On March 4, 2016 the Department for Business, Innovation and Skills (BIS) published a discussion paper setting out proposals to improve the transparency of ownership of foreign companies that purchase land or property in England or Wales or enter into public procurement contracts in England. Following on from the introduction, from April 6, 2016, of the “persons with significant control” or PSC regime for UK companies and limited liability partnerships, the discussion paper looks at options for identifying, reporting and using information on the beneficial ownership of foreign companies as part of the Government’s aim for the UK to be “one of the most open countries in the world for good, clean investment”.
Holding of foreign company beneficial ownership information
The discussion paper raises questions as to how an approach of requiring foreign companies to provide information on their beneficial ownership before they buy land/property or bid on a contract with the UK Government could be implemented. The Government would like the obligations on foreign companies to be broadly similar to those on UK companies. Companies House could manage a new register with the requisite information or it could be operated by a private sector organisation or another independent public body. The foreign company on the register would have a unique identifier number which would enable it to buy land or property in England or Wales or help it facilitate its participation in public contracting in England.
The discussion paper recognises that it is more difficult to enforce criminal penalties for failure to file information or for filing false beneficial information with UK authorities against foreign companies than UK companies. As a result, the discussion paper looks at possible additional civil and criminal sanctions, including a daily fine, sanctions linked to the specific activity that the company needs to register for or sanctions linked to other specific economic activities the company is undertaking in the UK.
Purchase of land or real property
The discussion paper notes that the Land Registry is publishing a data set containing the legal owner and addresses of all properties owned in the UK by foreign companies. The Government is considering exempting foreign companies incorporated in jurisdictions which already have an accessible central register of beneficial ownership information from providing similar information to a UK foreign company beneficial ownership register. As a result, all non-UK EU companies may be exempt given the requirements of the 4th Money Laundering Directive which EU member states must implement by June 2017.
One proposal is that foreign companies would only be able to register their ownership of land or property by providing the Land Registry with the unique identification number obtained from the foreign companies beneficial ownership register. Existing registered proprietors of land and property currently registered to foreign companies would also need to obtain this unique identifier. Possible civil and criminal sanctions against foreign companies that already own property in England and Wales and which do not apply for a unique identification number could include imposing criminal sanctions on the company, its officers and/or its persons of significant control and/or preventing the company from selling or charging its property until the unique identification number is restored.
The Government is proposing that the new policy would apply to “major projects” in Government procurement which have a value threshold of £10 million or more. While the new policy on the provision of beneficial ownership information would not be applied to existing contracts, it would be applied from a future date for contracts that have not yet been awarded. The Government has identified four possible options to ensure the contracting authority obtains beneficial ownership information from bidder companies before awarding a public contract. These are as follows:
- The failure to provide beneficial ownership information could be linked to existing grounds for exclusion under the Public Contract Regulations 2015.
- The link referred to above could be made but all non-UK companies could have the option to provide beneficial ownership information directly to the contracting authority.
- Failure to provide beneficial ownership could be treated as making the bid incomplete or non-compliant.
- It could be made a condition of the procurement process that to be awarded a contact a bidder must provide beneficial ownership information.
The closing date for responses to the discussion paper is April 1, 2016.
(BIS, Enhancing transparency of beneficial ownership information of foreign companies undertaking certain economic activities in the UK, 04.03.16)