The Government has signalled its intention to establish a register of beneficial ownership information for overseas legal entities (OLEs) that own or are purchasing UK property (or participating in UK Government procurement). UK inward investors using offshore vehicles to own UK property should familiarise themselves with the proposals.
The proposals will have a significant impact on OLEs transacting in the UK and it is crucial that the Government's laudable objectives to increase transparency do not result in a disproportionate administrative burden on OLEs that in turn discourages investment. Much of the detail has yet to be worked out and is likely to follow the publication of draft secondary legislation. Additionally, guidance from Companies House will be required to establish how the registration regime will operate in practice. We understand that some concerns have been raised by respondents as to the practical application of sanctions that prevent or make void disposals or acquisitions of property, subject to strict compliance or flood the market with forced sales by non-compliant OLEs. Whether these concerns will be addressed in the final proposals remains to be seen.
Recent moves in the UK and Europe have led to the establishment of a central register of people that have significant control of UK companies (the PSC register), which aims to:
• Increase transparency in corporate ownership.
• Prevent investment vehicles being used to shield the proceeds of crime, evade tax or finance criminal activity.
The requirement to keep a PSC register came into force in April 2016. From June 2016 UK companies and limited liability partnerships have been required to file information at Companies House about the people that have significant control over those entities. As a part of the consultations regarding the PSC register and the UK's implementation of the Fourth Money Laundering Directive ((EU) 2015/849), the Government has announced these proposals in respect of a register of beneficial ownership information for OLEs that hold UK property.
Summary of proposals
The Government's proposals were more specifically set out in a call for evidence in April 2017 and the scope can be summarised as follows:
• All OLEs that hold UK property (or are purchasing UK property) will be within scope. Certain registration and filing requirements are already in place as regards overseas companies with a UK established place of business under the Overseas Companies Regulations 2009 (SI 2009/1801) and these would be aligned with the new regime.
• The requirement would apply to both commercial and residential freehold property and certain registered leaseholders (leases of over 21 years). Unregistered land currently owned by OLEs is not included.
• The regime would be broadly aligned with the PSC register regime in terms of the definition of a beneficial owner. Guidance is expected to follow as to how OLEs might interpret the requirements and take steps to identify beneficial owners.
• There will be a concept of equivalence so as to reduce the administrative and investigative burden on OLEs where they are incorporated in jurisdictions with equivalent disclosure requirements to those under the new UK regime.
How the new regime is likely to operate
Under the proposals the new regime would operate as follows:
• The register should be publicly accessible and maintained by Companies House. A fee would be charged for OLEs that are required to register.
• OLEs already holding relevant UK property would have one year to provide the information or dispose of the property. If the OLE did not comply, it would be prohibited from selling the property or acquiring new property.
• OLEs looking to acquire UK property would need to apply for registration at Companies House and provide information about beneficial ownership. On a successful application the OLE can acquire property, however future disposals would be restricted where the OLE has not complied with its continuing obligations under the beneficial ownership register regime.
• OLEs will be required to provide information about itself (for example, name, contact details and registered address, legal form, registration number and jurisdiction of incorporation).
• OLEs that are unable to provide information on beneficial ownership will be required to include a statement to that effect on the register and also include details of its managing officers.
• The information requirement would be an ongoing obligation and, in addition to practical restrictions on acquiring or disposing of property (or participating in procurement), it may be an offence if the OLE is non-compliant or makes false or misleading statements regarding beneficial ownership.
As with the PSC register, the Government is considering measures to protect entities and individuals from disclosure of certain information (for example, residential addresses of individuals who may be at risk). It is also working through potential issues relating to:
• Allowing lenders to enforce security over property despite restrictions imposed for non-compliance with the beneficial ownership register.
• Preventing beneficial owners taking security over UK property from a non-compliant OLE and then enforcing that security to force a sale.
The call for evidence closed in May 2017 and the Government is currently considering the responses.
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