Navigating company ownership with a nominee in Germany

Germany remains one of Europe’s leading economic powerhouses, attracting foreign investors and entrepreneurs looking to expand their global footprint. For those considering setting up a company in this jurisdiction, the concept of appointing a nominee director or shareholder, a practice known as fiduciary service, can offer practical benefits.

However, unlike other jurisdictions such as Dubai, which has adopted a more liberal approach to foreign ownership, German corporate law follows a strict legal framework that places specific emphasis on compliance, transparency, and the duties of company management. Understanding these requirements is essential for any international investor.

What is a nominee in the German business context?

In Germany, the use of nominee services generally falls under the concept of fiduciary services or Treuhänder. A fiduciary relationship is established through a trust agreement (Treuhandvereinbarung) where one party, the Treuhänder or nominee, holds a legal position for the benefit of the actual owner, the beneficiary.

This practice is primarily used for two key roles in a German company:

Nominee director (Nominaldirektor or managing director)
Nominee shareholder (Nominalgesellschafter or trustee shareholder)

It is important to note that while the arrangement is legally recognised, it does not mean the actual owner’s identity is entirely hidden from the authorities, a crucial point covered in the beneficial ownership section.

The role of a nominee director in a German GmbH

The most common legal form for foreign investors in Germany is the limited liability company, or GmbH (Gesellschaft mit beschränkter Haftung). The director of a GmbH, known as the Geschäftsführer, holds significant legal duties.

Key legal considerations

Compliance with the GmbH Act The appointment must comply with the German Limited Liability Company Act (GmbHG). Crucially, a nominee director has the same legal obligations and personal liability as any other Geschäftsführer. They are legally bound to act in the best interests of the company, not just on the instructions of the beneficial owner.
Primary location of management. While the director does not have to be a German resident, they must meet the legal requirements to manage the company’s affairs effectively, which is often interpreted as having the ability to represent the company in Germany regularly. This may require them to have a physical presence. For a non-resident director, appointing a German agent with a general power of attorney (Prokurist) is often recommended to ensure operational continuity and compliance.
Public registration The nominee director’s details are publicly listed in the commercial register. This fulfils the mandatory legal requirement for company representation.

Deep dive into German corporate and tax law

The crucial difference between nominee and beneficial ownership

German law clearly distinguishes between the person holding the legal title and the person holding the economic interest. The nominee or Treuhänder is the legal owner of record, registered in the commercial documents, and is the party responsible for fulfilling all corporate and regulatory duties.

However, the beneficial owner is the natural person who ultimately owns or controls the business, typically holding more than 25 per cent of the capital or voting rights. It is the beneficial owner who retains the right to receive dividends, profits and who ultimately controls strategic decisions, despite the nominee’s name appearing on the share register. This distinction is formalised through the private trust agreement, or Treuhandvertrag.

Impact of the Money Laundering Act on nominee services

The use of nominee services must be viewed through the lens of Germany’s strict anti-money laundering legislation, the Geldwäschegesetz (GwG). With the implementation of EU directives, the German Beneficial Ownership Register (Transparenzregister) has shifted from being a derived register to a full register.

This conversion eliminates previous exceptions and makes reporting mandatory for nearly all associations, including many corporate structures like the GmbH & Co. KG. Failure to report the ultimate beneficial owner to the Transparenzregister is considered a violation of the GwG and can result in significant financial penalties, which may exceed EUR 100,000 for non-compliance. This strong regulatory stance ensures that anonymity is not a reason for using nominee services; rather, the benefit is administrative convenience and effective local representation.

Tax implications of fiduciary arrangements

When using a nominee structure, the tax burden rests almost entirely on the beneficial owner, not the nominee. The Treuhänder generally acts as a transparent entity for tax purposes because they do not receive the economic income from the company.

Profits or dividends distributed to the beneficial owner are typically taxed in their country of residence, although this is subject to Germany’s network of Double Taxation Treaties (DTTs). These treaties are crucial for allocating taxing rights between Germany and the beneficial owner’s home country, ensuring income is not taxed twice.

