National differences make transparency register burdensome

22 March 2023, Munich. What is the level of administrative burden placed on family businesses by transparency register requirements? The Foundation for Family Businesses has asked for this to be clarified in an empirical study – as a contribution to the debate about cutting red tape.

The transparency register is the result of an EU directive to combat money laundering and terrorist financing. In these types of publicly accessible registers, non-listed companies must enter details of their main shareholders or voting rights holders (the “beneficial owners”), including date of birth, nationality and place of residence, and keep this information up to date. Since the data is publicly accessible, many owners of family business believe that their security interests are at risk – while the objective of combating money laundering is not really being addressed.

However, this study focuses exclusively on the compliance costs incurred by businesses. The empirical study, which is based on a large number of interviews, was conducted by the Centres for European Policy Network and Prognos AG. It investigated four EU member states (Germany, France, Italy and Austria), looking into regulatory complexity and the economic cost in business practice. The study is part 3 of a four-volume research project.

It is once again the different interpretations of the directive in the respective EU member states that give rise to cost and effort for businesses. Some countries have a list, others – such as Germany – simply require all companies to make entries, including listed ones. The threshold of 25 percent of the shares to define beneficial owners is also applied in different ways; in Germany and Austria, for example, pooling agreements are also considered.

Interestingly, the transparency register had not yet been set up in Italy until recently, even though the directive had long since been transposed into national law. The Council of State, Italy’s highest administrative court, had meanwhile blocked its implementation.

Automatic information sharing between registers

The researchers have concluded that although the information requested does not differ significantly between the countries analysed, the work involved in entering the data is different. One reason is that the arrangements for sharing information between the transparency register and the commercial register are not identical everywhere. Another is that the systems offer different levels of user-friendliness. In Germany, for instance, it takes companies particularly long to complete the transparency register for the first time: 45 minutes. France, on the other hand, levies high registration fees. And in general, companies in need of help or information are often left to their own devices by the public authorities.

Things must be made easier for companies

The study’s authors recommend that automatic information sharing with other registers, as practised in Austria, should be extended to all EU member states. The establishment of a centralised EU transparency register could be a good idea to avoid having to make entries twice. The process of entering information in the register should be more user-friendly and support should be readily available to businesses.

Entries in the transparency register put the security of individuals at risk

Prof. Kirchdörfer, member of the Executive Board of the Foundation for Family Businesses: “Family businesses are extremely reluctant to enter their personal data in the public transparency register, as it does not in any meet their legitimate needs for security and data protection. This has now even been confirmed by the European Court of Justice. The fact that it creates considerable and ongoing bureaucratic burdens for them makes it even more annoying.”