The Department for Business, Energy and Industrial Strategy has published draft legislation for its proposed new “overseas entity beneficial ownership” (or “OEBO”) regime.

In 2016, the Government announced that it was proposing to create a new regime, to be operative from 2021, to require non-UK legal entities to file details of their beneficial owners in a publicly available register if they intend to acquire or hold land, or participate in a public tender, in the UK.

In April 2017, it published a formal call for evidence on the proposed OEBO regime, and in March 2018 it published its formal response.

The draft Registration of Overseas Entities Bill published this week covers only the real estate elements of the OEBO regime. The Government has said that it intends to deal with the public procurement aspects of the OEBO regime in due course.

The purpose of the regime is, in short, to combat the use of UK real estate for money laundering.

The Bill applies differently in England and Wales, Northern Ireland and Scotland, due to the three jurisdictions’ differing regimes for registering ownership of land. The proposed regime is modelled substantially on the UK’s existing regime for registering details of persons with significant control over companies and other entities (the “PSC regime”).

In relation to England and Wales, the OEBO regime would work as follows:

  • The regime applies to ownership of freehold land, or a lease for more than seven years over land, in England and Wales (which the Bill calls a “qualifying estate”).
  • An overseas entity would not be able to acquire a qualifying estate unless it first registers details of its beneficial owners with Companies House.
  • If an overseas entity already holds a qualifying estate when the Bill becomes law, it will have 18 months to register or to dispose of the estate. Failure to do either will be a criminal offence.
  • In addition, an overseas entity would not be able to sell, grant a lease for more than seven years or grant security over a qualifying estate without first registering.
  • To register, an overseas entity would need to provide details about itself and each of its beneficial owners.
  • If the entity does not have any beneficial owners, or to the extent it cannot identify them or provide their details, it would instead need to provide details of its managing officers.
  • The details to be provided broadly mirror those for persons with significant control (PSCs) under the PSC regime. For an individual, these are the person’s name, date of birth, nationality, usual residential address and service address, and the nature of their beneficial ownership.
  • The information would need to be updated annually, although an entity would be able to update it more frequently if it wanted to. Failure to update the information would be a criminal offence.
  • The conditions for being a “beneficial owner” of an overseas entity mirror those for being a PSC under the PSC regime. They are:
    • Holding (directly or indirectly) more than 25% of the entity’s share capital
    • Holding (directly or indirectly) more than 25% of the entity’s voting rights
    • Holding (directly or indirectly) the right to appoint or remove a majority of the entity’s directors
    • Exercising, or having the right to exercise, significant influence or control over the entity
    • Broadly, having significant influence or control over a trust or unincorporated entity that satisfies one of those conditions
  • The Bill also contains the same “anti-avoidance provisions” as the PSC regime.
  • Entities would have powers similar to those under the PSC regime to send information notices to suspected beneficial owners, or people who may know the identity of beneficial owners.
  • The register would be available to the public, although certain details of individuals (their residential address and the “day element” of their date of birth) would not be disclosed.

The Government has requested comments on the draft legislation by 17 September 2018.