Investors must be able to prove that they are the true beneficial recipients of the income to qualify for reduced withholding tax rates under a DTT. Therefore, careful tax planning is essential to ensure the arrangement achieves tax efficiency and complies with all international reporting standards.

Nominee shareholders and beneficial ownership

A nominee shareholder is legally registered as the owner of shares, but holds those shares under a private trust agreement for the benefit of the actual beneficial owner. This can offer a degree of transactional privacy, yet German law has strict transparency rules concerning true ownership.

**Beneficial ownership register (*Transparenzregister***)

Germany’s anti-money laundering legislation is aligned with EU directives and requires stringent identification of beneficial owners. Any natural person who ultimately owns or controls more than 25 per cent of the capital stock, controls more than 25 per cent of the voting rights, or exercises comparable control, must be registered in the Beneficial Ownership Register (Transparenzregister).

Therefore, while a nominee shareholder’s name is listed in the commercial register’s list of shareholders, the identity of the beneficial owner must still be disclosed to and registered with the Transparenzregister, which is accessible to competent authorities and, in some cases, the public. Details on the legal framework can be found at the German Federal Financial Supervisory Authority (BaFin).

Advantages of using a nominee service in Germany

For foreign investors, a fiduciary arrangement can be a powerful tool to facilitate market entry and maintain privacy over strategic commercial decisions.

Local representation and credibility

Hiring a local nominee director who understands German corporate and tax law ensures the company is compliant from day one. Their local presence can significantly aid in banking relationships, contract negotiations, and building credibility with local partners and authorities. This local expertise can reduce administrative burden, particularly for investors based outside the European Union who may also be exploring options like offshore banking or a business setup in other global hubs like Dubai.

Business continuity and efficiency

For businesses looking to begin operations quickly, using a nominee director provides instant fulfilment of the legal requirement for management. This is especially helpful if the ultimate beneficial owner is frequently travelling or is based far away.

Practical implementation and risk mitigation

Navigating the German corporate landscape requires meticulous execution, especially when incorporating a nominee arrangement. The process is procedural and relies heavily on professional legal and notary support.

The step-by-step process of appointing a fiduciary

The appointment process is formal and sequential, starting with comprehensive due diligence. The steps typically include:

Selection and Due Diligence: The investor must select a trustworthy corporate service provider or individual to act as the Treuhänder. This person must meet the legal requirements to serve as a Geschäftsführer under German law.
Drafting the Treuhandvertrag: A specialist in German corporate law must draft the trust agreement. This document legally establishes the terms of the fiduciary relationship, defining the nominee’s limited authority and the beneficial owner’s control.
Notarial Certification: The Treuhandvertrag and the deed of incorporation (including the nominee director’s appointment) must be notarised by a German notary public. The notarisation guarantees the legality and accuracy of the documents before they are submitted for registration.
Commercial Register Registration: The company is registered with the commercial register (Handelsregister), publicly listing the nominee director and shareholder (if applicable) as the legal representatives.
Beneficial Owner Registration: Crucially, the beneficial owner’s details are submitted to the Transparenzregister, completing the transparency requirement as dictated by the GwG.

Mitigating legal and financial risk

While using a nominee offers benefits, the fiduciary relationship carries risks that must be addressed contractually. The primary mitigation tool is a robust Treuhandvertrag.

This contract must include clear termination clauses, ensuring the beneficial owner can remove the nominee quickly should disputes arise or if the nominee fails to follow instructions (within the limits of their legal duties to the company). Furthermore, it is wise for the corporate service provider to carry professional indemnity insurance, which offers protection against professional negligence. By engaging only highly reputed German law firms, investors minimise the risk of disputes and ensure the contract provisions are fully enforceable under German corporate law.

Nominee service costs and transparency

The fees associated with establishing and maintaining a nominee structure in Germany are generally higher than purely administrative services, reflecting the high professional liability and fiduciary duty involved. Costs typically comprise an initial legal fee for drafting the Treuhandvertrag, plus ongoing annual fees for the nominee director and nominee shareholder services.

