Beneficial Ownership: Building on Corporate Transparency
The Registration of Overseas Entities Bill (OSE), set to come into force in 2021, is the latest of the Government’s measures to enhance corporate transparency with the primary aim of preventing and combating the use of land in the UK by overseas entities for the purposes of laundering money or investing illicit funds. Although in most cases the ownership of UK land by overseas companies is perfectly legitimate, the BEIS reports that law enforcement investigations into international corruption have identified more than £180 million of land in the UK which is suspected to have been acquired with the proceeds of corruption, with 75% of those investigated using overseas companies to hide their real owners.
The proposed legislation will require any overseas company wishing to purchase freehold land, or a registerable lease to first register at Companies House.
Once registered, overseas companies will be required to supply, and update annually, details of beneficial ownership for inclusion on a public register.
The OSE’s reporting requirements follow, broadly speaking, the same filing requirements as introduced by the Person with Significant Control regime, which came into force in April 2016. These apply to any individual or entity who holds more than 25% of the shares or voting rights of the company; has the right to appoint a majority of directors of the company; or has the right to exercise or actually exercises significant influence or control over the company.
Officers of the relevant companies will face criminal sanctions for failure to comply with the registration and updating requirements, as well as delivering (or causing to be delivered) misleading, false or deceptive information.
Notwithstanding the criminal penalties, non-compliance will in most cases affect the ability of the overseas company to acquire legal title to land, as the entity will be unable to register as proprietor or owner of land with the Land Registry. In cases where an overseas entity is already registered as proprietor of UK land at the Land Registry, non-compliance with OSE registration requirements will inhibit the entity’s ability to sell or lease that land, or create a legal charge over the land, as any buyer, tenant or a lender would be unable to register that disposition.
In advance of the introduction of the proposed registration regime, lenders should review their standard documentation to ensure that sufficient provision is made to ensure compliance with registration requirements when taking security over property held by overseas entities.
PDT’s Corporate and Real Estate teams act for both lenders and a variety of domestic and international businesses buying and selling companies and real estate assets, whether to UK or overseas buyers. Get in touch if you would like to discuss your business requirements.
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