The government has announced that overseas companies that own or buy property in the UK will be required to provide details of their ultimate owners on a public register.
This commitment was made in a debate in the House of Lords last week on the Sanctions and Anti-Money Laundering Bill. The government committed to bring forward legislation that will effectively prevent people concealing the underlying ownership of overseas companies when they are being used as vehicles to own UK property.
This proposal was the subject of a consultation exercise in April last year, as we explained in our article entitled Proposals for a register of overseas entities owning UK property. The government says that more than £180 million worth of property in the UK has been brought under criminal investigation as the suspected proceeds of corruption since 2004, and over 75% of properties currently under investigation use offshore corporate secrecy.
The new register is intended to help to reduce opportunities for criminals to launder dirty money and buy property in the UK with the proceeds.
The government is proudly announcing that the UK will be the first country in the world to require overseas owners to provide details of their ultimate owners.
The proposed timetable for implementation is leisurely. A draft bill will be published by the summer, with legislation to be passed in 2019 and for the register to take effect in 2021. Lord Ahmad of Wimbledon, speaking for the government, emphasised in the House of Lords that the process is complex, particularly as it will be necessary to work with Companies House and three different land registries (England and Wales, Scotland and Northern Ireland) to develop the necessary systems to ensure that the legislation achieves its purpose.
A key proposal is that those who own property and who do not comply with the new requirements will lose the ability to sell the property or create a long lease or legal charge over it. Similarly, buyers of property who do not comply with the new requirements will not be entitled to become registered as proprietors.
In terms of the time expected to be taken before the proposals become effective, Lord Ahmad made a comparison with the People with Significant Control (PSC) register, which took four years to set up from passing the necessary legislation to the introduction of the register. "It may have taken four years," he said, "but it still put the UK's framework in a world-leading position.
The new register will take a similar path, but there are numerous additional considerations."
In particular, one other reason for the lengthy timescale is that it will be necessary to give time for affected organisations to adjust to the new requirements.
Lord Ahmad pointed out that overseas entities that bought property in the UK, in some cases many years ago, will not have had these new provisions in their contemplation at the time. In most cases, the property will have been bought for "legitimate and innocent purposes" and by those who expected privacy offered by ownership through a legal entity.
Those entities, and their beneficial owners, will need time to understand the requirements and consider their options. In the consultation exercise last year, the suggestion was that entities that already own property will be given a transitional year in which they will be free to choose whether to disclose the information required by the new legislation or dispose of their property.
One other suggestion that was made last year, not referred to in the House of Lords debate or in the government's press release, is that the new rules should also apply to overseas entities that wish to take part in central government procurement exercises. It is not yet known whether this idea will be carried forward.