New register to target overseas owners of UK property
In May 2016, the government announced its intention to introduce a register recording the beneficial ownership and control of overseas entities that own UK property or participate in UK government procurement. This will be similar to the register of people with significant control (known as the 'PSC' register) that already applies to UK companies and LLPs. In its response to a call for evidence published in March of this year, the government has indicated that it intends for the new register, which will be the 'first of its kind in the world', to become operational in 2021.
What we know so far
All overseas legal entities that own the freehold, or registrable leasehold interest, in a UK property, or which intend to bid on UK government contracts, will be required to enter the details of their beneficial owners on a public register maintained at Companies House.
The definition of ‘beneficial owner’ will be aligned with the definition of a PSC and the same information will need to be recorded in respect of relevant overseas entities as is required for the PSC register in the UK. There will be certain exemptions for entities for which there is already transparency of beneficial ownership.
Where an entity is unable to provide information about its beneficial owners, it will instead have to provide information about its managing officers.
It is envisaged that under the new regime:
• On the acquisition of the freehold or registrable leasehold of UK property, only the beneficial interest (and not the legal title) will pass until the acquiring overseas entity has a valid registration number.
• For overseas entities that already own UK property, there will be a transitional period during which the overseas entity can either comply with the new regime or sell the property. The exact duration of the transitional period is still unknown but the government has indicated it will be longer than one year.
• Where an overseas entity fails to comply fully, a note will be placed on the title register and restrictions will be imposed on its ability to sell or charge the property, or to grant a long leasehold interest – and these will be backed up by new criminal offences.
• For bids on UK government contracts, the current intention is for provision of the beneficial ownership information to be a pre-condition to the award of a contract to the preferred bidder (rather than requiring the information to be provided as a pre-condition to submitting a bid).
There will also be an ongoing requirement to keep the register up-to-date, but the frequency of updating the register has yet to be confirmed.
Watch this space!
The government intends to publish a draft bill for parliamentary scrutiny this summer. Although implementation of the regime is still some way off, what we do know is that the government remains committed to the implementation of this regime and improving transparency and accountability in the UK, which should be borne in mind in property transactions involving overseas entities.
• Katharine Bush is an associate in the corporate team at Penningtons Manches. Visit penningtons.co.uk.
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