finance and projects newsletter germany

FINANCE AND PROJECTS NEWSLETTER
GERMANY
18 December 2008
LEASING AND FACTORING AMENDMENTS TO THE GERMAN BANKING ACT
LEASING AND FACTORING AS LICENSABLE FINANCIAL SERVICES
On 28 November 2008 the Annual Tax Act 2009 was adopted by the German Parliament (Bundestag) and it is anticipated that it
will enter into force on 1 January 2009. Along with about 200 amendments to the German tax legislation, it also contains a
number of amendment to the German Banking Act (Kreditwesengesetz, “KWG”), the Act on the German Federal Financial
Services Supervisory Authority (Finanzdienstleistungsaufsichtsgesetz) as well as the Regulation on the Imposition of Fees and
the Apportionment under the Act on the German Federal Financial Services Supervisory Authority (Verordnung über die
Erhebung von Gebühren und der Umlegung von Kosten nach dem Finanzdienstleistungsaufsichtsgesetz). The latter
amendments are of major importance for leasing and factoring companies providing such business in Germany.
I. Implementation of a licence requirement for leasing and factoring companies
From 1 January 2009, services provided by leasing and factoring companies will be subject to licence requirements under the
KWG. Thus, as well as the requirement to obtain a German financial services licence, activities of such companies will in the
future be subject to supervision of the German Federal Financial Services Supervsiory Authority (Bundesanstalt für
Finanzdienstleistungsaufsicht, “BaFin”) as well as the German Central Bank (Bundesbank).
The introduction of a licence requirement for leasing and factoring companies establishes the trade tax privilege, which was
available for credit institutions within the meaning of the KWG, for leasing and factoring companies. The applicable section of the
Executive Regulation of the Trade Tax Act (Gewerbesteuer-Durchführungsverordnung, GewStDV) requires that the relevant
company exclusively provides financial services. However, according to the legislator, it would not be detrimental if the relevant
company also provides side business activities and auxiliary services. What exactly can be qualified as such activities and
services will be assessed on a case-by-case basis. The legislator has asked the German Federal Ministry of Finance
(Bundesfinanzministerium) to issue guidance in this respect.
Section 1 para 1a sentence 2 no. 9 and 10 of the KWG (new) defines the licensable business activities as follows:
•
Factoring: The continuing acquisition of receivables on the basis of master agreements, with or without recourse.
•
Financial Leasing: The entering into financial leasing agreements as lease provider.
Special purpose vehicles (SPVs) within the meaning of section 1 para 26 of the KWG, which provide factoring business shall,
according to the legislator, not be included in the new licence requirement even where such activities consist of the acquisition of
receivables in the context of revolving asset backed securities transactions.
Furthermore, where there is no financing aspect attached to the factoring business (Fälligkeitsfactoring), the licence requirement
shall not apply.
II. Transitional provisions
If leasing and und factoring companies have already in the past obtained a German banking licence or a financial services
licence with respect to investment broking (Anlagevermittlung), investment advice (Anlageberatung), placing of financial
instruments (Platzierungsgeschäft), operation of an MTF (Betrieb eines multilateralen Handelssystems), contract broking
(Abschlussvermittlung), portfolio management (Portfoliomanagement) and own account trading (Eigenhandel), then the relevant
licence is deemed to be granted upon the entering into force of the new provisions.
For all other companies that have, as of 1 January 2009, provided leasing and factoring business activities, there is a simplified
procedure for obtaining the required licence: the licence is deemed to be granted, provided the company has notified BaFin, no
later than 31 January 2009, of its business activities, stating that it intends to continue to provide the relevant services in the
future. The notification period is extended until 31 December 2009 with respect to “small companies” within the meaning of the
German Commercial Code (Handelsgesetzbuch), i.e. companies where at least two of the following criteria are fulfilled: (1) a
maximum balance sheet total of 4,015,000 Euro, (2) an annual sales exposure of not more than 8,030,000 Euro and (3) not more
than 50 employees.
III. Exemptions from the licence requirements
According to the new section 2 para 6 sentence 1 no. 17 of the KWG, leasing companies which mainly finance one big leasing
object (single object vehicle) shall not qualify as a financial services institution and are, even though they provide licensable
business activities, by an explicit statutory exemption not subject to supervision by the BaFin.
