Government call for evidence
On 5 April 2017, the Government launched a call for evidence on its proposals for a public register of beneficial owners of overseas companies owning UK property. The call for evidence explains that the government is "concerned about the potential for illegal activity to take place through overseas companies investing in the property sector" which creates difficulties for law enforcement agencies to carry out effective investigations. The UK has already implemented a central public register of beneficial ownership of UK companies through the 'people with significant control' (PSC) register. In similar fashion to the PSC register, it is envisaged that Companies House would host the new register and it would be free to view for the public.
The Government proposes to give overseas entities which already own UK property a year to comply with the new requirements. At the end of this transitional period, if an overseas entity that owns UK property has not complied with the new register requirements, it will be prohibited from selling the property or creating a long lease or legal charge over it. The Government is considering whether to make it a criminal offence to fail to provide information to the new register, or where the entity has provided information, failing to keep it up to date.
Mehmet Karagoz, an Associate in Mishcon de Reya's Fraud Defence Group says:
"Steps towards increasing transparency of property ownership in the UK are to be welcomed. Just as law enforcement agencies find it difficult to identify owners of properties where overseas entities are involved in the ownership structure, victims of fraud face significant hurdles when seeking to recover their losses through civil proceedings. It is a costly and time consuming exercise for victims to obtain disclosure orders in foreign jurisdictions to ascertain whether a particular individual is the beneficial owner of an overseas entity that in turn owns UK property. Action that assists the victims of fraud in identifying potential assets that can either be frozen in advance or identified for the purposes of enforcing judgment once obtained must be welcomed."
Martin Shobbrook, a Partner in Mishcon de Reya's Fraud Defence Group says:
"Whilst there are various legitimate reasons for owning property through an overseas entity, it is also clear that there are unscrupulous reasons for structuring ownership in that way. It will be particularly interesting to see how the Government proposes to deal with overseas entities which already own UK property and ultimately fail to comply with the new register requirements. Preventing overseas companies from selling, leasing or placing a charge over the property may be a sufficient deterrent to encourage compliance for some. No doubt some companies will fail to comply until such time as their plans for the property requires them to do so. Whether the Government goes further, and makes it a criminal offence for failing to provide the necessary information, will be of significant interest to many."