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Register of Beneficial Owners of Overseas Entities

In May 2016, the Government announced its intention to introduce a register of beneficial owners of overseas companies owning property in the UK. Following a consultation on proposals, the Government has responded on how it intends to implement the register in light of the responses received.

Initial Proposal

The Government's initial proposal was to establish a new regime which would apply to all overseas legal entities that hold property in the UK. The new register would resemble the UK Persons of Significant Control (PSC) regime, which shows the identity of beneficial owners of limited companies, as well as the reasonable steps an entity should take and the information that should appear on the register.

In particular, the new register would require overseas entities to:

• apply to Companies House for a registration number, which they would then use at the Land Registry in the registration process or updating existing registered titles;
• any entities that already own property, they would have 12 months to comply. Failure of any overseas entities to comply, would result in a restriction against respective titles prohibiting the sale, long lease or legal charge; and
• information on the overseas register would need to be updated at least every 2 years and failing to meet this requirement would result in a criminal offence.

The Government's Response Post-Consultation

Following consideration of the responses received, the Government has set out how it plans to implement the register.

The key requirements of the new register include:

• subject to certain exceptions all legal entities that can hold property will fall within the scope of the new register. Trusts for example would not be included and entities where transparency of beneficial ownership already exists;
• all registerable leasehold property is covered (not just those with a term exceeding 21 years as provided in the proposal) in order for the register to work alongside the land registration process;
• the definition of beneficial owner to be aligned with the PSC definition under the existing PSC regime;
• for entities that not similar to UK companies limited by shares, the adaptations to the PSC definition should be used to identify beneficial owners;
• existing overseas owners will have longer than 12 months to either comply with the new register or sell, although the Government is yet to consider what that period should be;
• to ensure compliance, restrictions will be placed on titles for those entities that have not complied once the register is established and criminal offence will be established to provide an effective sanction;
• if a valid registration number is not available at completion, beneficial interest will pass but not legal title;
• a timeframe for providing updates has not been decided, although the Government is considering of increasing the frequency from the suggested 2 years to ensure that an accurate register is established.

The Government intends to publish a draft Bill creating the new register during the course of 2018 with a view to have the register operational by 2021.

With further details to be confirmed in the draft Bill, at this stage it is clear that overseas entities will need to keep up to date with the latest developments to ensure that they have the relevant information available for new purchasers or updating existing titles. As the new regime is targeted at all registerable land, establishing or maintaining legal title will require information regarding beneficial ownership information to be available in the prescribed form. This is important from a governance perspective, as well as enabling an entity to utilise its assets through charging for example. Additionally, maintaining updates as required by the upcoming legislation will also be important to ensure that the entity can deal with the asset as it chooses, as well as to avoid committing a criminal offence.

We will be providing further detail on these changes once the draft legislation is published. In the meantime, if you have any questions regarding these changes please contact our Corporate or Commercial Property teams on 0333 207 1130.

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