On April 5, 2017 the Department for Business, Energy and Industrial Strategy (BEIS) published a call for evidence seeking views on the proposals for a register of beneficial ownership information for overseas companies or other legal entities that own or buy UK property or participate in UK central government procurement.
The call for evidence follows BEIS’ March 2016 discussion paper on enhancing transparency of beneficial ownership information of foreign companies undertaking certain economic activities in the UK. The discussion paper particularly focussed on 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 wanted the obligations on foreign companies to be broadly similar to those on UK companies as required by the “persons with significant control” or PSC regime. The discussion paper suggested that 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.
Following the discussion paper, the Government announced in May 2016 that it intended to introduce a register of the beneficial owners of overseas companies owning UK property or engaging in UK government procurement. This call for evidence seeks views on the proposals and on the design of the policy and its impact.
Objectives and scope of the new register
BEIS objective is to create a new register that:
- Contains useful information – the register must not give superficial information that takes the reader no further in understanding a company than information that is currently available.
- Is publicly and easily accessible – the information will be of interest to a wide range of people and organisations both at an individual level and in the wider community.
- Protects the information of those at risk – it will be important to have a thorough protection regime to protect people who are at risk of harm as a result of information about them being publicly accessible.
- Avoids creating disproportionate burdens or putting off legitimate investors – in particular, BEIS is conscious that the new register will need to be readily applicable to, and understandable by, companies across the world. This carries important implications for how it is designed and communicated.
BEIS proposes including all legal entities that can hold properties or bid on central government procurement contracts in the scope of the new register’s requirements.
Registering information – property
BEIS intends to ensure that overseas entities cannot buy or sell property in the UK unless they have provided information about their beneficial owners for the new register. In respect of property already owned by an overseas entity, BEIS intends for this restriction to be reflected by a note on the title register for the property. Entities wishing to buy property will have to register their beneficial ownership information with Companies House. If their application is successful they will be allocated a registration number. This number will be required in order to register title to the property at the appropriate Land Registry. Entities that already own property will be given a transitional year in which they will be free to choose whether to disclose the information or dispose of their property.
Registration – procurement
The new register will operate in a similar way in relation to procurement as it does with property purchases. Once the register is in place, overseas entities that wish to take part in central government procurement contracts will need to supply beneficial ownership information before the contract can be finalised.
The requirements of the PSC register were developed through extensive consultation with stakeholders, including business and legal sectors, and have been well received. BEIS therefore believes that the PSC register requirements provide a good balance between providing transparency and the cost to business of compliance. Given this, and the similarities between the new overseas register and the PSC register, BEIS proposes to require the same information about beneficial owners as is required of people with significant control. The information will have to be updated at least every two years.
BEIS wants to ensure that overseas entities that own property in the UK comply with the new register requirements. The system outlined in the call for evidence achieves this using controls over property. If an entity does not supply the right information to Companies House it will not get an overseas registration number. Without this number it will not be able to buy property, and it will not be able to sell, lease or place a charge against any property it already owns. Some entities might be content to own property that is restricted in this way; the powers over the property might not act as enough of an incentive to comply with the law. Because of this, the Government is considering whether it would be appropriate to create a criminal offence for entities that still own property at the end of the transitional period but have not complied with the new register requirements by that time.
The new overseas register will be publicly accessible to ensure transparency and increase ease of scrutiny by law enforcement bodies and transparency groups. There are, however, some situations where making information about an individual public would put that individual at risk of harm or would create a wider public safety risk. This builds on a principle in the PSC register. The PSC register has a protection regime which allows a company or individual to apply to have information about an individual with significant control suppressed if the individual is at risk of violence or intimidation as a result of that information being made public.
BEIS proposes to provide for a beneficial owner or managing officer to apply to have their information suppressed on the new register in similar circumstances. However, BEIS also considers that because the new overseas register will relate to individual properties, the risk of harm to an individual or others may be increased by the individual’s association with the property being known and BEIS wishes to consult on whether a more extensive regime may be appropriate for the new overseas register as it may include individuals’ residential addresses.
Third party protections
BEIS wants to ensure that where an entity does not comply with the register requirements and has defaulted on a loan secured on the property, the lender can still enforce its security by repossessing and disposing of the property but it asks how it can best ensure that only legitimate lenders can repossess and dispose of a property with a restriction against it.
(BEIS, A register of beneficial owners of overseas companies and other legal entities: Call for evidence on a register showing who owns and controls overseas legal entities that own UK property or participate in UK government procurement, 05.04.17)