In April 2017, the government published a ‘call for evidence’ inviting comments on a proposed new public register (the ‘Register’) to record information about the beneficial ownership of any overseas legal entity owning, or wanting to buy, property in the UK.
A key driver for the proposed Register is to ensure that the UK property market is seen as fair, transparent and clean in order to attract the right investors and owners. On the other hand, the government is conscious of the need to strike the right balance and to ensure that the Register does not deter foreign investment in the UK.
What would the new register look like?
It is proposed that the Register should be held at Companies House and record details of the beneficial ownership of overseas entities who wish to buy, or who already own, property in the UK. ‘Property’ includes leases with a term of more than 21 years. The Register would also hold details of such entities bidding on central government procurement contracts.
Who is the beneficial owner?
‘Beneficial owner’ means the person who benefits from the legal entity and who exercises control over it and the assets it holds. Where another legal entity is the beneficial owner, disclosure further up the ownership chain would be required until the ultimate individual owner is identified.
The Register would record beneficial ownership above a certain threshold. For example, in the case of a company, details of beneficial owners directly or indirectly holding more than 25% of the shares or voting rights, or having the right to exercise a significant influence or control over it, would need to be disclosed.
Those details would include: name, date of birth, nationality, service address and the nature of the control. This information would be freely available online, but individuals might apply to suppress certain information in limited circumstances.
How will the register work in practice?
Overseas entities would not be able to buy, sell, charge, or grant a long lease of property in the UK unless they are registered in the new Register. Those who already own property would have a year to register.
Failure to register in the new Register would prevent registration in the Land Register and it is registration in the latter that confers legal title.
We do not yet know when the Register will be introduced, but, once in place, compliance with its requirements should not be seen as a last-minute tick box exercise. Looking at a few scenarios:
- Sellers will want to ensure that a potential sale to an overseas entity is not delayed by a failure to register in the new Register in good time.
- Third party buyers, lessees and mortgagees dealing with on overseas entity will not want to run the risk of their transaction not being registered in the Land Registry.
- Overseas entities will need to take potential disclosure in the Register into consideration when structuring a transaction.