The government is planning to create a public register of overseas companies and other legal entities that own property in the UK.
The register, which will be open to the public, will show the beneficial owners of property controlled by overseas companies and other legal entities. The government expects it to strengthen the UK's position as a world leader in corporate transparency and anti-corruption. Overseas entities that wish to take part in central government procurement exercises will also be required to register.
The proposal for such a register was first made last year. Last week the government launched a call for evidence, asking overseas investors and property experts for their views on how this register could be delivered. Responses have to be made by Monday 15 May 2017. A link to the government's document is set out at the end of this article
Details of the new register
The new register will be held at Companies House. It will be similar to the register of beneficial ownership called the people with significant control register (the PSC register) that already applies to UK companies. All companies incorporated in the UK must give information about people with significant control to Companies House with their annual confirmation statement.
The government had initially intended the new register to apply only to companies limited by shares. However, there is a concern that this could encourage the use of other less transparent entities as a means of owning property in the UK. Accordingly the proposal is now to include all legal entities that can hold properties or bid on central government procurement contracts in the scope of the new register's requirements.
The proposal is that the same tests should apply in relation to 'significant control' as apply to the PSC register for UK companies. These are persons who hold more than 25% of the shares in the company or more than 25% of the voting rights in the company (whether directly or indirectly in each case), hold the power to appoint or remove a majority of the board of directors of the company or otherwise have the right to exercise or actually exercise significant influence or control over the company, or any other relevant entity.
There would be an obligation to keep the register up to date at least every two years.
Entities holding property in the UK
The government intends to ensure that overseas entities will not be able to buy or sell property in the UK unless they have provided information about their beneficial owners for the new register. They will need to register their beneficial ownership information with Companies House, following which they will be allocated a registration number. Without this number, they will not be able to register the acquisition of property at the Land Registry. As an anti-avoidance measure, the consultation document suggests that an overseas entity should not receive even a beneficial interest in the property where it has not complied with the statutory requirements relating to registration. How this could work is still to be 'explored'.
Entities that already own property will be given a transitional year in which they will be free to choose whether to disclose the information or dispose of their property.
It is proposed that the new arrangements will apply to both freehold land and leasehold land where the lease is for a term exceeding 21 years.
There are three options for how the scheme will operate for entities involved in government procurement.
The three proposals are:
- Requiring the preferred supplier to provide its beneficial ownership information as a condition of being awarded the contract.
- Excluding bids from entities that have not provided beneficial ownership information. (Under procurement rules this could result in a three year exclusion from bidding for that contracting authority's contracts.)
- Treating bids without specified beneficial ownership information as incomplete or non-compliant and rejecting them on these grounds. (This exclusion would apply only to the procurement exercise in question and would not result in a three year exclusion.)
Views on these three options are invited.
The consultation document suggests that a restriction should be placed on the land register to prevent a disposition where an overseas entity has not complied with its obligations.
However, the government is also considering making it an offence not to comply with the registration requirements, and also possibly for failure to keep the register up to date according to the required timetable. Other possible offences are also suggested.
This article is a very brief summary of a consultation paper almost 50 pages long. Anyone interested in the proposals should read the consultation document itself, with a view to responding by the final date which is Monday 15 May 2017.
Click here for the government's consultation document 'Property ownership and public contracting by overseas companies and legal entities: beneficial ownership register'