Transparency and the ownership of foreign companies – BEIS response to Call for Evidence

The Department for Business, Energy and Industrial Strategy (BEIS) has published the response to its Call for Evidence on the creation of a register of ownership and control of foreign companies that purchase property in the UK or enter into UK public procurement contracts.  The proposal for a register was first announced at the UK’s International Anti-Corruption Summit in May 2016, and forms part of the Government’s broader transparency agenda.

In March 2016, the Government published a discussion paper setting out its concern about the potential for illegal activity to take place through overseas companies investing in the property sector. This was followed in April 2017 by a BEIS call for evidence which set out proposals to create a register of beneficial ownership of overseas companies that purchase UK property or enter into UK procurement contracts.  UK incorporated companies are already required to create a register and file information at Companies House about their beneficial ownership through the register of persons with significant control (PSC register).

Key points in the Government’s response to the Call for Evidence are:

  • Scope – All overseas legal entities that can hold properties or bid on central government procurement contracts would be within scope, subject to certain exemptions, including for overseas entities incorporated in countries with equivalent public disclosure regimes. Trusts will not be in scope of the regime.
  • Definition of beneficial owner – The definition of beneficial owner used for these new registers will be aligned to the definitions currently used in the context of the PSC register regime (that is, a person who: (i) directly or indirectly holds more than 25% of the shares in the company; (ii) directly or indirectly holds more than 25% of the voting rights in the company; (iii) directly or indirectly holds the power to appoint or remove a majority of the board of directors of the company; (iv) otherwise has the right to exercise or actually exercises significant influence or control over the company; or (v) has the right to exercise or actually exercises significant influence or control over a trust or firm that is not a legal entity which meets one or more of the previous conditions).  These definitions would be adapted for entities which are not similar to UK companies limited by shares.
  • The register – The information required in relation to beneficial owners would be substantially the same as that required under the PSC regime and so would include the beneficial owner’s name, nationality and service address. Information on the register would not need to be updated on an event driven basis, but would need to be updated at regular intervals (to be determined by the Government). Failure to update the register would be a criminal offence.
  • Impact on property transactions – Overseas entities would be unable to buy or sell or registrable leasehold property in the UK unless they comply with the regime. This restriction will be effected by requiring overseas entities to provide a registration number when registering title to property at the Land Registry or registering a long lease or creating a charge over a property. Overseas entities would only be provided with the registration number when they provide their beneficial ownership information to Companies House. There will be a transitional period for overseas entities which currently own a property to ascertain their beneficial ownership information and obtain a registration number.  The Call for Evidence suggested a one year transitional period.  Following feedback, the Government says that overseas entities should have a longer period to comply and will confirm the length of the transition period in due course.
  • Impact on UK government procurement – Overseas entities would be unable to participate in UK central government procurement processes unless they comply with the regime. They would be required to provide beneficial ownership information as a condition to being awarded the contract.

The Government intends to publish a draft Bill to implement its proposals over the summer.  It is intended that the registers become operational in 2021.

The BEIS response to the call for evidence is available on the website.

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Filed under Bribery and Corruption, Corporate Crime, Draft Legislation, Sanctions and Money Laundering, UK, UK Government, UK Legislation

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