Do any of your clients control UK property through a company registered overseas? If so, read on. In a bid to enhance its commitment to making company and property ownership more transparent, the UK government introduced a public register of company ownership in 2016.
The People with Significant Control Register (PSC Register) records information about who owns and controls companies in the UK and was first discussed by the then-Prime Minister, David Cameron at the International Anti-Corruption Summit in May 2016, where he committed to creating a new public register showing the beneficial owners of overseas companies that own property in the UK.
Government recognises that this new legislation is likely to have a significant effect on the UK market.
Taking this commitment one step further, the government published a “call for evidence” in April last year. It invited comments on proposals for a new public register that would record ownership information not only of overseas companies (as previously suggested) but of any overseas legal entity owning property in the UK or participate in UK government procurement.
The response sets out how the draft Bill is likely to read when it is published later this Summer. The key points of the response are as follows:
WHAT IS LIKELY TO BE AFFECTED?
Corporate Entities: subject to a few exemptions and adaptations, all overseas legal entities that can hold UK property (or that can bid on central government procurement contracts) will be within the regime.
Property: ownership of any freehold and/or registrable leasehold interests (that is, leases of 7+ years) will be captured by the regime.
WHAT INFORMATION IS REQUIRED
Beneficial Owner: the definition of beneficial owner will mirror the definition of Persons with Significant Control (PSC) definition under the existing PSC regime.
Managing Officers: where entities are unable to give information about their beneficial owners, they will need to supply information about their managing officers so that some information concerning control over the entity is available.
Information Required: the information required will be the same as the PSC regime.
Timing: overseas entities that already own UK property will have at least 12 months (exact timing to be confirmed in the draft Bill) from implementation of the regime to either obtain a registration or sell the property to avoid registration.
Procedure: a system of statutory restrictions and notes on the relevant land register is being proposed to ensure compliance.
Personal privacy protection: the register will be public but the government will consider whether it can protect the privacy of named individuals on the register.
Procurement: only the preferred overseas bidder will be required to supply beneficial ownership information as a condition of being awarded the contract.
Updating the Register: the frequency of the requirement to update the information on the register will be reviewed but so that there is a balance between maintaining an accurate register and the cost and burden of doing so.
ENFORCEMENT OF REGIME
Sanction for non-compliance: failure to comply with the registration and updating regime will be a criminal offence.
Transfer to a non-compliant entity: a transfer to an overseas entity that has not complied with the registration requirements will not be void – but only the beneficial interest will pass to the transferee. Not having the legal title in the property could lead to significant valuation and practical issues for the transferee, as without legal title overseas entities are restricted in what they can do with the property.
Third Party Protection: there will not be a requirement that only ‘legitimate lenders’ can repossess and dispose of property subject to a restriction under the new regime.
Whilst the proposed regime specifically relates to overseas entities, the government recognises that this new legislation is likely to have a significant impact on the UK property market; and has thus commissioned research looking into this. We are still awaiting these findings.
In the meantime, the government still intends to publish a draft Bill to be in force from 2021 creating the new register with a view to introducing the Bill to Parliament in the autumn. This does not give much time for those affected to adapt and comply with any changes ahead of implementation.