Germany: Regulatory M&A - updating the framework for ownership control procedures

In brief

On 28 December 2022, significant amendments to the ordinance on notifications pursuant to Section 2c of the German Banking Act (Kreditwesengesetz (KWG)) and Section 17 of the German Insurance Supervision Act (Versicherungsaufsichtsgesetz (VAG)), the Ownership Control Ordinance (Inhaberkontrollverordnung (InhKontrollV)) went into force.

1. Key takeaways

The amended InhKontrollV expands the scope of the documents and declarations to be submitted, but at the same time includes some simplifications for those subject to notification. In addition, some editorial adjustments were made. 

2. Outlook

Although there have been a few relaxations in the notification procedure in some special cases with lower risk, proposed acquirers should generally expect heavier notification and information obligations toward the BaFin (defined below) and the Deutsche Bundesbank, particularly state funds, PE funds and hedge funds. 

It remains to be seen whether the relaxations in cases of acquisitions with a lower regulatory risk will shorten the time it takes to obtain the regulatory approval.


The InhKontrollV sets out the details of the notification requirements applicable to persons and companies that intend to acquire a significant holding in a credit institution, a financial services institution, an insurance undertaking or a pension fund in Germany, either alone or in connection with other persons or undertakings (proposed acquirer), or to increase an existing significant holding to the extent that the thresholds of 20%, 30% or 50% of the voting rights or capital are reached or exceeded, or that the institution comes under their control. Furthermore, the procedure set out in Section 2c KWG also needs to be complied with in the case of acquisitions of a significant holding in payment services and e-money institutions as well as in companies that operate a stock exchange. 

Just as a reminder, the ownership control procedure also covers indirect acquisitions of a significant holding and this can easily be overlooked where a purchaser acquires a stake in a non-regulated target company that holds a participation in a regulated entity somewhere further down in the corporate structure.

Potential acquirers of such target entities must notify their above-described intent in writing without delay to the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)) and the Deutsche Bundesbank. Under the Single Supervisory Mechanism (SSM) in the case of credit institutions, the BaFin would merely be the entry point for the procedure conducted by the European Central Bank (ECB), which would take the ultimate decision based on a proposal from BaFin. 

The InhKontrollV reflects amendments to the KWG and the VAG implemented by the German Risk Reduction Act (Risikoreduzierungsgesetz ("RiG")) and takes into account the "Joint guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector" of the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA). 

Further amendments were necessary because under the SSM, the ECB has become responsible for deciding to oppose or not to oppose the acquisition of qualifying holdings in CRR credit institutions. While the SSM had already been in force for a long time, this had not yet been reflected in the InhKontrollV.

1. Scope of documents

The scope of documents and declarations to be submitted has grown overall. For example, more comprehensive information on new managers and their further mandates must be submitted. A completely new provision has been introduced, which creates additional obligations regarding the information and documents that need to be submitted for acquirers based in a non-EU country, or which are sovereign wealth funds, private equity funds or hedge funds.

Furthermore, the degree of detail of the information to be submitted regarding the reliability of the proposed acquirer and its management has been increased significantly.

2. Scope of supervision on a consolidated basis

A further new requirement is that the notification must include an analysis of the effect that the proposed acquisition would have on the scope of supervision on a consolidated basis. Information must also be provided regarding which group companies would fall under the scope of supervision on a consolidated basis following the acquisition or increase and at which levels within the group such supervision would or does take place on a consolidated or sub-consolidated basis. 

3. Additional capital 

Under the new rules, as part of the business plan, the proposed acquirer must also make statements about its willingness and ability to provide the target company with additional capital in the future if this becomes necessary. 

4. Reductions of the documents and information to be submitted

A very important part of the amendments is a significant reduction of the paperwork in cases where the proposed acquisition presents a lower risk. In these cases, the burden on acquirers to submit or re-submit information has been cut down significantly.

Proposed acquirers are not required to resubmit documents and declarations they have submitted if certain conditions are met, for example if the documents and declarations in question are still valid. The relevant period was extended from one year to two years and in cases where a holder switches from an indirect to a direct qualifying holding or in the case of group-internal restructurings, the resubmission of documents is waived irrespective of when these documents were submitted originally. For clarity, this is not a waiver of the obligation to notify the proposed acquisition, but only a waiver of submitting certain supporting documents.

The competent authorities may waive the submission of a business plan for proposed acquirers that are group companies if their holding in the target entity is solely indirect and they are not the top company of their group. If, in such a case, the target entity is merely a factoring and/or finance leasing company, Section 16 (12) InhKontrollV provides for a complete waiver of other declarations and documents as well, if their holding in the target entity is solely indirect and they are not the parent company of their group or if the transaction is an acquisition within a group.

5. Unintentional acquisitions and unintentional increases

Pursuant to Section 17 (1) sentence 1 No. 3 InhKontrollV, the reporting obligations have been expanded to include unintentional acquisitions and unintentional increases in holdings.

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