Draft Bill Provides for Financial Reporting in English - International Law Office

International Law Office

Company & Commercial - Germany

Draft Bill Provides for Financial Reporting in English

March 26 2001


The Federal Ministry of Justice's ministerial draft bill of December 21 2000 on the Euro Balance Sheet Act provides some relief from the legal obligation to disclose results for foreign companies' branch offices, and increases the threshold values pursuant to the Act on Accounts Disclosed by Certain Companies and Groups of August 15 1969.

In order to facilitate disclosure, the branch offices of foreign corporations or credit institutions with operations in several countries are to be allowed to submit their annual financial statements and annual reports, as well as their consolidated accounts and group business reports, to the Commercial Registry in English, unless German is the official language at the head office's location. The Federal Ministry of Justice has decided to make this proposal as English is already recognized as a medium for informing the public in German capital market law (eg, securities sales prospectuses and stock exchange admission prospectuses may be distributed in English, as may ad hoc notices and interim reports of foreign companies).

In addition, the expensive obligation of the branch offices of foreign corporations and credit institutions to publish results in the Federal Gazette is to be restricted. Until now, branch offices have been obliged to publish results if the parent company has a minimum turnover of €200 million. In future, this shall apply only if the branch office has a minimum turnover of €200 million. If the branch office's turnover is lower than this threshold, then submission of the relevant documentation to the Commercial Registry will suffice. As the registry court will have to examine whether the requirements for this relief have been met, it will be advisable to give details about the branch office's balance sheet total which are usually not indicated in the head office's documentation. Both kinds of relief are to apply for the first time with regard to the annual financial statements for the fiscal year 2000, as long as the draft bill is enacted before the end of 2001. However, as the discussion is not yet closed, banking associations have proposed to grant further retroactive effect as to the fiscal year 1995. Although the ministry did not dismiss this proposal out of hand, it seems ready to agree to it only as long as the delay is not the corporation's fault.

Further, following the inclusion of corporations in the Act on New Disclosure Obligations for Corporations and Certain Commercial Partnerships of March 9 2000, the provisions regarding the preparation and auditing of company and consolidated accounts in the Accounts Disclosure Act of 1969 are now of relevance only for very large sole traders and certain partnerships. Besides the change to euro amounts, the threshold values at which the Accounts Disclosure Act applies are to be raised by approximately 25%, from Dm125 million to €80 million for companies and from Dm250 million to €160 million for groups. The ministry expects that around 20% to 25% fewer companies will be obliged to disclose their results pursuant to the Accounts Disclosure Act following this amendment. The higher threshold values are to apply for the first time with regard to annual financial statements, business reports and consolidated accounts for the fiscal year 2002.

In addition, the amounts given in Deutschmarks in the Commercial Code's provisions on balance sheet law are to be changed to euro amounts. The delimitation amounts between small, medium-sized and large companies, which are of relevance for accounting pursuant to the Commercial Code, have already been increased by approximately 25% within the framework of the Act on New Disclosure Obligations for Corporations and Certain Commercial Partnerships. The delimitation amount for consolidated accounts has also been reduced considerably.


For further information on this topic please contact Roman Bärwaldt at Clifford Chance Pünder by telephone (+49 30 254 65 800) or by fax (+49 30 254 66 900) or by e-mail (roman.baerwaldt@cliffordchance.com).


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