A draft Bill has recently been published by The Department for Business, Energy and Industrial Strategy and sets out provisions to establish a new beneficial ownership register of overseas entities that own UK property. This follows the commitment made at the Anti-Corruption Summit in 2016 to establish such a register in order to combat money laundering and achieve greater transparency in the UK property market. This new register of overseas entities beneficial ownership would be the first in the world.
The legislation is the beginning of a wide crackdown on money laundering in the UK with the hope that disclosing the properties beneficial names on a register will make it easier for law enforcement to cut down on criminal activity and increase clarity in the property market.
The bill defines a beneficial owner as someone who:
- Holds over 25% of the shares
- Controls over 25% of the voting rights or
- Has a significant interest over the entity.
The Bill will require overseas entities who, for example, wish to purchase a property in the UK to firstly register as a “Registered Overseas Entity” at Companies house and identify and register its beneficial owner. There will then be an ongoing obligation to update Companies House of any change to the beneficial owner or confirm that there has been no change on a yearly basis.
The Register is a reaction to widespread concern expressed about the lack of clearness around who ultimately owns land in the UK, where the land is registered to an overseas company or other entity. Currently, the information available from the land register about overseas owners of land (or registered leaseholders) is, at best, limited to the entity’s name and territory of incorporation. It is therefore not explicit “who” really owns and controls the entity and by extension the land itself.
More significantly, failure to comply with the new requirements will prevent an overseas entity from registering their title to a property (as well as facing personal imprisonment and an unlimited fine).
As a result, anyone proposing to buy, take a security over, or lease property to or from an overseas entity needs to consider the additional checks that will be required to ensure that any proposed transaction with the overseas entity will not be void. Purchasers, tenants and lenders will likely be less keen to transact with any overseas entity unless they are a registered overseas entity. This will inevitably add additional complication and potential for delay as additional checks are required in any property transactions involving an overseas entity.