Entities that hold UK property or enter into UK public procurement contracts will have to register their beneficial ownership information in a public register under government plans. Legislation is scheduled to be put before Parliament in the first half of 2018, the government confirmed this week as part of its UK anti-corruption strategy. The plans are aimed squarely at overseas entities: UK entities are already required to disclose their beneficial ownership information under the “people with significant control” (PSC) regime. Read more about the PSC register regime here.
The final details of the new beneficial ownership registers have not yet been confirmed, but earlier in 2017, the government set out its proposals in a call for evidence. What did we learn from that document? At that time the government proposed that:
- The UK property regime would apply to all legal entities owning UK registered property – current and future – with no minimum value requirement. There would be a transitional period to allow current owners to register their beneficial ownership information. If they failed to do so, they would be unable to transfer or register security against their UK property.
- By contrast, the UK public procurement regime would only apply to future contracts valued over £10 million. The call for evidence offered three options for what could happen to bidders who failed to provide their beneficial ownership information. Option 1 was that they would be required to provide the information as a condition of being awarded the contract. Option 2 was that they would be treated as excluded from bidding (which would mean a 3 year exclusion period would apply under public procurement rules). Option 3 was that they would be treated as non-compliant with the bid process (which would mean exclusion from that bidding process but not any future bids).
- The beneficial ownership test would be the same as the PSC register test which has been in force since April 2016. In broad terms, this test captures the individuals who ultimately own or control more than 25% of an entity or who otherwise exercise control over it or its management. (In many cases, registrable people are easy to identify but in cases with complex overseas structures, the analysis can be difficult).
- The register would be maintained by UK Companies House. When a legal entity registers its beneficial ownership information it would be given a unique reference number which it would have to supply to the Land Registry (in respect of UK property transactions) or to the contracting authority (in respect of UK public procurement contracts).
- There would be some sort of equivalence regime which would recognise beneficial ownership registers in other jurisdictions. So, if a legal entity had already provided its beneficial ownership information in an equivalent jurisdiction, it would not have to supply it again in the UK.
Osborne Clarke comment
We knew that policy in this area was being developed but questioned whether the government’s appetite for implementation may have waned given the pressures of Brexit. This week’s announcement of a specific timetable for the legislation should sharpen the sector’s focus on this potentially impactful plan.
At a minimum, there will need to be changes to processes and culture within the UK property and public contracts sectors as they transition to the new regime. And the foreign companies to which more than 100,000 registered freehold and leasehold properties in England and Wales are registered will need to be put on notice about their new obligations.
We will publish further updates on our Insights page as additional detail on the new legislation emerges.