The new UK register of beneficial owners of overseas entities – stay one step ahead
As part of its commitment to making the UK’s company and property ownership more transparent, the government proposes to establish a public register which records information about the beneficial ownership of overseas entities that own UK property.
But what is an “overseas entity”?
All overseas legal entities able to hold property will fall within the scope of the new regime including, but not limited to, non-UK incorporated companies and non-UK resident trusts. It has yet to be decided whether any entities should be exempt.
And what does “property” mean?
It includes tenancies under long leases with an original term of more than 21 years, as well as freehold property.
Who qualifies as a beneficial owner?
A beneficial owner means the ultimate owner or controller of an overseas entity and the assets it holds. Beneficial ownership should be traced back to that person where other legal entities or nominees are identified as the legal owners of an overseas entity. It has been proposed that the definition of a beneficial owner should mirror the approach taken in the PSC Register. For more information on the PSC Register please see the article “PSC Register – Is Your Company Ready?” on our website.
Who will maintain the register and what information needs to be registered?
An overseas entity that owns or wishes to acquire UK property will need to provide information about itself and its beneficial ownership to Companies House and apply for a registration number. The information about the beneficial owner will include their name, date of birth, nationality, service address, country or state of residence, nature of their control and the date the control was acquired. In the case of trustees, they may be required to disclose details of settlors, trustees or beneficiaries. However, a protection regime which allows individuals to apply to have their information kept private in limited instances is being considered. It is proposed that the information in the register should be updated at least every two years.
What obligations are there for overseas entities that already own UK property?
They will not avoid the new regime. Overseas entities that already own UK property will have 12 months from the date of implementation of the regime to register or to sell their property if they do not wish to disclose their ownership information. At the end of the transitional year, any overseas entity which has not complied with the requirements will have a restriction appear on the title register of its UK properties potentially preventing the registration of disposals of the property.
How will the new regime affect the buying and selling of UK property by an overseas entity and how will it be enforced?
It has been proposed that, once a registration number has been allocated to an entity, this number will have to be included in any Land Registry applications by that entity in order to acquire UK property and either register the title of the property or its qualifying interest.
Furthermore, it is envisaged that an overseas entity will not be able to sell, charge or grant a long lease of its UK property unless it is registered. If the overseas entity is not registered, a restriction will appear on the title register to any UK property it owns or in which it has a qualifying interest.
How will the new regime affect third parties?
Buyers, lessees and mortgagees that transact with overseas entities who are not registered run the risk of not having their title or interest registered at the Land Registry.
What happens in the event of failure to comply with new regime?
It is proposed that it will be a criminal offence to provide false or misleading information when applying to register. It has yet to be decided whether an offence will be committed by entities who (i) already own UK property and who fail to register during the transition period or (ii) fail to keep the information on the register up to date. However, it is expected that legitimate lenders should still be able to enforce security over property even where an overseas entity is not compliant.
How can I prepare for the new regime?
Until the government has finalised the new regime and announced a timeframe for its implementation, it is difficult to prepare for it. However, given the likelihood of implementation, the following points should be considered:
• Overseas entities that are concerned about jeopardising their anonymity should bear the new registration requirements in mind when entering into transactions in respect of UK property and consider either restructuring their beneficial ownership or selling the property before implementation of the regime.
• Overseas entities should ensure that transactions are not held up by registering their beneficial information before entering into negotiations to buy, sell, lease or charge UK property.
• Third parties transacting with overseas entities should ensure that the overseas entity is registered before contracts are exchanged.