Elsewhere on this blog, we have discussed the intricacies of the PSC Register, the law requiring all UK companies to register their PSCs (Persons with Significant Control) with the Companies House. This law, which took effect in April 2016 and was revised in March 2017, attempts to create more transparency over the ownership of UK companies in an effort to stymie the efforts of money launderers, tax evaders and financiers of terrorist activity.
Now under consideration by the UK government is a similar proposal aimed at the beneficial owners of UK land. This proposal would record and make public information concerning overseas entities that own UK property. Additionally, the government hopes to gain information on overseas entities that enter into government contracts.
Could this affect your company?
While details of the legislation are still under review, we’ve answered some of the likely questions the law raises so that you and your company won’t be caught off-guard.
Who will the new overseas register affect?
Broadly speaking, the new overseas register is designed to pertain to all overseas legal entities (OLEs) that own or purchase properties in the UK or bid on central government procurement contracts. This includes not just companies, but also body corporates, corporations, partnerships and trustees.
Any overseas entity wishing to buy, sell, charge or grant a long lease of property in the UK would first need to:
- Provide details to Companies House verifying beneficial ownership of the overseas entity.
- Apply for a registration number.
OLEs that already own property will have a 12-month transitional period in which to register with the Companies House and obtain a registration number.
How does the law define “beneficial ownership”?
The beneficial owner is the individual or individuals who can claim ultimate ownership or control of an overseas entity. The process used to determine beneficial ownership will be similar to the process used to identify “persons with significant control.” Thus, any individual who holds more than 25 percent of the voting rights, controls the appointment or removal of the majority of the board, or who otherwise exercises significant influence over the day-to-day dealings of the company shall be considered a beneficial owner.
What sort of information will be included on the OLE register?
For the time being, the OLE Register requires the same information as the PSC Register: the name, date of birth and home address of the beneficial owner. Additionally, entities should include the nature of control over the OLE and the date on which that control was established.
As with the PSC Register, an OLE will be required to confirm the information with their beneficial owners before listing it with the Companies House. If, after taking reasonable steps to do so, an OLE is unable to confirm the information regarding the beneficial owners, they must record these statements on the record and provide additional information about their directors and managing officers.
How often does the OLE Register need to be updated?
Unlike the PSC Register, which requires continual updates as changes occur, the OLE Register need only be updated once every two years.
Does the OLE Register apply to both registered and unregistered land?
The proposed legislation only affects registered land. Any OLE currently holding unregistered land would not have to provide information to the OLE Register if they have no plans to sell or otherwise transfer the lease. However, any transfer of lease or purchase of unregistered land triggers a registration requirement.
How does the OLE Register relate to government contracts?
The proposed legislation states that an OLE must provide information to the OLE Register and obtain a registration number in order to be considered for government contracts.
This registration requirement would only pertain to new UK contracts valued over £10 million. Companies holding a preexisting contract would not be required to procure a registration number retroactively.
The proposal remains undecided on how exactly to implement these changes to government bids. Currently, there are three methods under consideration:
- requiring the preferred supplier to provide beneficial ownership requirements as a condition for being awarded the contract.
- excluding bids from all entities not properly aligned with the OLE Register and imposing a three-year exclusion from bidding on that authority’s contracts.
- treating bids that have not registered as incomplete and invalid. This option would not impose the bidding ban above.
Will the OLE Register be made public?
The Companies House will hold the OLE Register. Anyone wishing to review an entity’s land holdings will be able to do free of charge by visiting the Companies House website.
What are the consequences of non-compliance?
OLEs that fail to submit or update their OLE Register will be prohibited from selling their property, establishing a long lease or creating a legal charge over it. A notice filed with the Land Registry will prevent the sale, lease or mortgage of the property.
Are there exemptions to the proposed OLE Register?
In an effort to reduce the amount of “double reporting,” the government will exempt any OLE that already provides it with beneficial ownership information in a publicly accessible register in another country. This includes any companies or legal entities who have met the requirements of the central registry as part of the EU’s Fourth Money Laundering Directive.
There will also be exemptions allowed for any beneficial owners who can prove that public access to their information might put them at risk of harm or intimidation. Further, OLEs involved in procurements that touch on national security would likewise be exempt from publicizing their information.
Does your company hold property in the UK?
It may be wise to review constitutional documents now in order to identify beneficial owners and procure the necessary information about them. It may also be prudent to institute a schedule of internal updates so that your files concerning owners, holdings, leases and mortgages will always be current.