The exemption applies provided the leasing company does not take any business policy decisions and is managed by an
institution having its seat in the European Economic Area (“EEA”) and which is, according to the laws of its home state, admitted
to provide financial leasing services.
IV. Provisions of the KWG that are not applicable
Financial services institutions that exclusively provide factoring or financial leasing services are exempt from certain provisions of
the KWG, in particular relating to solvency issues. Thus, inter alia the provisions on equity capital, liquidity, participation limits,
large exposures, risk concentration and company loans are not applicable and no monthly return notifications (Monatsausweise)
have to be sent to the Bundesbank. Some of the BaFin notifications do not have to be sent, for example when setting up a
branch or when acquiring qualified participating interests in other companies. Finally, the measures available to the BaFin in
case of imminent danger with regard to equity capital, liquidity and an impending insolvency of the relevant company are
restricted.
V. Details on the applicable provisions
Applicable are, however, - and these will require immediate action to be taken - the provisions on the professional suitability and
the personal reliability of the management, as well as the provisions on notification requirements regarding qualified participating
interests, in particular the provision of evidence of the reliability of the holders of qualified participating interests in factoring or
financial leasing companies. Furthermore, the companies will have to comply with the internal organisational requirements set
forth in section 25a of the KWG, in particular with respect to the risk management and the outsourcing of activities. In addition,
the format for the accounting and the balance sheet must be adjusted to the relevant regulation applicable for banking and
financial services institutions (Verordnung über die Rechnungslegung der Kreditinstitute und Finanzdienstleistungsintitute).
V. Provision of factoring and financial leasing business on a cross-border basis
•
Provision of factoring and financial leasing business on a cross-border basis into Germany
With respect to factoring and financial leasing business provided on a cross-border basis into Germany, a licence is not required
if the relevant entity qualifies as a credit institution within the meaning of the European Banking Directive 2006/48/EC and has its
seat in the EEA. In such case, the relevant institution may benefit from the concept of the so-called “European Passport“. The
“European Passport” allows credit institutions to provide services for which they have obtained a licence from their competent
home state authority in any other contracting state to the EEA without the requirement to obtain an additional licence in that
state.
As regards foreign factoring and financial leasing companies that do not qualify as credit institutions within the meaning of the
European Banking Directive 2006/48/EC and / or have their seat not within the EEA, a German financial services licence will be
required. According to a note produced by the BaFin in September 2003 (which was updated on 1 April 2005), the provision of
financial services on a cross-border basis into Germany requires a German financial services licence if the service provider
repeatedly targets the German market. In this context it should be noted that simply maintaining existing client relationships (i.e.
relationships existing prior to 2003) or entering into agreements at a client's own initiative, which the BaFin deems is typically the
case with large corporate clients or institutional investors, do not require a license (“passive freedom to provide services”).
Finally, the BaFin may - upon application - grant an exemption from the German licence requirements which, however, requires
that the applicant is effectively supervised in its home country by the competent authority in accordance with internationally
recognised standards.
•
Provision of factoring and financial leasing business on a cross-border basis from Germany into other
countries
German factoring or financial leasing companies cannot benefit from the “European Passport” concept. As a result, possible
licence requirements will have to be assessed based on the applicable laws in the relevant country (irrespective of whether it is
an EEA or non-EEA state).
German credit institutions within the meaning of the European Banking Directive 2006/48/EC may provide factoring or financial
leasing services within the EEA under the “European Passport” regime. As regards the provision of such services in non-EEA
states, possible licence requirements have to be assessed based on the applicable laws in the relevant country
For more information
Mathias Hanten
T: +49 (0)69 271 33 381
F: +49 (0)69 271 33 200
M: +49(0) 175 723 44 96
[email protected]
Nina-Luisa Siedler
T: +49 (0)69 271 33 240
F: +49 (0)69 271 33 161
M: +49 (0)173 59 83 343
[email protected]
Andreas Gregor Erm
T: +49 (0)69 271 33 382
F: +49 (0)69 271 33 200
M: +49 (0)160 905 675 10
[email protected]
www.dlapiper.com
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