Commercial register and disclosure of annual financial statements: Federal government resolves even more transparency – and corporate obligations “The EHUG leads to a fundamental modernisation of the handling of company data subject to publication. We are reducing information costs, cutting red tape, speeding up processes and start-ups, and thus giving the German economy an important innovation boost,” said Federal Minister of Justice Brigitte Zypries.
Importance of transparency: Already according to the “EC-CapCo-Directive” companies are obliged to file their annual accounts with the commercial register. Anyone who has learned to read a balance sheet, or even better, interpret it for a credit rating analysis, can draw direct conclusions about creditworthiness from public data. Just such market participants, who try to hide commercial mistakes or negligent legal arrangements, will, according to experience, be particularly “hesitant” to disclose the data via the commercial register first.
Several changes: An “Electronic Trade, Cooperative and Partnership Register” is introduced. By 01.01.2007 at the latest, commercial, cooperative and partnership registers will be converted to electronic operation. Jurisdiction remains with the local district court/registrar’s court. In future, documents can only be submitted electronically. The federal states may provide for transitional periods according to which the documents may still be submitted in paper form until the end of 2009 at the latest. However, public certification – e.g. by a notary – remains necessary for applications for registration. In order to speed up the process, it is stipulated that a decision on the application must in principle be taken “without delay”.
Not only the keeping of the register, but also the publication will be done electronically in the future. Therefore, the data is then easily accessible to everyone from home and abroad ? by the way, as has been the case in Switzerland for years !
Only for a transitional period until the end of 2008, the announcement will also be made in a daily newspaper, a very expensive fun ? a subsidy to newspaper publishers by the legislature that is now coming to an end. Transparency through disclosure of annual financial statements In order to facilitate the publication of annual financial statements, their central receipt, storage and publication will no longer be the responsibility of the local courts but of the electronic Federal Gazette. This will relieve the courts of administrative burdens ? for example because of the tireless inquiries from Experten.de
This will make the electronic Federal Gazette a central publication medium for business law announcements. The electronic company register – www.unternehmensregister.de As of 1 January 2007, central company data subject to publication requirements can be accessed online at www.Unternehmensregister.de.
This means that in future legal and economic operators will have a central source of information to obtain the essential information about a company that is subject to publication requirements.
New law implements EC Directive: The EHUG implements Directive 2003/58/EC amending the 1st Company Law Directive, parts of the EU Transparency Directive 2004/109/EC and resolutions of the Government Commission on Corporate Governance. In addition, this is a contribution to the “small-company-act” to relieve the burden on small and medium-sized enterprises and start-ups.
More pressure for transparency: A breach of the disclosure obligation is currently largely without consequences. The sanctioning of an infringement shall only take place upon request. Such applications for the imposition of an administrative fine are on the increase, but are still the exception in the mass. With the new law, all capital market information (ad hoc notifications, directors’ dealings notifications, notifications in accordance with the BörsenZulVO, notifications of changes in voting rights, etc.) should also be sent to the central register “online”. The current splitting of data between the commercial register/municipal court, BaFin and the electronic Federal Gazette is thus no longer necessary.
New fine procedure: Already today there is the obligation of the district court to check the documents, also for submission and completeness ? However, an administrative fine will only be imposed on application (by anyone !) if the documents are not available at the Commercial Register. In future, a fine procedure will replace this, in the case of incorrect, incomplete, untimely submission of documents, etc. The operator of the electronic Federal Gazette will have to report violations without being asked – the fine procedure will thus be automated. The fine (up to 50,000 euros) may also be imposed repeatedly.
The companies concerned will thus be forced to either massively change their disclosure practice as of 1.1.2007 or to change their own corporate form through structuring or restructuring. Already today, quite a few companies have failed to recognise this option of a change in circumstances, and have taken it in their stride that unnecessary coercive or regulatory fines have been imposed. In most cases, it is the tax advisor who is responsible, because exceeding deadlines in the preparation of annual financial statements can at the same time constitute an offence under various criminal law provisions ? whereby the management is primarily responsible.
by Dr. Johannes Fiala
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About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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