In February we wrote about the proposed timetable for the introduction of a beneficial ownership register of overseas companies that own UK property. Since then the Government’s response to the BEIS call for evidence has been published and this sets out how the Government plans to implement the register. A draft Bill will be published this summer and the operational register should be ready by 2021.
Which entities will be caught by the register?
All legal forms that are able to hold property or that can bid on government contracts will be within the scope of the new register. However exemptions will be permitted, such as where there is already a regulatory burden imposed on an entity which also seeks to achieve increased transparency.
One key question was whether the definition of beneficial ownership for the new register should be aligned with that used in the PSC regime (which requires certain corporate entities to keep a register of ‘people with significant control’ over them). Many believe that this should not be the case due to the different requirements of the two registers but the Government considers that the definitions should be consistent in order to avoid any contradiction of information when comparing the two registers. Despite the similarities, suggestions to combine the two registers were rebuffed at an earlier stage of the consultation.
Entities that are not companies limited by shares will be able to apply the adaptations which were introduced for PSC purposes. For example, those entities which do not have share capital or entities that do not hold general meetings at which voting rights can be exercised will be required to determine beneficial ownership using alternative criteria.
For those entities already holding property when the register comes into force, the Government has decided that a registration period of longer than 12 months will be appropriate. So entities caught by the requirements will be given longer than one year to either register information, or sell the property in order to avoid the requirements.
For those overseas entities looking to acquire UK property a system of statutory restrictions will be introduced along with a system of placing notes on the land register where an owner is not compliant with the requirements. These sanctions for non-compliance will include criminal offences.
Entities listed on the register will be given a registration number. Those which do not have a valid registration number will only be entitled to the beneficial interest in a property and the legal title will not pass over until a number is obtained. This applies where an overseas entity buys property after the register has come into force. This is intended to encourage compliance as the entity will not hold full title to the property until the register’s requirements have been satisfied.
Only the preferred bidder on any government procurement contract will be required to submit information and this will be a condition of being awarded any contract. Requiring all bidders to submit beneficial ownership information is seen by the Government as disproportionate to achieving the register’s aim.
The register will require the same information as is required under the PSC regime. This will help to ensure consistency when entities come to file relevant information.
If an entity is not able to provide the relevant information about its beneficial owners the entity will have to supply information about its managing officers to ensure some information relating to who controls the company is made available.
Initial proposals included a requirement that information on the register be updated every two years, but the Government will consider increasing the required frequency of updates in order to ensure information remains accurate and up to date. An event driven approach to updating the register will not be adopted and failing to keep information up to date may be made a criminal offence.
Concerns have been raised about the availability of residential addresses of individuals named on the register. Only recently the Government announced new laws to protect directors whose addresses may be in the public domain and a similar approach may be adopted for beneficial owners who feature on the new register.
The new register will be the first of its kind in the world and further demonstrates the UK’s desire to tackle corruption. Owing to the fact that there is no existing model to work from the Government has said it will proceed cautiously and look to strike the right balance between improving transparency and minimising burdens on legitimate business activities. This cautious approach is evident from the length of the consultation process and the Government is clearly committed to making the register work whilst not impacting the UK’s reputation as a leading business hub.
This blog post was written by Elliot Gibson. For further information, please contact:
Sophie Brookes, partner, Corporate team
T: 0161 836 7823