The government published a long-heralded draft Registration of Overseas Entities Bill on July 23, 2018.
The purpose of the Bill is to “prevent and combat the use of land in the UK for money laundering purposes by increasing the transparency of beneficial ownership information relating to overseas entities that own land in the UK”. It seeks to achieve this by establishing a new register of the beneficial owners and controllers of such entities – the first of its kind. The new register will be held by Companies House and the current intention is that it will go live by 2021.
In broad terms the Bill provides that
- Any overseas entity that owns, or wants to own, UK land - residential or commercial - will be required to identify its beneficial owners, register their details in the new register and update that information annually.
- “Overseas entities” include companies, partnerships, corporations sole, governments and public authorities – in fact any entity that has a legal personality under the law by which it is governed.
- The registration requirement will be retrospective and overseas legal entities that already own UK land will have 18 months to register or to sell.
- The register will record beneficial ownership above a certain threshold. For example, in the case of a company limited by shares, a person holding more than 25 per cent of the shares in the company would be a registrable beneficial owner.
- Where another legal entity is the registrable beneficial owner, disclosure of ownership further up the chain will be required until the individual (or individuals) who exercises control over the legal entity is identified.
- There will be measures to ensure that an individual’s beneficial ownership isn’t disguised by diluting their shareholding (or equivalent) amongst others.
- Where an overseas entity has no registrable beneficial owners or they cannot be identified, a statement to that effect must be registered together with information about each managing officer of the entity.
- While the register will be publicly available, some information will be protected, for example date of birth and residential address information.
- A failure to register and to update the register annually will mean that an overseas entity
- Cannot register at the Land Registry as the legal owner of land.
- Where already registered as legal owner, cannot sell, charge or lease the land for a term of more than seven years as any buyer, chargee or tenant will not be able to register the disposition at the Land Registry.
- Compliance will be enforced through restrictions on the title registers of land owned by overseas entities. There will also be criminal sanctions for non-compliance and delivering misleading, false or deceptive information.
Comments on the draft Bill are invited by September 17, 2018 but it is unlikely that the fundamentals will change. Overseas entities need to be aware that compliance may be onerous, not to say time-consuming, particularly for those with sophisticated ownership structures. There will also be additional levels of due diligence for those proposing to enter into a land transaction with an overseas entity.