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Atsumi & Sakai
ATSUMI & SAKAITOKYO | LONDON | FRANKFURT
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Newsletter from our FRANKFURT OFFICE (Tokyo - Frankfurt): Atsumi Sakai Janssen Rechtsanwaltsgesellschaft mbH
Atsumi & Sakai is a multi-award-winning, independent Tokyo law firm with offices in London and Frankfurt.
Expanding from its highly-regarded finance practice, the firm now acts for a wide range of international and domestic companies,
banks, financial institutions and other businesses.
The firm operates as a foreign law joint venture, combining a comprehensive Japanese-law and German-law practice consisting ofa team of highly experienced Japanese, German and other foreign lawyers.
The Frankfurt office advises its clients in Japanese, English or German both in German and European law.

‘Brexit’ Impact on Financial Institutions

Relocating to Germany, Part 2: Corporate & Licensing Considerations| Page 1/3 |February 2018 No.FRT_002

In the first of this series of notes on the possible effects of Brexit
on financial institutions in the UK and how they can relocate
operations to Germany, we considered the EU financial passportand reactions of the market; in this note we look at the choiceof an entity and the need to obtain a license[1].

Choice of Entity
If a bank or financial institution established wishes to establish an
operating presence in Germany to conduct a banking[2], financial
services[3] or payments services[4] business (together below, “banking,etc. business” ), it may only do so through a subsidiary incorporated
in Germany or a branch office.

A. Subsidiary

B. Branch
Sect. 53 of the German Banking Act (Kreditwesengesetz – KWG)[5] lays
out the requirements for the establishment of a branch office in Germany.
At least two natural persons residing in Germany have to be appointed
as managers of the branch office. The branch is obliged to keep separatebooks and render separate accounts to the Federal Financial Supervisory
Authority (Bundesanstalt für Finanzdienstleitungsaufsicht – BaFin)
and the Deutsche Bundesbank in respect of the business it conducts
and its assets used in its business.
Under the EU Banking Directive 2006/48/EC, establishment of abranch office for financial institutions of EEA member states is easierthan for those from non-EEA member states. They will, in principle,
not require a BaFin license (see 2. Below) since supervision of theiractivities is the responsibility of the home state’ s authorities.
They will, however, be required to comply with local (i.e. German inthis case) regulatory reporting and liquidity requirements of the member
state where the branch is established.

Almost all German companies are limited liability companies(Gesellschaft mit beschränkter Haftung – GmbH) or stock companies(Aktiengesellschaft – AG):
・The AG is a publicly held company comparable to the Public Limited
Company (plc) in the United Kingdom. The legal bodies of the AG
are the shareholders’ meeting, the supervisory board and theexecutive board. An AG must have a paid-up capital of at least EUR
50,000 and at least one director heading its executive board, though
an AG with a share capital of more than EUR 3 million must haveat least two directors if an exemption from the requirement has notbeen included in its constitution. There are, in principle, norestrictions on the nationality or place of residence for membersof the executive board.
The shares of an AG may be publicly traded on a stock exchange.
・The GmbH is a privately held company comparable to the Limited
Company (Ltd) in the United Kingdom. A GmbH must have apaid-up capital of at least EUR 25,000, and at least one managing
director and one shareholder. The managing director does not haveto be a German citizen nor reside in Germany. A GmbH hasshareholders’ meetings, and may choose to have a supervisory board.
Shares in a GmbH cannot be traded on a stock exchange.
The main difference between these two forms of company is that theshares in an AG can be publicly traded, whilst those of a GmbH cannot
be. A GmbH is also simpler to establish and manage than an AG, andis therefore the most common and appropriate legal form used by
EU/EEA-based financial institutions when establishing operationsin Germany; a GmbH can later change its form to an AG.

Licensed Required forBanks & Financial Institutions
A. Types of Licenses
Sect. 32 (1) KWG requires that anyone wishing to conduct a banking
business or to provide financial services in Germany commerciallyor on a scale which requires commercially organized business operations
needs written authorization from the BaFin.
i. Banking BusinessBanking business is defined in Sect. 1 (1) KWG; it includes theacceptance of funds (deposit-taking activities), the granting ofloans (lending activities), and the purchase and sale of financialinstruments (prime brokerage services).
ii. Financial Services
Financial services are defined in Sect. 1 (1a) KWG, and include
investment brokerage, the purchase and sale of financial instrumentsfor others (contract brokerage), and portfolio management.
iii. Commercially Organized BusinessThe commercial conduct of a banking or financial services business
requires a license. Conduct qualifies as commercial if the activity
is to be undertaken for a certain length of time and with a view toa profit. Business volume, however, does not influence the license
requirement, so even ‘small’ banks need a license.

