of the Corona crisis, the amount was increased by 800,000 euros – in total, aid of up to one million euros is thus permissible. Insofar as this limit is exceeded, the subsidy is to be regarded as illegal and the recipient of the aid can, in the worst case, be liable to prosecution for subsidy fraud. Subsidy fraud is punishable by up to five years’ imprisonment or a fine.
The following generally applies under a KfW Entrepreneur Loan: If the term for a KfW loan is more than six years, the entire amount is considered a subsidy. The loans are granted with maximum amounts of up to € 800,000 over a maximum term of ten years. It is therefore imperative to observe the applicable maximum limit of the hatchet subsidy – together with the other Corona bridging subsidies granted by the state. Especially with high loan amounts, the limit is quickly exceeded. If the entrepreneurs concerned do not unknowingly commit subsidy fraud, they could in any case be threatened with no longer being able to benefit from Corona aid towards the end of the year, because the maximum limit has already been reached. Often a reference to this can only be found in the small print of KfW loans.
In the case of the so-called KfW Quick Loans, which were used by numerous entrepreneurs at the beginning of the Corona pandemic, it should be noted that here the entire amount is considered a subsidy regardless of the term.
These regulations may come as a surprise to many, as it was previously the case with KfW loans that for terms of up to six years, only the interest savings were to be regarded as additional aid. Even the banks often seem to be unaware of this regulation, if they have not even contractually excluded their liability for such issues.
The European Commission is already planning a possible way out for the affected entrepreneurs. A possible total aid of up to three million euros per company is envisaged, which could be granted if certain conditions are met. The Federal Government is currently examining whether such an amendment to the law on state aid could be implemented in the near future. For the entrepreneurs concerned, it only remains to be seen what result the federal government will come to in its examination.
We will keep you informed about the latest developments!


Going to Switzerland to save money?

Foreign authentications in Switzerland – To save costs in Switzerland?

In Germany, notary fees are prescribed by law and are generally based on the notarised value. In company law in particular, this may well lead to relatively high notary fees. In Switzerland, on the other hand, notary fees are freely negotiable – so it is quite possible to agree on much lower fees.

 

However, it has long been disputed whether and to what extent Swiss certifications are permitted in Germany. Notarisation by a foreign notary is always permissible if the foreign notary is equivalent to a German notary and the notarisation procedure corresponds to the German procedure. While the case law on marriage contracts and real estate contracts is very tolerant and affirms equivalence for many Swiss cantons, it has so far been extremely restrictive with regard to corporate law transactions such as formation, conversion or transfer of shares.

 

Can share transfers now be notarised in Switzerland?

Until the German Act to Modernise the Law on Private Limited Companies and Combat Abuses (MoMiG) came into force in 2008, transfers of shares certified in Zurich-Altstadt, Basel-Stadt and Zug were considered equivalent in consistent case law and thus permissible in Germany. With the introduction of MoMiG, however, legal obstacles were placed in the way of this practice. Since then, §40 II GmbHG in particular has laid down special requirements for share transfers. For this purpose, it is now mandatory to submit the new list of shareholders to the register court. In its decision of 17.12.2013, Ref.: 99 AR 9466/10, the Federal Court of Justice (BGH) decidedly rejected a blanket rejection of the equivalence of the submission by a foreign notary, but at the same time neither established general equivalence in the case of share transfers by Swiss notaries nor did it standardise concrete requirements for equivalence. Consequently, the assignment of shares in Switzerland was associated with great legal uncertainty.

 

What has changed following the decision of the Berlin Court of Appeal of 24.01.2018, Ref.: 22 W 25/16?

 

In that decision, the Kammergericht Berlin held that the establishment of a German GmbH by notarisation in Switzerland was permissible. The significance of this decision is grave. Up to now, it was assumed that at most transactions between two or more parties in need of notarisation could be notarised abroad, but certainly no transactions changing the organisation’s statute such as foundations or conversions. After all, such transactions have a much more far-reaching effect than changes in ownership. However, this decision now firmly contradicts the prevailing view and may even pave the way for the notarisation of mergers and restructurings in Switzerland. But beware: The equivalence of the GmbH foundation certified abroad was initially only established for the Canton of Bern.

We will keep you informed of developments in this respect. Wenn Sie Fragen haben, wenden Sie sich bitte an uns und lassen Sie sich von uns beraten.

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