Family foundations are a popular instrument in Germany for securing assets across generations and pursuing private or entrepreneurial goals in the long term. However, since the tightening of money laundering legislation, transparency has also become a top priority in German foundation law.
What is the transparency register?
The transparency register serves to combat money laundering and terrorist financing in Germany. Since October 01, 2017, the beneficial owners of legal entities under private law and registered partnerships must be entered in this register. It makes it clear who is actually behind companies, foundations or trusts and is intended to prevent the misuse of complex legal and corporate structures.
Foundations with legal capacity are also obliged to register in the transparency register. A mere entry in the German register of foundations is not sufficient.
What information must be entered in the transparency register?
The following information must be reported for the beneficial owners:
- First name and last name
- Date of birth
- Place of residence, but without the specific address
- Nationality(ies)
- Type and scope of the beneficial interest, i.e. why and to what extent the person is considered to be the beneficial owner
Who is the beneficial owner of a family foundation?
The key question is, of course, who is the beneficial owner of a family foundation and therefore who should be entered in the transparency register. In other companies, the shareholders who hold a certain stake in the company are usually the beneficial owners. But family foundations have no shareholders. The law therefore stipulates that the beneficial owners of family foundations include, in particular, the members of the foundation board and the beneficiaries of the foundation. These typically include the founders and their descendants.
Would you like to receive such news directly to your mailbox every two months? Subscribe to our newsletter VSN Insider – Assets | Foundations | Succession.
Changes to the beneficial owners must be reported as soon as they become known so that the transparency register is always up to date.
When must the entry be made and what sanctions apply in the event of failure to do so?
The obligation to register lies with the foundation itself. The required information must be submitted electronically to the transparency register and updated on an ongoing basis. In the case of newly established foundations, registration must take place immediately after recognition of the foundation. Existing foundations are also obliged to register in the transparency register.
If the foundation’s board of directors fails to register or notify changes, fines may be imposed.
Who can view the transparency register?
The data stored in the register is accessible to authorities, courts and the persons subject to the reporting obligation themselves, among others. The public is also permitted to view the data. However, since a ruling by the European Court of Justice, access for the general public has been restricted: private individuals or journalists can only access the data if they can prove a legitimate interest. Beneficial owners can also apply to further restrict access to their data under certain conditions, for example to protect against criminal offenses or in the case of minors. This ensures that data protection is maintained for family foundations while the statutory transparency requirements are met.
Transparency register entry as an important basis for your family foundation
The obligation to be entered in the transparency register is an additional but indispensable compliance requirement for family foundations in Germany. Registration not only serves to fulfill legal requirements, but also to protect against possible sanctions. Foundation directors and managers should therefore carefully observe the reporting obligations in order to safeguard the integrity of the foundation and the interests of the beneficiaries in the long term. We are happy to assist foundations with their entry in the transparency register and are also available to answer any further questions.
Continue reading:
Transparency Register in Germany: Observe Deadlines And Avoid High Fines
German Family Foundations
