The 2007 Reform of the German Disclosure System for Company Data (Die neue Unternehmenspublizität nach EHUG und TUG)

Abstract

German law requires both private and public companies to disclose a far-ranging set of information to shareholders, creditors, other market participants and the public. The information that must be disclosed under these rules is more extensive in scale and scope than those provided by data storage and retrieval systems that merely focus on public corporations and the needs of the capital markets (such as the U.S. Edgar system). However, previously to the recent reforms, two significant weaknesses of the German disclosure system were widely discussed among corporate scholars: First, the lack of efficient enforcement vis-a-vis private companies, and secondly, the fragmentation of the system. In particular, German companies needed to distribute corporate information through a plethora of methods, including newspapers, the website of the corporation and those of stock exchanges, the Federal Bulletin and others. The German legislature sought to fix these problems with two major legislative projects: The Law regarding the Electronic Commercial and Company Registrar (which came into force 1 January 2007), and the Law implementing the Transparency Directive (which came into force 20 January 2007). Under these reforms, the newly established Federal Justice Agency enforces the disclosure obligations. In addition, the legislature provided a significant overhaul to the methods of, and the channels through, which companies need to utilize in order to fulfill their disclosure obligations.

This paper introduces into the most significant amendments that were achieved by the aforementioned pieces of legislation. In particular, it describes in which way the German legislature established a one-stop-shop option for the retrieval of all company data that German companies must disclose both under corporate and securities law. However, the delivery of company data by the issuers to the company register is still complicated. While the overall situation has improved significantly when compared to the status ex ante, companies still need to simultaneously distribute the relevant information through several channels. The several-stop-delivery concept is more costly to issuers than a one-stop-delivery system whose entry-gate is an officially administered, or supervised, website. It was the intention of the German Federal Secretary of Justice to implement such a one-stop-delivery-system for both corporate and securities law-based information. However, the European rules of, and implementing, the Transparency Directive require a concept of intermediary-based dissemination for certain securities law-based information. Under this concept, issuers must forward their disclosures to informational intermediaries before they may disclose them in any other way. Disclosure in any other way includes storage in, and access through, an officially administered information storage and retrieval system. This intermediary-based approach mandated by European law exhibits two significant flaws. First: European law does neither define the intermediaries. Secondly, European law does not require the intermediaries to publish the information sent to them by the issuers. Thus, transparency is a random effect. Moreover, internet-based technologies (such as RSS-feed, etc.) render an intermediary-based concept for the dissemination of information useless. This paper argues in favour of reforms to the European rules on the dissemination of information.

Note: Downloadable Document in German.

Keywords: EHUG, TUG, Company Register, information, disclosure, transparency

JEL Classification: G30, K00, K22