knowledge | 5 May 2017 |
New Register for Overseas Companies owning UK Property or bidding for UK Government Contracts
Are you are a director, shareholder or manager of a corporate entity which owns UK property or bids for UK government contracts? If so, the UK government’s proposal for a new register of beneficial owners of overseas companies concerns you.
What is proposed?
The UK government proposes to establish a register to show the true ownership of overseas companies who own or propose to buy property in the UK, or who wish to participate in UK government procurement. The full proposals and the UK’s invitation for submissions by 15 May 2017 are available here.
What is the objective?
The proposals are aimed at combatting corruption by improving transparency in UK property ownership, and so limiting the potential for money laundering and other illegal activity through property investments in the UK by overseas companies.
Who do the proposals affect?
All non-UK companies, which either currently own property in the UK or intend to buy UK property or bid for UK government contracts, are affected. While freehold title is understandably caught, the proposals, as currently framed, will also affect entities which hold property as tenants under leases of longer than 21 years. The proposals are also intended to apply across the UK, in England, Scotland, Wales and Northern Ireland. While Scotland has put in train similar proposals separately, the UK government indicates that it will work with the devolved administrations as the proposals develop.
What are the main implications for those affected?
Overseas entities, which have not provided information about their beneficial owners to the UK’s Companies House, will not be able to buy or sell property in England, Scotland, Wales or Northern Ireland or bid for UK government contracts. Entities proposing to buy property will not be permitted to become the registered owners in the relevant Land Registries without being able to show compliance with the proposed requirements. Entities which already own or hold property when the proposals come into effect will have one year during which to comply with the requirements. If they do not, a note will be put on the property title which will prevent the registration of any sale, lease or mortgage of the property. Similarly, bids for UK government contracts by overseas entities which fail to include information on the bidder’s beneficial ownership, will be excluded and if received, will be rejected as incomplete or non-compliant.
How do these proposals differ from existing Irish and UK disclosure requirements on corporate ownership?
In compliance with the European Fourth Anti-Money Laundering Directive 2015/849 (also referred to as MLD4), Irish companies are already required under Irish regulations1 introduced in November 2016 to maintain a register of beneficial ownership information. A further requirement to provide this information to a central register to be controlled by the Irish Companies Registration Office will be introduced shortly. The UK has a similar scheme for beneficial ownership information (the people with significant control or “PSC” register) in place since June 2016. In affecting non-UK companies operating in a specific market in the UK, the UK’s current proposals go a step further than the requirements of MLD4. As such, the proposed new UK “foreign ownership register” is set to be the first of its kind in the world.
Are any exemptions likely?
The invitation for submissions on the proposals indicates that the UK government plans to exempt entities incorporated in countries with equivalent disclosure requirements. This is potentially significant for Irish and EU entities in particular, which have implemented MLD4, but further detail will be necessary before the impact of this can be properly assessed.
Parties affected by the proposals are encouraged to make submissions to the UK Government by 5pm on 15 May 2017.
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.