In June 2017, the law implementing the Fourth EU Money Laundering Directive also revised section 40 of the German Limited Liability Companies Act (GmbHG), requiring the shareholders' list (Gesellschafterliste) of German limited liability companies to contain information on the percentage participation of each shareholder. In addition, section 40 para. 4 of the GmbHG authorises future regulations to stipulate further requirements for shareholders' lists. The German Federal Ministry of Justice and Consumer Protection has made use of this to issue the Regulation on the Structure of the Shareholders' List (Gesellschafterlistenverordnung - GesLV). The Regulation entered into force on 1 July 2018 and clarifies a number of previously open questions. Below is a summary of the most important points.
Since 2008, Section 40 of the GmbHG has stipulated that shares must always be marked with consecutive numbers. This is to ensure that all changes in the ownership structure can be fully traced following the incorporation of a company.
The GesLV further stipulates that shares must be numbered with whole Arabic numerals. Roman numerals or combinations of numbers and letters (e.g., 1a, 1b, 1c) are not permitted. In exceptional cases, for example a share split, numbering in decimal order (e.g., 1.1, 1.2, 1.3) is allowed.
The GesLV has clarified that the shareholders' list can be sorted by either shareholder name or the numbering of the shares. The explanatory memorandum to the GesLV (Bundesrat Printed Matter 105/18) also notes that several shares may be listed on one line as long as the numbering is consecutive (e.g., "shares 1 to 25,000"). This reflects current prevailing practice.
3. Continuity of numbering
Once a number has been assigned to an individual share, it may not be used for another share. This principle is referred to as 'numbering continuity' and is intended to ensure that shares are unequivocally identifiable.
New numbers for shares may only be issued if new shares are created, combined or split (so not in the case of a step-up or cancellation of shares, a capital reduction or a transfer of shares). In each case, the next free whole Arabic number must be allocated.
In particular, the principle of numbering continuity must be observed following a share split. If a shareholder splits a share, the previous number of the share must be dropped and new individual numbers must be allocated according to the number of shares created by the split. These will be given the next free Arabic numbers. In addition, the GesLV allows decimal classification to be used and the previous whole number given to the share to be used as part of such decimal number (e.g., "share nos. 1.1 and 1.2").
Deviating from the strict principle of numbering continuity, the GesLV also requires the renumbering of the shares in a clearing list (Bereinigungsliste) if the shareholders' list would otherwise be confusing or become so due to the previous numbering. However, in order to further ensure the identification and origin of shares, the shareholders' list in such a case must include an additional column in which the previous numbering must be specified.
4. Additional column for explanatory notes
The additional column for explanatory notes (Veränderungsspalte), which often appears in shareholders' lists, can still be used. The GesLV clarifies that the legal basis for changes to the shareholders' lists "can" be entered in a separate column for explanatory notes and also specifies the facts that "should" be included in such additional column. These include the splitting, combination and cancellation of shares, capital increases and capital reductions, as well as the transfer of shares. Any change in the details of the shareholders or their participation "can" also be entered in the additional column. The wording "should" and "can" make it clear that this is not an obligation: entries in the notes column are at the (appropriate) discretion of the issuer of the shareholders' list.
An additional column containing the previous numbering of the shares is only mandatory in the event that a clearing list is created (see paragraph 3 above).
The notes column should only include facts that explain changes to the previous list recorded in the commercial register. Accordingly, when updating the list with regard to specific shares, the previous information in the notes column relating to these shares must be deleted.
Pursuant to section 40 of the GmbHG, the percentage participation in the share capital of each share, based on the nominal amount of the share, must be stated. If a shareholder holds more than one share, the total amount of their participation in the share capital must also be stated separately as a percentage.
The GesLV also clarifies the rules for rounding percentages. The percentage participation for an individual share may be rounded to one decimal place and in accordance with commercial principles. Rounding to more than one decimal place remains permissible.
The percentage participation may not be displayed as a fraction. Nor is rounding to 25.0 per cent or 50.0 per cent allowed. This could give the false impression that a shareholder, contrary to section 3 of the German Money Laundering Act, is not a beneficial owner or has no indirect control, as this requires a participation of more than 25 per cent or 50 per cent, respectively.
The GesLV has also clarified that in the case of micro-participations of less than 1 per cent of the share capital, the statement "less than 1 per cent" is just as permissible as the actual percentage participation. For understandable reasons, rounding down to 0.0 per cent is not permitted.
According to the explanatory memorandum to the GesLV, all shares in the shareholders' list must be rounded applying the same commercial principles and indicate the same number of decimal places.
The GesLV expressly states that the total amount of the percentage participation of a shareholder must be calculated before any rounding or omission of decimal places in relation to individual shares. This is intended to prevent rounding differences for the total participation becoming too large.
It is also worth noting that where shares are jointly held by shareholders, the percentage participation of the joint owners must be stated and not the participation of the individuals. This applies both to the individual share and to the total volume of the percentage participation.
When presenting the percentages, this information must be given in a separate column for the individual shares. The percentages of the total amount of the participation of the individual shareholders must be stated in a further column. Alternatively, the total percentage participation can be shown on separate lines immediately following the end of the shareholders' list (but in the same document).
6. Transitional arrangements
The GesLV entered into force on 1 July 2018. For companies already established before 1 July 2018, however, the requirements only need to be observed if a new list of shareholders has to be submitted to the commercial register due to a change in the details of the shareholders or the scope of their participation.
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.