Earlier this year, as we reported in our Transparency Update March 2018, the UK Government confirmed its intention to proceed with a register of overseas companies owning UK property. The Government has now published for consultation the draft Registration of Overseas Entities Bill, which sets out the framework for the new regime.

New register of overseas entities

The plan is to ban any overseas company from being registered as proprietor of UK land or buildings, unless it has registered details of its beneficial owners in a new, largely public register. An overseas company that fails to register these details will also, in practice, be unable to sell, mortgage or lease land that it already owns. Criminal penalties for non-compliance will also apply.

An overseas company or other entity will apply for registration by giving the Registrar of Companies details of the entity and its "registrable beneficial owners". Before making an application, the overseas entity must take "reasonable steps" to identify any registrable beneficial owners and obtain the required information in relation to them.

The register will be public. Beneficial owners' dates of birth and residential addresses must be given to the registrar, but will not be included on the public register. The registrar will have power to make other information confidential; for example, if publication of that information would put the individual at risk of physical harm.

Slight differences from the regime applicable to UK companies

The register of overseas entities regime has been modelled on the existing "PSC" register for UK companies. The criteria for identifying "registrable beneficial owners" of overseas entities are similar to those for identifying "people with significant control" of UK companies. A key difference, however, is that overseas entities, unlike UK companies, will not be required to keep their own (internal) registers; instead they will be required to deliver the information directly to the Registrar with their application for registration.

After an overseas entity has been registered at Companies House, it will be required to confirm or update its information annually. UK companies must already do this.

UK companies also have to notify changes to their registrable beneficial owners within 14 days of a change to their internal register, without waiting until the next annual update (see our June 2017 PSC registers briefing), but this requirement will not apply to overseas companies. This means beneficial ownership information on UK companies may end up being slightly more up to date than for overseas entities.

Practical impact for overseas entities holding UK property

Failure by an overseas entity to register beneficial ownership details at Companies House will prevent the entity from being registered as proprietor of land via the three land registries of England and Wales, Scotland and Northern Ireland.

Failure to register (or to comply with the updating duty) will also mean that certain dispositions made by an overseas entity registered proprietor cannot be registered at the land registry. In practice, this means that a non-compliant entity will not be able to sell, lease or mortgage the land, as any disponee would be unable to register the disposition at the land registry and therefore will be reluctant to transact with the overseas entity.

Transitional regime for overseas entities already owning UK property

Overseas entities that already own UK property will have 18 months from when the new register goes live (expected to be in 2021) either to register their beneficial ownership details, or to dispose of the land if they do not wish to register.

New criminal offences

The draft Bill imposes criminal penalties for non-compliance, applicable to both overseas entities and any of their officers in default. It will be vital for directors and other officers of overseas companies owning UK land to ensure they comply with the new rules.

Next steps

The Government is inviting comments on various aspects of its draft Bill by 17 September 2018 and it is intended that the new rules will come into force in 2021.

The overseas entities register comes in the midst of various other transparency initiatives. As we reported in May 2018, for example, the Government has made clear its intention to require Britain's overseas territories to establish public beneficial ownership registers for their companies, whether or not they own UK land (see our Transparency Update May 2018).

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.