The UK government announced in March that it is to publish legislation to introduce the world’s first public Register of Beneficial Owners of Overseas Companies and Legal Entities bodies that own UK property or participate in UK government procurement.
The government said the introduction of the overseas register would make it easier for enforcement agencies to track criminal funds and would serve to inhibit corruption. Recent figures suggested that over £180 million worth of UK property has been placed under criminal investigation since 2004, of which 75% was linked to overseas companies.
The register is to be administered by Companies House and will adopt the same definition of ownership control that governs inclusion in the register of persons with significant control (PSCs) over UK companies, that is individuals who: hold more than 25% of the shares or voting rights of the company; have the right to appoint a majority of directors of the company; or have the right to exercise or actually exercise significant influence or control over the company, trust or other legal entity.
To ensure compliance, the government intends to introduce a system of statutory restrictions backed up with criminal offences. The government proposes that overseas entities will be unable to buy or sell property in the UK unless they have provided information in respect of their beneficial owners for the new register. Legal title will be withheld to overseas legal entities that do not have a valid registration number at completion. Preferred suppliers will be required to produce beneficial ownership information as a condition of being awarded a contract.
Overseas entities that currently own UK property will have a transitional period to register their beneficial owners. A period of 12 months was initially proposed, but the government now intends that this time period should be longer.
The introduction of the register follows a consultation and call for evidence on the issue last April, which received 56 responses. Respondents to the consultation largely agreed that all legal entities that can own property should fall within the scope of the requirement to be on the register. The government said it would follow this view, although it would ensure there would be flexibility to allow exemptions where appropriate, for instance where there is already transparency of beneficial ownership information.
The government also said trusts would not be included in the register because publishing the details of who owns and benefits from trusts would “not be proportionate and effective especially as disclosure would undermine family confidentiality”. HMRC set up a register of trust ownership last year, but this register is only accessible by tax and law enforcement authorities.
Sovereign Comment
The government said it intended to publish draft legislation by the summer, which will be introduced into Parliament by summer 2019: the register is to be operational in 2021. Draft legislation is progressing through the UK parliament that will force British Overseas Territories to disclose publically details of beneficial owners of companies in their jurisdictions. Taken together with the government plans set out above this represents a fundamental shift in the confidential manner in which UK property has been held in the past. The territories involved are concerned that compared to the Crown Dependencies (the Channel Islands and the Isle of Man) a level playing field will no longer be possible. For updates and to discuss how this might affect you
