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.