On 5 April 2017, the Government published a call for evidence seeking views on proposals to create a register of the beneficial owners of overseas entities that either own UK property or participate in UK Government procurement. The new register will be the first of its kind in the world.
All overseas legal entities that own property or bid on certain public contracts will be required to disclose information on their beneficial owners on a new register held by Companies House.
Identifying beneficial owners
In terms of identifying beneficial owners, the intention is to adopt the existing definition used in the "persons with significant control" (PSC) legislation and to impose the same obligation to take reasonable steps to identify PSCs. Please refer to our dedicated PSC site for more on the existing PSC regime.
Owning UK property
Overseas entities that own or wish to acquire UK property will be required to register beneficial ownership information with Companies House and will be provided with a unique registration number. Overseas entities would then need to provide their registration number to the Land Registry before applying to register titles to land or property. Criminal sanctions could be imposed for those who do not comply. Restrictions on the title of the property are also proposed for non-compliance.
It is proposed that the information on the new register is updated at least once every two years. Failure to update will be an offence.
To avoid duplication, an exemption for overseas entities in jurisdictions that already operate an accessible central register of beneficial ownership information is proposed.
Overseas entities owning existing titles
Overseas entities owning existing titles will have a transitional period of 12 months to comply with the new requirements and to apply for a registration number (or to dispose of the property if they do not wish to comply with the new requirements). The overseas entity will not be able to register title to new properties until it has received a registration number. At the end of this transitional period, overseas entities will be prohibited from selling the property, creating a long lease or a legal charge over it if they have not complied with the new regime and a restrictions note will be entered on the title register.
It is proposed that overseas entities that are leaseholders of property where the lease is required to be registered and the original term is for more than 21 years should register their beneficial ownership information with Companies House.
Views are sought on how existing bank or other legitimate lenders should be able to enforce their security where a restriction has been entered against a property due to the failure of an overseas entity to comply with the regime.
Bidding for public contracts
The new regime will apply to overseas entities bidding for new Government contracts with a minimum value of £10 million. Existing public contracts will not be affected. Various options have been suggested for implementing the beneficial ownership regime for public contracts.
Changes to the PSC regime for UK companies
The call for evidence also noted that the Government intends to publish amendments to the PSC regime for UK companies in light of the Fourth Money Laundering Directive shortly.
The call for evidence is open until 15 May 2017. Click on the link below for a copy:
Please see our previous article for further background to the proposals and the original discussion paper published on 4 March 2016. The Government announced in May 2016 that it intended to proceed with the reforms. We will continue to monitor and report on developments.