The UK may become the first country to introduce a
beneficial ownership register for overseas companies and other legal entities owning
UK property (of any kind) or who wish to procure UK Government work.
According to the Government’s April 2017 ‘Call for Evidence’
publication, the register will be modelled on the existing UK Persons of
Significant Control (PSC) register for
companies, with the information publicly available at Companies House.
Currently the legal ownership of registered UK properties is
publicly displayed at the Land Registry.
Where a UK company owns a property, the company’s name is recorded on
the title of the property and so the PSC register shows who ultimately owns the
UK company. The Government faces the difficulty
of providing helpful transparency for tenants and neighbours while ensuring
that the obligations are not so onerous that they discourage overseas investment
in the UK.
The Government is proposing that any company which currently
owns a UK property, or wishes to purchase one, applies to Companies House with
information about each beneficial owner which mirrors that currently requested
under the PSC (name, date of birth, address, nationality and the nature of
their interest), unless the beneficial owner is an entity that reports its
beneficial ownership on another public register. Privacy exemptions will be considered where
the beneficial owner is a person of interest or may be at risk of violence or
intimidation. The company will then receive a registration number. Without this number, the Land Registry will
not transfer legal title or create a long leasehold interest. Potentially a contract for purchase or sale
could be voided.
The need to provide information will not be a one-off
exercise. Each company will have to
update their records every two years in order to maintain their registration
number. The Government may make failure to maintain the register a criminal
offence. Offshore entities already
owning UK property will have 12 months to obtain a registration number.
Concerns have been raised about the impact that this may
have on a buyer’s or seller’s willingness to deal with an offshore
company. As well as the risk of a voided
transfer, a seller may end up acting as a trustee for an offshore company buyer
post completion. Lenders may find themselves unable to sell the
property to redeem their charge, if the registered owner is an offshore company
which has not complied with its requirements under the register. It seems inevitable that requesting proof
that the offshore company has the registration number will form part of the
pre-exchange enquiries.
Not only will the directors of an offshore company need to
compile information about the beneficial owners, they must also confirm this
information with those owners. Is the
solution that an offshore company should provide this information to Companies
House in advance of purchasing a UK property, so that it is ready to proceed
with no delay once it has found one? This
would seem to require an offshore company to provide information to the Government
before it even has any interest in the UK!
From the Government’s consultation, it seems that it is
aware of many of these issues and intends to deal with them. The consultation closed in mid May and so we
must now wait for the outcome to see how workable the Government’s solutions
will be.
