The UK government intends to introduce a new register of People with Significant Control over Overseas Companies, “the PSCOC Register”, in order to improve transparency of beneficial ownership for foreign entities which own UK properties. The Bill will be introduced to Parliament in 2019 and is intended to become operational by 2021.
What is the impact on the transactions of overseas entities which hold UK properties?
There will be restrictions on transactions as the overseas entities will not be able to buy, sell, grant a lease or mortgage on the property in the UK unless they have provided information about the beneficial owners for the PSCOC Register.
In respect of overseas entities which already own UK properties, the restriction will be imposed by note made on the Title Register of the property, prohibiting any transaction unless the overseas entities are fully compliant with the requirements under the PSCOC Register.
Overseas entities which intend to acquire UK property will first have to apply to register their beneficial ownership with the Companies House. The overseas entities will be allocated a registration number once the application for registration is successful. In the case where the overseas entities fail to supply a valid registration number on the form, then the application will be cancelled and the transfer of title will not be registered. As a consequence, the overseas entities will not become the legal owner of the UK properties.
Who must be registered in the PSCOC Register?
It is proposed that an individual will be considered as PSCOC if he meets at least one of the conditions below, which mirror the current person with significant control of the “PSC" regime. Therefore, PSCOC is someone who:
- holds more than 25% of shares in the company;
- holds more than 25% of voting rights in the company; and/or
- has the right to appoint or remove the majority of the board of directors.
Trusts can be used as a vehicle for the protection of anonymity.
In accordance with the new proposed legislation, an “overseas entity” means a legal entity that is governed by the law of the country or territory outside of the UK, and a “legal entity” means a body corporate, partnership or other entity that, in each case, is a legal person under the law by which it is governed.
According to the abovementioned definition, we will observe that the proposed legislation does not cover trusts. Consequently, a trust can be used as a vehicle for protection of anonymity for the people who own properties in the UK. It is worth noting, however, that any overseas entity holding land on behalf of a trust will be required to register with the Companies House even though this is not a requirement for the trust itself.
A one-year transitional period will be given for overseas entities which own UK property to comply with the new requirements and apply for a registration number. Therefore, overseas entities will have sufficient time to decide if they would like to dispose of their property interest rather than disclose the required information. During the transition period, overseas entities will not have the right to register the title to new purchasers of property without a registration number.