Hot on the heels of the changes to the PSC regime which we mentioned on Monday, the government has also proposed a new public register showing who owns and controls overseas companies that own (or wish to acquire) UK property or that may seek to engage in UK government procurement. The UK would be the first country to create such a register.
Why do we need another register?
There is potential for illegal activity to take place in the UK through the use of overseas companies. The UK is considered the number one destination for foreign direct investment in Europe and the government is keen to ensure that the UK remains an attractive country in which to do business. This new register aims to increase transparency and also reduce the impact of money laundering on the UK economy.
Whilst the government maintains that it welcomes legitimate foreign investment in the UK, it also highlights evidence that overseas investors in the UK property market have included criminals laundering the proceeds of crime.
According to BEIS, a reported £25 million of property is currently frozen worldwide owing to ongoing international corruption investigations.
BEIS recently issued a “call for evidence”, setting out the objectives, scope and impacts of the government’s proposed new register and asking overseas investors and experts for their opinions on how this register could and should be delivered.
Following the introduction of the register, overseas entities that own or wish to acquire UK property, or bid on government procurement contracts (valued at over £10 million), would have to supply beneficial ownership information to Companies House and apply for a registration number. Overseas entities that already own UK property will have 12 months to comply with the new rules and obtain a registration number.
The government says that the register will;
- contain useful information;
- be publicly and easily accessible;
- protect the information of those at risk; and
- not create disproportionate burdens or put off legitimate investors.
The Law Society of England & Wales has published its response to the “call for evidence” and, whilst acknowledging the importance of improving transparency, it also comments that the government must “strike the right balance between improving transparency while minimising the burden on legitimate commercial activity and interference with commercial arrangements with third parties.”
The criteria used when identifying a person with significant control (PSC), covered in a recent Gateley blog, will also apply when identifying the beneficial owners of an overseas company.
It is likely that the information required by the register will need to be updated every two years, with the same criminal sanctions in place as with the PSC regime.
The consultation closed on 15 May 2017 and, whilst its outcome is yet to be released, the proposed register has been criticised as to whether it will actually achieve its objective. There have also been concerns raised about the protection of information listed on the register and just how publically available this should be.
The government is aiming to publish a response to the consultation, setting out its intended approach, within three months of the consultation closing. So watch this space for more details.
This blog post was written by Tamanna Keir. For further information, please contact:
Sophie Brookes, partner, Corporate
T: 0161 836 7823