Corporate Compliance @ Tech Deals – 3 / 4 观点
The transparency register is currently in focus due to the elimination of the so-called notification fiction as from 1 August 2021. In addition, the legislator has created several new registers in the current year. The following sets out an overview of which registers should be consulted as part of the due diligence process for tech deals:
Every corporate due diligence process kicks off with an examination of the commercial register. In addition to information on the management, share capital and capital contributions as well as corporate group reorganisations, initial information on the group structure can also be ascertained. The shareholdings of the target company and the seller, if it is a GmbH, entrepreneurial company or partnership, can be traced in this way - unless it is a trust structure, which may be identifiable through the transparency register. Another exception is public limited companies, whose shareholders are only recorded in the share register kept by the company in the case of registered shares. In the case of bearer shares, the transparency of shareholdings can only be checked to a limited extent via the notification obligations under Section 20 of the German Stock Corporation Act (shareholding threshold of 25 %) and the list of participants in the general meeting. In the case of listed companies, there are also the notifications pursuant to Section 33 Securities Trading Act (participation thresholds staggered from 3 %).
The Act to Modernise the Law on Partnerships (MoPeG), which was promulgated in the Federal Law Gazette on 10 August 2021, will create the company register for German Civil Code companies from 2024 as an equivalent to the commercial register (Sections 707 et seq. German Civil Code new version). Upon registration, the company is obliged in future to use the designations “registered partnership under the German Civil Code” or “eGbR” as a suffix to its name (Section 707a (2) German Civil Code new version.). The registration must contain information on the partners (Section 707 (2) no. 2 German Civil Code new version). This means that in future the transparency of shareholdings will also be extended to the eGbR.
Since 1 August 2021, the transparency register has been a so-called full register. From now on, every company must always fully disclose the information on its beneficial owners to the transparency register and keep it up to date. The previous exception of the so-called notification fiction from other registers, in particular the commercial register, no longer applies. Companies are now called upon to make the necessary entries or changes within the transitional period.
Thus, within the scope of due diligence, it should be carefully checked whether the notification status in the transparency register is correct for the target company, not least in order to avoid fines.
The Competition Register provides information to contracting authorities for award procedures in order to check whether a company is or can be excluded from the award procedure because of economic offences committed, Sections 123 and 124 Act against Restraints of Competition.
Although the Competition Register Act already entered into force in 2017, the notification and enquiry obligations are not yet applicable. The Federal Ministry for Economic Affairs and Energy will publish an announcement in the Federal Gazette when the requirements for electronic data transmission to the Federal Cartel Office, which maintains the competition register, are met. Until then, the existing enquiry obligations with regard to the corruption registers of the Federal States and the Central Register of Trade and Industrial Offences remain in force.
In future, the purchaser of a target company that is also active for the public sector should obtain an extract from the competition register as part of the due diligence process in order to check whether the target company is listed there and, if so, whether it can be deleted from the register after self-cleaning. The German Federal Cartel Office has recently concluded the consultations for the “white washing” procedure and will publish its guidelines shortly.
However, the purchaser cannot inspect the competition register itself. This is only available to the target company concerned.
The equivalent of a police certificate of good conduct for natural persons has been the Central Register of Trade and Industrial Offences since 1976. Both are kept by the Federal Office of Justice. Not all tradespeople in Germany appear in this Central Register since it records decisions of the administrative authorities prohibiting the licence or the exercise of a trade due to unreliability or unsuitability (section 149 (2) no. 1 German Industrial Code). Decisions imposing fines and certain criminal court convictions for administrative offences or criminal offences committed in connection with the exercise of the trade are also recorded in the Central Register of Trade and Industrial Offences.
The Business Register is designed as a database for storing legally relevant company data. The public platform has been operated together with the electronic Federal Gazette since 2007. The aim is to bring together centrally all important company data subject to publication and to make it available for electronic retrieval. In practice, the retrieval of annual financial statements is the most important function. In addition, the Business Register also provides access to the entries in the registers of companies, cooperatives and partnerships, the documents submitted to the registers and the announcements of these registers. The same applies to publications from the Federal Gazette, company-relevant notices from issuers of securities and, finally, notices from the insolvency courts.
On 9 July 2021, the “Act on the Establishment and Maintenance of a Register on Basic Business Data and on the Introduction of a uniform federal business number for businesses (...)” was published in the Federal Law Gazette. According to this, another register on business data will be introduced at the Federal Statistical Office, legally defined as a “basic register”. The aim is to create consistent, complete and up-to-date basic business data from data already available in registers and other databases of public bodies. In addition to the master data, the newly introduced uniform business number as well as other identification numbers, such as the company numbers according to Section 18i Social Security Code IV, will be available there in the future.
Just as hot off the press is the Lobby Register Act, which was published in the Federal Law Gazette on 16 April 2021. As of 1 January 2022, lobbyists must register in the lobby register when they contact or commission members of the German Bundestag or the Federal Government in order to directly or indirectly influence their decision-making processes. The Lobby Register is intended to create transparency about the influence of lobbyists in the processes of parliament and government. The Lobby Register is maintained by the German Bundestag and the obligation to register is punishable by a fine.
Whilst it is not an actual register, it is nevertheless very important to check within the framework of due diligence whether the target company, its products, employees and business partners are on embargo or sanctions lists. The first place to start is the homepage of the Federal Office for Economic Affairs and Export Control (BAFA). It publishes information texts in country folders that provide an overview of the individual embargo measures. The EU also provides an information portal with its EU Sanctions Map. In addition to the presentation of country-specific embargo measures, it is also possible to search for personal restrictions.
All public sources must be evaluated for the due diligence process. The degree of transparency of company information was significantly increased by the described amendments to the law in 2021. The eight registers listed above alone prove that Germany has earned the title of world champion for keeping registers. Is there nevertheless a register gap in Germany? For transactions in Germany, US companies in particular often ask whether there is a litigation register for civil proceedings. Since court records are publicly accessible in the USA, a corresponding search is possible there. Unfortunately, this is not (yet) the case in Germany. This could be a project for the next Federal Government.