Reporting obligations to the transparency register for a KG or GmbH & Co. KG

I. Background of the Reporting Obligations to the Transparency Register

Since 2017, legal entities under private law domiciled in Germany and partnerships registered with a German register are under an obligation to file information on their beneficial owners with the transparency register.This obligation results from Section 20 (1) of the German Anti-Money Laundering Act ("AMLA") and applies to almost all German domestic corporations and partnerships (including AG, GmbH, OHG, KG, PartG), which the AMLA jointly refers to as "associations".

According to the AMLA, the beneficial owner of an association is particularly any natural person (i.e., individual) who (i) directly or indirectly holds more than 25 percent of the shares or participations in the capital, (ii) controls more than 25 percent of the voting rights or (iii) by comparable means exercises control.

The information to be communicated to the transparency register or the competent body for registration shall include information on the name, date of birth, place of residence and the nature and extent of the economic interest of a beneficial owner in an association (cf. § 19 (1) AMLA).In particular, the information must indicate what the position as beneficial owner is based upon in the individual case (e.g. the amount of the shares or participations in the capital or voting rights, the function of the legal representative, managing shareholder or partner or other means of exercising control).

II. The Reporting Fiction under the AMLA

Within the scope of the reporting obligation to the transparency register, the AMLA provides for a fiction according to which the reporting obligation is deemed to have been fulfilled if the information on the beneficial owner of a company results from an electronically retrievable register, such as the commercial register (cf. Section 20 (2) AMLA). To the extent that the information on the beneficial owner required under the AMLA is registered with the commercial register, it does not have to be separately transmitted to the transparency register.

III. The Restrictive Interpretation of the Reporting Fiction by the BVA regarding a KG or GmbH & Co. KG

For companies in the legal form of a KG or GmbH & Co. KG the BVA, which is the authority responsible for sanctioning breaches of reporting obligations has recently, in a procedure of non-compliance with the AMLA, stated an administrative opinion the gist of which sounds as follows:

Contrary to the previous understanding of the predominant literature, the information on the shareholders as registered with the commercial register is not always sufficient to assess whether a shareholder can be qualified as a partnership’s beneficial owner. In the case of limited partners, only their liable contribution (Haftsumme or Hafteinlage) is registered with the commercial register, while the contribution of a personally liable shareholder is not apparent at all. Therefore, the commercial register does not provide any information on the extent to which a shareholder holds an economic interest in the company because it does not contain any information on the contributions to be made by the shareholders pursuant to the partnership’s articles of association. However, these contributions are, decisive in establishing economic rights as well as voting and other control rights in the partnership. Also, at least as a rule, that information can only be deduced from the partnership’s articles of association, which in the case of a KG or GmbH & Co. KG are not part of the documents available for inspection and cannot be inspected by the commercial register.

According to the BVA, a reporting fiction under Section 20 (2) AMLA remains generally applicable to a KG or GmbH & Co. KG. It especially concerns cases in which a personally liable shareholder is the only beneficial owner of the partnership (given that there are numerous limited partners) or which regard a unified partnership (a partnership holding itself the shares in its limited liability company) or a one-man-partnership (a partnership in which the only shareholder and director of the limited liability company is also the limited partner). The BVA intends to publish soon for the first time information on the reporting obligation and reporting fiction of partnerships in its updated FAQs.

IV. Conclusion: Additional Reporting Obligation of a Multiple Person KG or GmbH & Co. KG

It remains to be seen to what extent the opinion stated by the BVA in the aforementioned procedure becomes generally applicable, how the administrative practice is going to develop and what particular consequences this will bring about. For the time being entrepreneurs operating in the legal form of a KG, including a GmbH & Co. KG, are advised to notify the transparency register of the participations in the partnership’s capital held by the shareholders who qualify as beneficial owners under the AMLA, unless a personally liable shareholder is the only beneficial owner or the company operates as a unified partnership or a one-man-partnership. If the beneficial owner is a limited partner, the transparency register must also be notified of the amount of the contribution made by the beneficial owner in accordance with the partnership’s articles of association. In this respect, due to the lack of corresponding commercial register information there is no reporting fiction, according to the decision of the BVA.

Failure to comply with the disclosure obligation arising from the AMLA can be punished with fines of up to one million Euros. It would therefore be our recommendation that entrepreneurs who have not complied with this obligation yet take the precaution and send the (additional) information required by the BVA's manifested administrative opinion to the transparency register in due course. A report of superfluous information going beyond the legal obligation will not do any harm in any case.