Early signals suggest the UK will be the first nation in the world to keep a register of the beneficial ownership of overseas companies.
Piggybacking on the requirement for UK companies to keep a public Register of People with Significant Control over the company, which became mandatory on 6 April 2016, the Department for Business, Energy & Industrial Strategy (BEIS) has made a call for evidence on a register showing who owns and controls overseas legal entities that that own UK property, are considering buying UK property or participate in UK government procurement.
This is part of a wider government strategy to improve the transparency of company ownership, to identify beneficial owners and understand who controls corporate entities. As the UK property market attracts significant investment from overseas, the government hopes that by increasing transparency, investor confidence in the UK will grow. One reason for this is that will be able to be more confident in who is behind overseas investor companies and the source of funds.
The call, published on 5 April 2017, has seven key proposals. The BEIS will accept responses up to 15 May 2017. The seven proposals are:
- All overseas legal entities that can hold property, or will hold UK property or that can or will bid government procurement contracts will be required to disclose who the beneficial owner is with significant control.
- The rules for identifying beneficial owners will be similar to the PSC regime; companies will be required to take reasonable steps and make the information will be available on a public register. There will be criminal sanctions for failure to comply.
- If a company is purchasing a property, the company will need to obtain a registration number from Companies House, which it will only get if it has provided satisfactory information. Otherwise, it will not be possible to register title at the Land Registry. Registration of title to property will not be possible without that number. Conversely, companies that that already own UK property be given 12 months to obtain a registration number, otherwise a restriction preventing the sale, leasing or charge of property will be put on the title register, effectively locking out the property owners from dealing with the property until they have obtained the registration number.
- The proposals will also apply to long leases with an initial term of at least 21 years.
- The information will be updated every 2 years.
- As overseas companies may own properties that are the residential address of the beneficial owners, a more stringent confidentiality regime is proposed than the current PSC regime to prevent associations between individuals and their properties.
- Lenders should be able to enforce security over property, even where an overseas company has not complied with the regulations.
The government document is available here.