UK: New Compulsory Register Of Beneficial Owners Of Overseas Entities Holding UK Real Estate

The government has recently published its response to a call for evidence on the proposed UK register of beneficial ownership for overseas entities (the "OEBO register") with implications for overseas entities that currently, or in the future propose to, own or lease UK real estate, as well as lenders lending to such overseas investors. The OEBO register will be the first of its kind in the world. It will be available for the public to view online at no cost and will, when reviewed alongside publicly available Land Registry title documents, reveal legal and beneficial owners of all registered UK property. The new register will create an additional layer of due diligence on future UK property transactions, it could impede transactions if not complied with and it will impose an initial and ongoing compliance burden on those owning and leasing registered UK property. Failure to comply with the new regime will result in criminal liability. With a draft Bill intended to be published in summer 2018, it is expected the OEBO register will become operational in 2021. We set out below the proposed scope of the OEBO register regime and next steps for those affected.

What is a beneficial owner?

The OEBO register will require disclosure of beneficial owners in a similar way to the PSC register already in place for companies registered in England and Wales, being broadly any person that directly or indirectly:

  1. holds more than 25% of the shares (or rights to the capital or profits) or voting rights (or equivalent) in an entity; or
  2. has the power to appoint or remove the majority of directors on the board of a company (or equivalent managing officer(s) of an entity); or
  3. exercises (or has the right to exercise) significant control or influence over the entity (as detailed in the statutory guidance issued in connection with the PSC register).

Who is required to comply?

The intention is that all legal forms of entities (apart from trusts) that can hold UK real estate will be subject to registration. The obligation on overseas entities will be to take reasonable steps to ascertain who its beneficial owners are. So far as an entity is unable to verify this information, or determines it has no qualifying beneficial owners to be named on the OEBO register, a statement to this effect can be made to Companies House. For such entities, disclosures must instead be made about the relevant entity's managing officer(s) so that some information is available at least regarding the individuals involved in the upkeep of the properties they own. Potential exemptions are being considered for entities where transparency of beneficial owners is already in place, but the scope of these is not yet clear.

Period for registration

Although the government is still considering the time frame (initially a one-year period was proposed), it has indicated that overseas entities already owning UK real estate at the point the OEBO register is introduced, will have a period in excess of 12 months to comply with the registration requirement. Successful registration will provide an entity with a registration number, which it will need to provide to the UK Land Registry to register any future property transactions.

System of notes and restrictions at the Land Registry

The government's proposals suggest a note will be placed on the registered titles of all qualifying UK property (both freehold and leasehold property with an initial term of more than seven years) after the expiry of a reasonable period (currently expected to be more than one year) from the date the OEBO register is formally introduced, thereby preventing overseas registered proprietors after the expiry of the relevant period from selling, leasing or granting security over their property without first complying with the OEBO register's requirements. So far as existing overseas registered proprietors do not intend to comply with the requirements, they will need to dispose of their property within the relevant time period to avoid later becoming unable to deal with their property. For future overseas registered proprietors, once the measures are introduced, no new purchases, leases or charges will be registered by the Land Registry without a registration number, so they must comply immediately with the OEBO register's requirements and, in any event, before completion of the relevant transaction in their favour.

The proposed note on registered titles means it will become a due diligence matter in future property transactions and all parties involved will be checking that their counterparties to the proposed transaction are complying, and have complied historically, with the OEBO register's requirements.

Ongoing compliance

The OEBO register must be kept up-to-date and overseas registered proprietors will be required to submit periodic statements confirming their beneficial owners. Initially a period of two years was proposed, but after consultation, the government is considering increasing the frequency of the periodic updates. Importantly, criminal offences are intended not only for knowingly or recklessly providing false information, but also for failing to update the register periodically. Each update to the OEBO register by an entity will reset the date their next update is due, and, if no update is submitted within the relevant period, the registration number will become invalid.

Third party protections and lenders

While transparency is key, the UK government has highlighted the need for the new OEBO register requirements to be workable and proportionate so that they do not prevent or interfere with transactions of overseas entities in UK property. In particular, the proposed notes or restrictions on title registers should not prevent lenders from enforcing their security or repossessing and disposing of secured property to recover their debt.

It remains to be seen therefore whether the legislation relating to the OEBO register will require overseas lenders also to comply with its requirements. It appears it would otherwise be possible to circumvent the requirements of the OEBO register by having a charge registered against registered UK property in the name of an overseas lender and realising the value of property instead via the purported "lender".

The government's response to the consultation also does not clarify exactly what the consequence of entering into transactions with non-compliant overseas entities would be. There is a suggestion that a sale of registered UK property to a non-compliant overseas entity would result in the transfer only of beneficial title, not legal title; however it is not clear what that might mean for the relevant seller, any tenants or lenders of the relevant property.

Next steps

The government is now working out the exact framework and detail of the OEBO register. The draft Bill is expected to be published for scrutiny this summer and the register to become operational by 2021.

We will continue to monitor developments on the OEBO register, and in the meantime we would be happy to discuss any of the above issues and consider what they mean for your UK real estate investments and loans.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions