As part of the move to improve transparency of beneficial ownership for foreign entities investing in UK property, it is proposed to introduce a new Register of People with Significant Control over Overseas Companies (the PSCOC Register). A Consultation Document on this issue was published in April 2017 and on 18 January 2018, the Business Minister, Greg Clark announced that draft legislation would be published in the Summer of 2018 and introduced into Parliament before summer 2019.
Government has confirmed that a draft bill will be published for scrutiny this summer. A Bill will be introduced to Parliament in 2019 and it is intended that the register will become operational by 2021. Their response to the consultation sets out current thinking about implementation of the register.
Overseas companies owning a UK property or bidding for public contracts will need to register.
Restriction on Transactions relating to UK Property by Overseas Entities
Indeed it is proposed that overseas entities will not be able to buy or sell property in the UK unless they have provided information about the beneficial owners for the PSCOC Register.
In respect of property already owned by overseas entities, it is proposed that the restriction will be reflected by a note on the Title Register for the property, prohibiting a sale, grant of lease or mortgage unless the entity is fully compliant with requirements under the PSCOC Register.
For overseas entities which wish to acquire UK property, they will first have to apply to register their beneficial ownership with Companies House. If the application to register is successful, the entity will be allocated a registration number. This number will be required in order to register title to the property at the appropriate Land Registry. Checking that an overseas entity is compliant with the new regime can be done very easily and quickly by checking the register on the Companies House website. Failure to supply a valid registration number on the form would mean that the application is cancelled and the transfer of title will not be registered and consequently the overseas entity will not become the legal owner of the property.
End to Anonymity
The proposed register will, in all likelihood, be publicly available and will contain similar information to the Persons with Significant Control Register which is now in operation for UK companies. Any overseas entity which is a leaseholder of property, where the lease is required to be registered and the original term is for more than 21 years, will be required to maintain a PSCOC Register.
The Conditions for Registration
It is important that the PSCOC Register identifies who benefits from the legal entity and who exercises control over it and the assets that it holds.
Under the PSCOC Regime it is proposed that an individual will be a person with significant control of an overseas company (a “PSCOC”) if he meets at least one of the conditions that mirror the current PSC regime
New condition brings Trusts into the PSCOC net
A new, ‘fifth condition’ catches trusts and results in some settlors, protectors, enforcers and beneficiaries of trusts being PSCOCs.
If the trustees of a trust or the members of a firm which is not a legal person have a majority stake, the fifth condition would also need to be applied to establish if there was a PSCOC with significant influence or control over that trust or firm.
A person would hold a “majority stake” in a legal entity in any of the following circumstances:
a) The person holds a majority of the voting rights in a legal entity;
b) The person is a member of the legal entity and has the right to appoint or remove a majority of the board of its directors;
c) The person is a member of the legal entity and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights of that legal entity; or
d) The person has the right to exercise, or actually exercises, dominant influence or control over the legal entity.
Overseas entities which own UK property when the new rules come into force will be given one year to comply with the new requirements and apply for a registration number. This will give overseas entities sufficient time to dispose of their property interests if they choose to do this rather than disclose the required information. During this period entities will be unable to register title to new purchases of property without a registration number.
All overseas entities that own UK property will be contacted before the law comes into force, setting out the requirements and the consequences of non-compliance. A reminder will be sent three months before the end of the first twelve month period.
After the end of the one year transitional period, all overseas entities that own property in the UK, regardless of when they bought the property, will be prohibited from selling the property or creating a long lease or legal charge over it unless they have complied with the PSCOC Register requirements. As stated above, a restriction will be noted on the title Register which will be visible to prospective buyers when they carry out a title search. A transfer of the property will be void if the overseas entity is not compliant with the PSCOC Register requirements at the time the contract to acquire the property completes.
Once the overseas entity has bought property in the UK, a note will be put on the title register that will reflect the statutory prohibition on sale, grant of a lease or mortgage unless the entity is fully compliant with the register’s requirements.
Information to be provided for the Register
The Department for Business, Energy & Industrial Strategy are currently reviewing the feedback on this proposal so details of what is required are not yet confirmed. However, in addition to personal details, name, date of birth, nationality, country or state where beneficial owner usually resides, the register will likely include information about the nature of the beneficial owners’ control over the entity.
It is proposed that the information on the PSCOC Register should be updated at least once every two years and the overseas entity should have the option to update the information more often.