Overseas entities may have to provide details of their beneficial ownership for a public register at Companies House in order to acquire or dispose of UK real estate or bid for government contracts.
As part of ongoing efforts against money laundering, on 5 April the Department of Business, Energy and Industrial Strategy issued a consultation on introducing a register of beneficial ownership for any overseas entities owning UK land or bidding for UK government contracts. The consultation closed on 15 May 2017. It would be similar to the PSC register (persons with significant control) for UK companies and LLPs introduced on 6 April 2016 – see our website briefing – with the objective of preventing the purchase of UK land as a means of laundering the proceeds of crime.
What measures does the consultation propose?
If the proposals are implemented as set out in the consultation, overseas entities would need to supply information as to their beneficial ownership to Companies House and get a registration number. That information would include details of those individuals or bodies who – directly or indirectly – hold more than 25% voting rights, have the power to remove a majority of the board or otherwise exercise significant control over the entity.
Without registration they will not be registered at the Land Registry as the owner of any major interest in UK land or entitled to bid for central government contracts to which the procurement rules apply. Of concern is the suggestion that overseas entities who already own UK real estate, whether freehold or on a lease for over 21 years, will have 12 months either to dispose of it or to supply the information and get a registration number, failing which the Land Registry will place a restriction on their title preventing them from charging the property, letting for more than 21 years or selling it until they comply.
What are the implications of a Beneficial Ownership Register?
Anyone proposing to buy, sell or let property to or from an overseas entity needs to be aware of the proposal that a lease, charge or transfer made with an overseas entity will be void if that entity does not have a valid registration at the date of the transfer. As the consultation also proposes that there will be an obligation to update the register every two years, the overseas party could be compliant at the date of the contract but no longer compliant when the contract is later completed if it overlooks the updating requirement.
The regime will be backed up with potential criminal penalties for failing to update or for supplying false information. We are aware that some of those who responded to the consultation, while in full agreement with the policy objectives, have serious concerns about how the proposals would work in practice and their potential to deter, delay or otherwise complicate legitimate transactions.
We await the government's decision on how to take the policy forward in the light of these responses to the consultation. Given the uncertain political situation, it is not currently possible to guess when – or what version of – these proposals may become law.