The draft Registration of Overseas Entities Bill has been published for consultation. It moves the UK one step closer to a ‘world-first’ public register of overseas entities owning UK property (the register). From 2021, overseas entities wishing to own UK property will need to identify and register their real owners. Entities failing to comply will be unable to sell, buy, lease or mortgage UK property – and could face criminal sanctions and fines.
Business minister Richard Harrington said the register “will expose the ultimate owners of overseas shell companies, giving authorities the information they need to come down on criminals who launder their dirty money through the UK’s property market”.
The definition of ‘overseas entity’ encompasses all non-UK entities with a legal personality (including companies, partnerships, corporations sole, governments and public authorities but not trusts). These entities will need to comply with the new regime unless the Government decides to exempt them.
Entities owning or intending to own UK property will need to take ‘reasonable steps’ to:
We await guidance on what amounts to ‘reasonable steps’. As a minimum, entities must send information notices to anyone they reasonably think:
A person who fails to respond to a notice within one month, without reasonable excuse, could face up to two years in jail and an unlimited fine.
Entities unable to provide information on beneficial owners (for reasons specified in the bill) must instead provide Companies House with details of their managing officers (including their directors, managers or secretary).
Beneficial ownership information must accompany an entity’s Companies House application. After a successful application, Companies House will notify the entity of:
The entity must then update its beneficial ownership information at least annually to ensure that its ID number remains valid.
The register will be viewable free by anyone on the Companies House website. Some information will not be public. Regulations will also set out an application process to suppress details where there is a ‘risk of harm’.
The bill contains serious sanctions to compel compliance:
The Land Registry will not register an entity as proprietor of a freehold interest or leasehold interest granted for more than seven years (qualifying estate) unless the entity has a valid ID number. Although the unregistered transaction will operate to pass the beneficial interest in the property, the entity will not obtain full legal title. If the entity successfully registers as proprietor, a restriction will still be placed on the title (see below).
The Land Registry must place a title restriction on any qualifying estate where an entity is the registered proprietor. Such restriction will prevent an entity:
However, the restriction will not prevent:
Because it is possible for an entity to dispose of property despite not being a registered proprietor, the Land Registry will not register restricted dispositions in these circumstances.
These entities will have 18 months from the bill’s commencement date (a ‘transitional period’) to either:
There are various penalties for non-compliance, including:
Overseas entities should prepare now. It will take time to identify any/all registrable beneficial owners and comply with the registration requirements. Third parties contracting with overseas entities should:
When acting for buyers, conveyancers should also consider raising enquiries of the seller to ensure that both legal and equitable title passed on previous disposals made by overseas entities.
March 2016: Discussion paper published. The Government commits to introducing the register
April 2017: Call for evidence and response published
March 2018: Response to call for evidence published
July 2018: Draft Registration of Overseas Entities Bill published for consultation along with a research paper
September 2018: Consultation closes
Spring/summer 2019: Bill to be laid before Parliament
2021: Register will become operational after royal assent and the making of secondary legislation
The Government seeks industry views on the bill, including on:
You can read the draft bill here – views must be submitted before 17 September 2018.
This article was published in Estates Gazette in September 2018.