Draft legislation to implement the government’s proposals for a “beneficial ownership register” has finally been published and the government is seeking views on the detail. The Registration of Overseas Entities Bill follows hot on the heels of last year’s consultation on the proposed register and provides some much needed flesh on the outline plans.
The government’s preferred option is a register showing the owners and controllers of overseas entities that own property in the UK. This will affect freehold and leasehold property (where the term is more than seven years) and will apply to all overseas entities except governments and public authorities.
Beneficial ownership will need to be registered with (and verified by) Companies House who will then issue a unique identification number (an overseas entity ID). Without the ID, the overseas entity will not be registered at the Land Registry as the owner of property. The overseas entity will need to comply with an “updating duty” (at least every 12 months) in order to retain its status as a “registered overseas entity” and restrictions will be put on the title registers of its properties that will prevent the registration of certain transactions (transferring the title, granting leases with terms of more than seven years or granting charges) unless the overseas entity is registered (or is exempt from registration).
Overseas entities who already own UK property will be given 18 months from implementation of the new law to register and obtain an ID. After that a restriction will be put on their property registers whether or not they have done so.
The diagram below (published as part of the government’s impact assessment) sets out how the proposed system will work:
The Bill is open for consultation and views are specifically invited on the following topics:
- Whether there are any types of overseas entities that may not have beneficial owners or managing officers.
- Whether it is reasonable that foreign governments and public authorities should be exempt from registration and whether there are any other types of overseas entities that should be exempt.
- Whether the requirements should be modified for any types of overseas entities so that the information they have to produce would be changed or reduced.
- Whether registration should still be possible in the rare circumstances where an overseas entity is unable to identify their beneficial owners (the government envisages that this may be needed, for example, where an entity is incorporated in a jurisdiction that allows “bearer” shares).
- Whether the scope of the prohibited dispositions are sufficient.
- Whether there should be power to disapply the effect of the prohibitions in specific circumstances (the government envisages that there may need to be an “appeal” process which could be invoked on a case by case basis).
- Whether the proposed exceptions to the prohibited dispositions (court order, statutory obligations, prior contract and power of sale/receivership dispositions) are sufficient.
The government describes the register as a “world’s first” that will tackle money laundering and increase transparency. It is especially quick to highlight the criminal sanctions that will follow for those who illegally profit from the UK’s real estate market through the illegal use of overseas shell companies.
The government expects the beneficial register to become operational by 2021.
This is another key step on the road to greater transparency. It will still be important to ensure that the proposals are workable and will not cause undue problems with the proper operation of a real estate market.
The closing date to submit your views is 5pm on 17 September and you can respond by clicking here.