The cost can vary significantly, ranging from a few thousand Euros annually for a basic service to substantially more for complex arrangements or where the director takes on a Prokurist (general power of attorney) role. Investors must always prioritise quality and proven compliance over cost savings, especially given the severe financial penalties associated with violations of the Geldwäschegesetz.

Comparative context: Germany versus global hubs

For the international investor, choosing between Germany’s strict regulatory environment and more flexible global jurisdictions often depends on strategic goals. Germany offers unparalleled economic stability and market access, while centres like Dubai offer greater flexibility and tax neutrality.

Germany’s nominee structure compared to the UAE

The purpose of a nominee structure differs fundamentally in Germany compared to the historical requirements of the UAE. Until recently, a nominee structure (local sponsorship) in the UAE was a mandatory requirement for mainland companies, designed to fulfil local ownership quotas (51 per cent).

Following the reforms allowing 100 per cent foreign ownership in most eligible UAE sectors, this mandatory requirement is largely eliminated, making business setup Dubai simpler. In contrast, Germany’s nominee structure is purely a mechanism for administrative compliance and professional representation. It provides representation without circumventing the requirement for full beneficial ownership disclosure, reflecting Germany’s commitment to international financial transparency standards.

Strategic considerations for global investors

When deciding on a corporate base, investors managing international assets must consider which jurisdiction best supports their long-term growth and compliance needs.

Market Access vs. Autonomy: Germany provides direct entry to the largest economy in Europe, but with stringent local governance. The UAE, conversely, offers full ownership autonomy and is an ideal hub for tax-efficient international trade and relocate to Dubai initiatives.
Compliance Certainty: German law is complex but highly predictable, offering assurance to major institutions. The UAE provides rapid setup and specialised Free Zones, but ongoing compliance requires expert navigation of dual jurisdiction rules (Mainland and Free Zone).

Specialised industry focus: finance and crypto

For financial technology and high-risk industries, the regulatory environment is paramount. Setting up a company to offer financial services or offshore banking is vastly different in the two regions.

In Germany, financial service providers must obtain comprehensive licensing from the BaFin, a complex and lengthy process often requiring a locally based director with specific expertise to satisfy regulatory requirements.

In the UAE, specialised zones like the Dubai World Trade Centre (DWTC) or the DIFC/ADGM offer tailored regulations for obtaining a VARA crypto license. This specific process for securing a crypto license UAE offers a more streamlined path for focused fintech ventures compared to the comprehensive banking requirements in Germany. A German nominee director, therefore, becomes essential not for ownership, but for fulfilling the strict local oversight demands of the BaFin.

The importance of a clear trust agreement

Any arrangement involving a nominee director or shareholder must be formally governed by a comprehensive trust agreement (Treuhandvertrag). This agreement is a private contract that must clearly outline the following:

The limited scope of the nominee’s authority
The terms of their service and remuneration
The duties and obligations owed to the beneficial owner
Specific instructions on how the nominee should exercise their voting rights or management power

This contract must be drafted by a legal professional experienced in German commercial law. The tax authorities must also be informed of the existence of the fiduciary arrangement. You can consult resources from the OECD on German legal structures for a broader context.

Conclusion for the international entrepreneur

Germany offers a stable, well-regulated environment for business expansion, but it prioritises transparency and robust management duties. While nominee services for both directors and shareholders are legally recognised and offer administrative convenience and a layer of privacy for legal shareholding, they do not circumvent the mandate to register the beneficial owner with the Transparenzregister.

For international investors managing a diverse asset portfolio, from a VARA crypto license in the UAE to European expansion, leveraging experienced German fiduciary services can ensure your operations remain legally compliant while you focus on your wider strategy of market growth or potential relocation. For more information on international business standards, resources like the International Monetary Fund (IMF) offer detailed reports on global financial transparency.