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German Federal Financial Supervisory Authority (BaFin)’s promulgation of the Third Regulation amends the Regulation on the Control of Holders (InhKontrollV). It reflects amendments to the German Banking Act (Kreditwesengesetz – KWG), the German Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG) and the “Joint Guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the banking, insurance and securities sectors” issued by the European Supervisory Authorities.

In addition, responsibility for the licensing procedure and for decisions on the acquisition of significant shareholdings in the Capital Requirements Regulation (CRR) credit institutions has since been transferred to the European Central Bank, which was not the case in the rules under the Capital Requirements Directives, which preceded the CRR.

The InhKontrollV regulates notification obligations of companies and persons pursuing the acquisition of a significant interest in a credit institution, financial services institution, insurance company or pension fund, or in certain insurance holding companies. The aim of the amendments is to facilitate owner control procedures, but at the same time to tighten notification and disclosure obligations of persons who are subject to notification requirements. In addition, the annexes to the InhKontrollV have been amended with the help of standard forms to be used for notifications.

Autoren: Felicitas Scriba

Tightening of provisions

With regard to the tightening of notification and disclosure obligations, the duty to notify under the InhKontrollV has been extended by the addition of section 7.

Section 7.2.2 extends the notification obligation to the acquirer as soon as the acquirer expresses its intention to acquire a significant participation prior to the completion of the acquisition. In this case, the duty to notify also covers the period after the end of the assessment period.

Section 7.2.3 also extends the duty to notify. Since the duty already applies as soon as the participation threshold is merely “reached,” more circumstances will need to be covered. In addition, BaFin will be given the opportunity to review decisions with the help of notification obligations that arise again and again.

In addition to the expansion, the amendments have strengthened notification requirements. First, the scope of the notifications has been expanded to include additional documents and declarations of certain notifying parties and the disclosure obligation for groups of companies. Furthermore, a broader group of persons on behalf of the target company is now included in the duty to notify and there is to be an intensification of the control density.

As part of the amendments, a new Section 8a has been added. This is aimed at notifying parties domiciled in a third country. In future, affected parties to whom the provision applies must, when making disclosures, include a clearance certificate issued by a public body or the financial supervisory authority of the third country. Ideally, where possible, there should also be a statement from the financial supervisory authority that there are no impediments to the provision of the information necessary for the supervision of the target company. In addition, a summary of the third country’s prudential regulation must be provided within the disclosures. Finally, hedge funds and private equity funds are subject to more stringent notification requirements as a result of the increased risk due to their significant participation in the financial market. If the notifying party can be assigned to one of the two, it must also disclose the fund’s investment policy, strategy and corporate history (within the meaning of the KWG) and also provide details of decision-making structures and anti-money laundering procedures.