On 5 April 2017, the UK government issued a "call for evidence" - essentially a short updated consultation - on its proposed register of overseas companies owning UK property.
The government had previously declared its intention to introduce a new public register of beneficial owners of overseas companies that own or buy UK property or engage in UK government procurement. In particular, the government wishes to prevent overseas entities buying or selling UK real estate without registering details of their beneficial owners. The requirements would cover freehold property and also leaseholds where the term is over 21 years.
This is the latest in a series of corporate transparency initiatives aimed at tackling money laundering and terrorist financing. Since April 2016, most UK companies and LLPs have been required to maintain a register of "people with significant control" (known as the company's PSC register). This information must also be lodged at Companies House.
The government now intends to align the new overseas companies register requirements with the existing PSC regime by, for example, using similar tests to determine whether someone has beneficial ownership or control of an overseas company.
Where an overseas entity wishes to buy UK property, it is proposed that the entity will be able to apply to Companies House to participate in the new register and, if successful, it will be given a registration number. Then, when the entity applies to register itself as the legal owner of a property, the land registry application form will require the entity to give its registration number. Without this number, the form will not be accepted by the land registry and the application will be cancelled.
The government suggests that in such a case, the transfer document would be treated as void. It is not clear what this would mean for an unwitting UK seller who had collected the sale price on completion and might not be in a position to refund it, i.e. if this had been spent on a new property.
Entities that already hold UK property would have 12 months either to comply with the requirements or to dispose of the property. If a registration number has not been obtained after 12 months, the entity will not be able to sell the property, and this will be enforced by a restriction in the title register.
Information to be included on the new register will be the same as that required from UK companies under the PSC regime. It includes the beneficial owner's name, date of birth, nationality and residential address - although this will not be public. The information will be held at Companies House and will be accessible free of charge.
The detailed mechanics have not yet been finalised and will need to dovetail with the UK's existing PSC regime and the Fourth Money Laundering Directive. This requires all EU companies to collect beneficial owner/s information and member states to hold this information on a central register by June 2017.
The Fourth Directive will also require the UK's existing PSC regime to be expanded to other types of legal entity, not just companies and LLPs. The UK was a key supporter of the Directive, which we therefore expect to remain part of our law after Brexit. The deadline for responses to the call for evidence is 15 May 2017.