ATSUMI & SAKAITOKYO | LONDON | FRANKFURT
www.aplaw.jp/en| Page 2/3 |February 2018 No.FRT_002

Normally, the BaFin will issue a single license covering the commercial
conduct of a banking or financial services business. However, underSect. 32 (2) KWG, the BaFin may issue a license with limited scope
covering only specific forms of banking and/or financial services, andwith specific requirements or restrictions.
A BaFin license is also required under the Payment Services Supervision
Act (Zahlungsdiensteaufsichtsgesetz – ZAG)[6] for the commercial
provision of payment services (Sect. 10 KWG) or electronic money
issuance (Sect. 11 KWG).

B. Licensing Procedures
The authorization procedure for a banking business, etc. license islaid out in Sect. 32-38 KWG. The application to the BaFin requires asignificant amount of information, such as suitable evidence of sufficient
resources for business operations, names of senior managers, andinformation sufficient to assess their trustworthiness, etc. (Sect. 32(1) KWG). The application and accompanying documents usually
have to be submitted in German or with an officially certified translation.
However, if the application and documents can be provided in English,
BaFin may waive this requirement in individual cases.
The initial minimum capital requirement of the applicant company
is laid out in Sect. 33 KWG and depends on the nature of the planned
business activity (for example EUR 50,000 for a banking license forinvestment advice (Sect. 33 I.a. KWG) and EUR 730,000 for securities
trading banks).
At least two professional and reliable managing directors have to beappointed to the applicant company, and its management needs to bedeemed trustworthy and professionally qualified to run the institution.
・A manager is deemed trustworthy unless any facts to the contrary
are found. Such facts may include a criminal record or known priorbreaches of rules or regulations.
・A manager is deemed professionally qualified if they can prove they
have significant relevant theoretical and practical knowledge, as well
Bas experience in managing a similar business. Each manager has
to submit a curriculum vitae laying out his experience to the BaFin.
In the manager has a track record of at least three years of managerial
experience at a comparable licensed institution (at least one year ofwhich must be in Germany), such relevant experience will be assumed.
・At least one of the managers has to be fluent in German.

The application has to include a sustainable business plan, laying out the:・Type of business・Budget, including profit and loss calculations for the first threebusiness years
・Organizational structure
・Internal control mechanisms
The newly set-up institution must also join an organization set up by
German banking groups in order to provide security for investors in theevent of a member institution’ s insolvency (Einlagensicherungsfonds)[7] .
It takes between 6 months and one year for the application to beprocessed, the fees charged by BaFin usually varying between EUR
2,000 and EUR 200,000; both depend mainly on the range of services
the applicant intends to provide.
The application process, etc. for the grant of a payment services license
is similar to that under Sect. 32 KWG for a banking/financial services
license, and that for the grant of either type of license to a branch issimilar to that for a company.
---[1] The next note will address labour law matters.
[2] See 2.A.i. below[3] See 2.A.ii. below[4] The provision of payment services or electronic money issuance (Sect. 10& 11, respectively, Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz)[5] English Translation available:
https://www.bafin.de/SharedDocs/Downloads/EN/Aufsichtsrecht/dl_kwg_en.pdf;jsessionid=E8DF59D9B4B30BCAEA028EFA888869BD.1_cid290?__
blob=publicationFile&v=3[6] English Translation available:
https://www.bafin.de/SharedDocs/Downloads/EN/Aufsichtsrecht/dl_zag_en.pdf?__blob=publicationFile&v=3[7] Sect. 32 (3, 3a) KWG in conjunction with Sect. 2 of the Deposit Guarantee andInvestor Compensation Act (Einlagensicherungs- und Anlegerentschädigungsgesetz)

Frankfurt

LondonATSUMI & SAKAITOKYO | LONDON | FRANKFURT
www.aplaw.jp/en| Page 3/3 |February 2018 No.FRT_002

Author(s) / Contacts
Atsumi Sakai Janssen Rechtsanwaltsgesellschaft mbH*

Atsumi & Sakai (Tokyo Head Office)Frank Becker

Takafumi Uematsu

Admitted in the Federal Republicof Germany**

Admitted in Japan (2004)
and California (2010)> View Profile
E-mail:frank.becker@asj-law.jp> View Profile
E-mail:takafumi.uematsu@aplaw.jp

Before opening the Frankfurt office, Frank Becker was one of thefounding partners of the Munich office of a major US law firm andan associate in a Magic Circle firm.
He leads the Frankfurt office and has extensive experience in M&A
transactions and joint ventures.
He studied law in Japan for a year and advises Japanese clientsin connection with German law related matters, with a focus ontransactional, corporate and compliance matters.

