Fiduciary Services and Trust Agreements in Germany

Fiduciary Services in Germany

When it comes to the pursuit of such a fiduciary arrangement, there are numerous reasons as to why this arrangement may suit those involved. As stated above it may be to keep the competition guessing as to who is really behind the decision-making within the firm or it may be for other reasons. Make sure to get legal advice when planning such an arrangement to remain informed as to the legal requirements in Germany. In practice, this relationship may involve the non-listed director being a shareholder within the firm so that they do have a real financial stake in the success of the company. Thus, they may be listed as a shareholder of the company without necessarily stating their unofficial director role at the company.

This form of fiduciary relationship can be particularly useful when it comes to foreign companies setting up subsidiary companies in Germany. By going down this route they can legitimately pursue the opening of a German office without needing to have a strong presence in the country. Such a move is particularly useful for companies who are starting their expansion into Germany.

When it comes to companies adopting this approach they should inform the tax services as to this plan. Under German Commercial Law such a trust agreement (Treuhandvereinbarung) is allowed for but the tax authorities must be told of the arrangement. In such an arrangement, where the authorities are aware of the nature of how the company is run, the nominee directors will have limited powers concerning the running of the company. Their information will be listed with the German Commercial Register along with those involved from a distance.

The Trust Relationship

The nature of the trust relationship will depend on the case. In some companies this trust relationship will be known and open knowledge so the shareholders are aware of the relationship and approve of it occurring. In such a scenario, it is advisable to ensure that the different parties within the company are aware of what is involved and what it means for the company. Our lawyers can work with you on this front as part of our fiduciary services. However, in some cases the trust relationship is not as open and the relationship is not known by elements within the company.

“Straw Man” Company Director

One option available to companies is to have a “straw man” managing director in the running of their firm. The “straw man” director is one who on paper has the power within the company but in practice has a more experienced operator working behind the scenes. In order for the “straw man” to be put in place, that person must be the one registered as the managing director on the official paperwork. Now the “straw man” should be warned that should they approach this role that they will be viewed in law as the managing director of the company and thus be liable as one. For a fuller picture of the responsibilities of a managing director make sure to visit our page “Managing Directors Rights and Obligations in Germany“.

The “straw man” managing director may suit a company to have in place for a number of reasons. Companies may have it in place in order to facilitate a less experienced managing director or because the “straw man” can act as a front for a person who may currently not be permitted to act as managing director. They may not be permitted for reasons concerning insolvency issues or other reasons. Alternatively, the “straw man” model may also be used in order to leave competitors guessing as regards what the company will do as they may not be aware of who is really making the big decisions.

When it comes to the designated “straw man”, it is quite often a spouse or someone close to the other person. Entering such an arrangement is risky for those concerned as it can leave the “straw man” in a situation where they are held liable for actions within the company that they did not know about. It can also be risky for the “real” managing director as the Money Laundering Act (“Geldwäschegesetz” – GwG) makes provision for a transparency register (§ 18 (Abschnitt 4) GwG) when it comes to these kinds of arrangements.

Fiduciary Services: Our Services

At Schlun & Elseven Attorneys, our team of corporate law professionals assists our clients when it comes to setting up fiduciary arrangements. With our help we can ensure that the legal side of these matters is taken of and thus ensure that your company does not come into conflict with the German legal authorities. Here are some of the services we offer to our clients in this field:

• Planning and drafting of trust agreements,
• Assessment of contractual and bureaucratic requirements,
• Advice on German Tax law,
• Support the directors on issues relating to German corporate law,
• Risk assessment,
• Counsel concerning requirements under the Transparency Register.

How we can help you in this matter will depend entirely on the facts of the matter at hand. Above listed is a non-exhaustive list and, therefore, should you find yourself in need of assistance on this issue it is better to contact us directly. We can be reached by using the contact form below with details about the issue at hand. Once we have the facts we can provide the specialised assistance needed.