Amendment to the German Ownership Control Regulation: Extended notification requirements also for shareholders in Fintechs - part 1
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On 12 May 2021, the German Regulator BaFin published a draft of the third Regulation amending the Ownership Control Regulation (Inhaberkontrollverordnung - InhKontrollV) for consultation. The draft in particular entails new notification requirements for shareholders in fintechs. In the first part of our client information, we will therefore present the substantive innovations. In the second part of this article, we will then discuss the forms to be used to make the relevant notifications to the supervisory authorities.
In connection with the amendment of the Ownership Control Regulation, BaFin has taken the opportunity to implement the new "Joint Guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector" of the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA)" in the draft InhKontrollV for shareholders in fintechs. This implementation leads, among other things, to an expansion of the notification requirements with regard to the acquisition or increase of significant stakes. Furthermore, the Act on Risk Reduction (RiG) stipulated the obligation to report unintentional acquisitions and unintentional increases as well as the unintentional relinquishment and unintentional reduction of a significant stake. The draft InhKontrollV now also reflects this extended scope of application.
1. Applicability of Fintechs
Currently in the regulatory landscape for fintechs, the general laws apply to their activities. This results primarily from the "same business, same risk, same rules" approach pursued by the European and German legislators in the technology sector. In general, this means that the matter of regulation and the licensing requirement depends on the relevant business area of the fintech. The innovations that come with the draft InhKontrollV are primarily relevant for shareholders of those fintechs that conduct banking transactions (Section 1 (1) KWG) or offer financial services (Section 1 (1a) KWG). Credit and financial services institutions are also covered by the scope of application of the InhKontrollV.
However, if the relevant fintech provides investment services as an investment firm (or investment institution), the InhKontrollV does not apply. The distinction is difficult, as some investment services tend to qualify as banking and financial services and some credit institutions also provide investment services. However, the ownership control of investment firms is primarily governed by the Delegated Regulation (EU) 2017/1946 of the Commission (Del. Regulation (EU) 2017/1946). In the future, this European regulation for investment firms will be flanked by the new Investment Firm Ownership Control Regulation (Wertpapierinstituteinhaberkontrollverordnung - WpI-IKV), which draft has also been put out for consultation. The draft WpI-IKV supplements the European regulations of the Del. VO (EU) 2017.1946. The new draft WpI-IKV expands and adapts the European regulations on the ownership control of investment firms in such a way that the regulatory content relating to banking and financial services are synchronized with those relating to the investment services.
2. Extension of the reporting requirements also for the unintentional acquisition or increase of a shareholding
Following the amendment of Section 2c (1) KWG by the Risk Reduction Act, the unintentional acquisition or increase as well as the unintentional reduction of a significant stake are also subject to notification. Therefore, the legislator has also extended the scope of application of the Ownership Control Regulation. An unintentional acquisition or unintentional increase takes place, for example, if other shareholders leave the company in the course of a capital reduction and the majority ratios shift in such a way that the (remaining) shareholder reaches or exceeds the threshold of 10% of the share capital. This gives rise to a reporting requirement. In contrast, the situation of an unintended reduction of a significant shareholding may arise if a shareholder waives participation in a capital increase and his shareholding falls below the threshold as a result of dilution through the issue of new shares. Now the respective shareholder has to report such unintentional acquisition or increase using the newly arranged form "Acquisition-Increase" of Annex 1 of the draft InhKontrollV. For a corresponding unintentional abandonment or reduction, the shareholder has to make his notification by using the form “Abandonment-Reduction” of Annex 7 of the draft InhKontrollV.
