Partner
Attorney at Law (Germany)
M&A Vocabulary – Understanding the experts: “Holder Control”
In this ongoing series, rotating M&A experts from Rödl’s offices around the world introduce an important term from the English technical language of the transaction business, along with notes on its usage. This is not about academic-legal precision, linguistic nuances, or an exhaustive presentation, but about conveying or refreshing a basic understanding of a term and providing some useful tips from consulting practice.
Holder Control (German: Inhaberkontrolle) refers to notification obligations to the Federal Financial Supervisory Authority (BaFin) and the Deutsche Bundesbank for individuals and companies intending to acquire a significant holding in a credit institution, financial services institution, insurance company, pension fund, or certain insurance holding companies. These notification obligations arise from Section 2c of the German Banking Act (KWG) and Section 17 of the German Insurance Supervision Act (VAG). These obligations are specified in BaFin’s so-called Holder Control Ordinance (Ordinance on notifications pursuant to Section 2c of the German Banking Act and Section 17 of the German Insurance Supervision Act).
Anyone intending to acquire a significant/qualifying holding in an investment firm or to increase an existing holding must, when submitting notifications pursuant to Section 24(1) of the Investment Firms Act (WpIG), comply with Delegated Regulation (EU) 2017/1946.
The Holder Control Ordinance was adapted to the amendments to the KWG and VAG as of December 28, 2022. An updated version of BaFin’s guidance note of November 27, 2015, which still refers to the old Holder Control Ordinance, is expected soon.
Addressees
Holder Control covers, on the one hand, companies as potential acquirers that are outside the financial sector. On the other hand, in addition to direct holdings in credit institutions, financial services institutions, insurance companies, pension funds, or certain insurance holding companies, it also covers the acquisition of shares in companies outside the financial sector where this nevertheless results in an indirect acquisition of a target company under the Holder Control Ordinance.
A key feature triggering notification obligations is the acquisition of a significant holding. A significant holding exists if 10% of the capital or voting rights are held, or if a significant influence can be exercised over the management of the bank or financial services provider. In addition, certain increases in existing significant holdings must be reported. Notification obligations also arise if the acquisition is not planned but occurs, for example, through universal succession as a result of an inheritance.
Holder control procedure
The holder control procedure is initiated by submitting the holding notification. Companies or individuals required to make such a notification must, among other things, provide information on the reason for the notification, the type of company in which they hold shares, and details of the percentage of their holding in the company’s total nominal capital.
The following criteria are then used to review all potential acquirers:
- Reliability of the prospective acquirer
- Reliability and professional suitability of the institution’s future managers
- Financial soundness of the prospective acquirer
- Whether the institution will continue to be able to meet the relevant supervisory requirements
- Whether the intended acquisition is connected with money laundering or terrorist financing
BaFin then makes its decision and may prohibit the acquisition or the increase of the holding if the documents submitted are incomplete or incorrect, do not meet the requirements of the Holder Control Ordinance, or if facts justify the assumption that the statutory review criteria listed above are not met.
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