Takafumi Uematsu previously worked as a secondee at the Frankfurt
office of Norton Rose, and since then has been involved in EU-relatedmatters, such as EU financial regulations, antitrust, and data protection
matters.
He has experience in cross-border matters between Japan and the EU.
He has extensive experience in securitizations and M&A transactions.
He manages the Tokyo-based German desk.

Atsumi Sakai Janssen Rechtsanwaltsgesellschaft mbH*

Atsumi Sakai Janssen Rechtsanwaltsgesellschaft mbH*

Dr. Pascal Soepper

Daisuke Tsuzuki

Admitted in the Federal Republicof Germany**

Admitted in Japan (2007)> View Profile
E-mail:pascal.soepper@asj-law.jp> View Profile
E-mail:daisuke.tsuzuki@aplaw.jp

After serving as Assistant Professor at Niigata University for a termof 3 years, Pascal Soepper joined Atsumi Sakai Janssen in 2016
and recently relocated to Frankfurt.
He works in the field of general contract and corporate law, as wellas IT Law and FinTech, with a particular emphasis on crowdfunding.

Daisuke Tsuzuki is a Japanese lawyer (Bengoshi); he was admitted
in 2007 and joined Atsumi & Partners (now Atsumi & Sakai) that year.
He advises mainly on M&A, Corporate Restructuring, CapitalMarkets, Joint Ventures, and Financial Laws and Regulations.
After secondment to leading Japanese security companies, he joined
ASJ Frankfurt in 2017. He speaks Japanese and English.
* A German legal professional corporation** Not Registered as a Foreign Lawyer and not practicing law in Japan

Location (Frankfurt Office)Contact

Atsumi Sakai Janssen Rechtsanwaltsgesellschaft mbH
Taunusanlage 21, 60325 Frankfurt am Main, Germany

Europe Practice Team (Atsumi & Sakai)
E-mail: info_frankfurt@aplaw.jp--Atsumi & Sakai newsletters are prepared by Japanese lawyers (Bengoshi) and are provided as a general guide only; they do not constitute, and should not be relied on as constituting legal advice.
Please see notice 2. below regarding any subsequent Japanese law advice.
NOTICES
1. ABOUT ATSUMI & SAKAI
Our ﬁrm’ s name is Atsumi Sakai Horitsu Jimusho Gaikokuho Kyodo Jigyo; we are a partnership organized in accordance with the Japanese Civil Code, and a foreign law joint enterprise regulated by the Bengoshi Law, the Law on Special
Measures concerning the Handling of Legal Services by Foreign Lawyers and regulations of the Nichibenren (Japan Federation of Bar Associations) and bar associations to which our lawyers belong. We are authorised in Japan to adviseon the laws of Japan, England & Wales, Germany (in association with Janssen Foreign Law Oﬃce), India, the PRC, the U.S. States of New York and California, United States federal law, the States of Queensland and Victoria (Australia)
and Australian Federal law. For further information, please see our website, www.aplaw.jp.
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Advice on Japanese law will be provided under the supervision and authority of a Bengoshi (Japanese lawyer) Partner or Partners, as identiﬁed to you above and/or in correspondence. We will not be liable for any comments or views onJapanese law made by any member of our ﬁrm other than a Bengoshi; any such comments or views do not constitute advice on Japanese law and you act on them at your own risk.
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Advice on any foreign law referred to above will be provided under the supervision and authority of a Registered Foreign Lawyer registered to advise on that law in Japan, as identiﬁed to you above and/or in correspondence. We will not
be liable for any comments or views on such a foreign law made by any member of our ﬁrm other than a Registered Foreign Lawyer as referred to in this paragraph; any such comments or views do not constitute advice on that
foreign law and you act on them at your own risk.
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© Atsumi & Sakai 2018