New legislation has come into force in Germany on 25
December 2008. As of this date factoring has become a
regulated financial service within the meaning of the German
Banking Act (Kreditwesengesetz).
The background of the new legislation is that the factoring
companies in Germany wished to enjoy certain tax advantages which
until 24 December 2008 had been reserved to the banking sector.
Along with this it was decided, that the factoring sector like the
banking sector should then also become a regulated sector under
supervision of the German Financial Supervisory Authority
(Bundesanstalt für Finanzdienstleistungsaufsicht -
BaFin) (the "German Authority").
As a consequence, any entity which intends to provide factoring
services in Germany will be required to apply to the German
Authority for a licence.
Since 25 December 2008 doing factoring business in Germany
without a licence constitutes a criminal offence pursuant to the
German Banking Act and may result in imprisonment of up to three
years or fine.
The new law contains transitional provisions in
favour of companies which had been doing factoring business before
25 December 2008. These companies have the opportunity to obtain a
licence by merely notifying the German Authority and submitting
certain information and documents. The deadline
for this notification is 31 January 2009 (for
certain smaller companies 31 December 2009).
Any company which will set up a factoring business in Germany
after 24 December 2008 will need a normal licence and will thus
have to go through the normal application procedure.
Although the new law will in principle treat factoring in the
same way as any other financial services already within the scope
of the German Banking Act, there will be certain relief for the
factoring companies: There will be no minimum capital requirement.
Certain control mechanisms regarding liquidity and solvency will
not be applicable. Further, the new law requires only one (not two)
reliable and competent managers (as formally approved by the
authorities) of the factoring company.
The new law takes into account the principles of freedom of
establishment and freedom to provide services under European law.
It thus allows factoring companies, which are based in another
member state of the European Economic Area, under certain
conditions to provide trans-border factoring services into Germany
or to provide factoring services in Germany through a German branch
without a license of the German Authority. Details should be
clarified by way of a formal request to the German Authority.
Factoring companies already doing factoring in or into Germany
should take care to observe the notification period. They should
file the notification well before 31 January 2009 and against a
receipt from the German Authority.
The new law also introduces a continuing
supervision of factoring companies by the German
Authority. This includes in particular considerable reporting
obligations, organisation obligations as well as obligations to
submit annual accounts, management reports and auditor's
reports to the authorities on a regular basis. The costs of the
supervision by the authorities will be financed by way of
allocating the costs to the factoring companies.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
A trustee in bankruptcy's rights to obtain a possession order and order for sale against a bankrupt's property will not be suspended indefinitely even where there are exceptional circumstances.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).