Amendment to the German Ownership Control Regulation: Extended notification obligations also for shareholders in fintechs - part 2

3. Extension of the communicating data and submitting documents

Most relevant in practice, especially for shareholders in fintechs, are likely going to be the extensions of the data and documents to be submitted, which the draft InhKontrollV stipulates.

a) Information on the new managing director

In the future, the shareholder subject to the notification requirement must indicate how much time a managing director that is appointed or to be appointed by the shareholder at the target company will devote to his activities at the target company pursuant to Sec. 8 No. 8 of the draft InhKontrollV. In addition, the managing director, must account in the future as to whether he holds further mandates as a managing director or is a member of an administrative or supervisory body of another company (Sec. 8 No. 9 draft InhKontrollV).

b) Information for legal entities domiciled in third countries, hedge funds and private equity funds

More extensive notification requirements for the acquisition of credit institutions and financial services institutions apply to legal entities domiciled in third countries, private equity funds and hedge funds.

In addition to the notification requirements applicable to all, a legal entity with its registered head office in a third country must submit a certificate of good-standing or equivalent document from the relevant foreign competent authorities in relation to the proposed acquirer (Section 8a (1) No. 1 draft InhKontrollV). Furthermore, if available, such an entity must submit a declaration by the relevant foreign competent authorities that there are no obstacles or limitations to the provision of information necessary for the supervision of the target entity (Section 8a (1) no. 2 draft InhKontrollV). In addition to these two certificates, legal entities domiciled in third countries must provide BaFin with general information on the regulatory regime of that third country as applicable to the proposed acquirer. Comparable obligations apply to shareholders in investment services companies. These result from Art. 5 para. 2 Del. VO (EU) 2017/1946.

The scope of notification in Section 8a (3) of draft InhKontrollV will also be intensified for private equity funds and hedge funds in the future. These must first compile a detailed description of the performance of other significant shareholdings (i.e. shareholdings of at least 10% of the capital or voting rights of a company) in credit institutions, financial services institutions, insurance companies or pension funds in their portfolio. In addition, hedge funds and private equity funds will in future have to disclose details of their investment policy and any investment restrictions to which they are subject. The decision-making structures that serve as the basis for investments must also be disclosed to BaFin in the future. This includes all factors that led to the investment decision regarding the target company (such as the respective fintech that provides banking transactions or financial services) (Section 8a (3) No. 3 draft InhKontrollV). The names and job titles of the decision-makers must also be disclosed from now on (Section 8a (3) No. 4 draft InhKontrollV). Finally, the prevention of money laundering practiced in the company must also be described to BaFin (Section 8a (3) No. 5 draft InhKontrollV).

c) Reliability information

In the future, the regulator will also increase the requirements for the declaration on the reliability of both the party required to notify and the manager appointed or to be appointed. The required person to notify must state in future whether insolvency proceedings or similar proceedings have been initiated against him or against a company controlled by him (Section 9 (1) no. 3 draft InhKontrollV). The required person to notify must also make this notification with regard to the managing director (Sec. 9 (4) draft InhKontrollV).

In the future, the required person to notify must state whether he, himself or his manager has lost a job, a position of trust or a comparable position (Sec. 9 (2) draft InhKontrollV). Comparable facts and proceedings under other legal systems must also be reported (Section 9 (3) draft InhKontrollV).
In the future, the information on the reliability of the required person to notify must be provided using the form "Information on reliability" from Annex 3 of the InKontrollV. For the information regarding the business manager, there will be released a new form "Information on intended business managers" from Annex 4 of the InhKontrollV. It should be noted that a new and separate form must be used for each natural person and for each company.

If the target company is a significant CRR credit institution[1], additional information on the professional qualifications of both the notifying party and the managing director must be provided (Section 9 (5) draft InhKontrollV).

4. Practical note: Revision of the forms

As already mentioned, the legislator has also extensively revised its annexes and forms. In the previous version of the InhKontrollV, there was only a single annex containing all forms. So far, the forms "Acquisition-Increase", "Complex Shareholding Structures", "Abandonment-Reduction" and "Information on Reliability" were provided by the legislator.

These have now been restructured. From now on there will be the following forms:

Annex 1: "Acquisition-Increase" (This indicates the intention to acquire or increase an interest, as well as the unintentional acquisition or increase of an interest.)

Annex 2: "Complex shareholding structures" (In particular, attributable voting rights, subsidiaries, etc. are identified via this form.)

Annex 3: "Information on reliability" (Herewith the information on the reliability of the required person to notify according to Sec. 9 draft InhKontrollV is given.)

Annex 4: "Information on intended managers" (This form has been extracted from the "Information on reliability" and has been made an independent form; all information on the reliability of the manager must be provided here.)

Annex 5: "Questionnaire for assessing the professional qualification of the person required to notify" (Information on the professional qualification of the required person to notify must be provided here if the target company is a CRR credit institution within the meaning of Section 9 (5) draft InhKontrollV.)

Annex 6: "Questionnaire for the assessment of the professional qualification of the managing director" (This form is used to provide information on the professional qualification of the managing director if the target company is a CRR credit institution within the meaning of Section 9 (5) draft InhKontrollV)

Attachment 7: "Abandonment Reduction" (This form provides information on the intended abandonment or reduction of a significant investment or an unintended abandonment or reduction).

5. Conclusion

With the reform of the InhKontrollV, the legislator condenses the notifiable circumstances for some shareholders, in some cases considerably. Since the required effort to fulfill these extended notification requirements will take a certain amount of preparation and resources on the part of the required person to notify, it makes sense for shareholders in fintechs in particular to familiarize themselves with the new legal requirements at an early stage in order to ensure smooth internal implementation of these notification requirements.

[1]One of the conditions set out in the second subparagraph of Article 6(4) of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring upon the European Central Bank specific tasks concerning the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63; L 218, 19.08.2015, p. 82) must be met.