(The National Law Review) -- The UK Government recently published a draft Registration of Overseas Entities Bill that will require foreign entities who own or desire to own land in the UK to take steps to identify their beneficial owner(s) and to register them. Such a register would be a world-first and is part of the UK Government's drive to increase transparency to combat money laundering. The Bill imposes penalties for non-compliance and restrictions on the buying and selling of UK property for non-compliant entities.
Plans for a public register of beneficial ownership of overseas companies owning property in the UK ( the "Register") were first announced at the Anti-Corruption Summit in May 2016 by then-Prime Minister David Cameron. Following this, in April 2017, the Government published its proposals on how it intended to implement the Register and called for evidence seeking views on these specific proposals. In May 2018, the UK Government published a response to the call for evidence—see our previous advisory, "UK Government Proposes Beneficial Owners Registry of Overseas Companies That Own UK Property," for more details.
How the Register Will Work
The key features of the Bill are as follows:
The diagram below (published by the UK Government alongside the Bill) sets out how the proposed system will work:
Next Steps and Comment
The UK Government is now consulting on this draft Bill (the Bill is available in full here) with the consultation closing at 5.00 p.m. on 17 September 2018. The UK Government has confirmed it is proposing a separate mechanism with regard to overseas entities that wish to engage in UK central government procurement.
This draft Bill fleshes out in detail the UK Government's plans for the Register. Non-UK investors in UK property will need to continue to be aware of such developments and give due consideration to the registration requirements as it is anticipated that the Register will come into force in 2021.
1 Under the PSC regime, beneficial owners of overseas entities are required to be registered with Companies House. A beneficial owner (X) of an overseas entity (Y) is defined as a person or other legal entity that satisfies one or more of the following conditions:
• Condition 1 – X holds, directly or indirectly, more than 25% of the shares in Y;
• Condition 2 – X holds, directly or indirectly, more than 25% of the voting rights in Y;
• Condition 3 – X holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of Y;
• Condition 4 – X has the right to exercise, or actually exercises, significant influence or control over Y;
• Condition 5 – (a) the trustees of a trust, or the members of a partnership, unincorporated association or other entity, that is not a legal person under the law by which it is governed, meet any of the conditions above (in their specified capacity as such) in relation to Y; and (b) X has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or entity.