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Foreign Companies: Public Register of Beneficial Ownership
The Prime Minister has announced that overseas companies that own or wish to acquire land or property in England and Wales, or intend to bid on a contract with the UK government, will be required to enter details of their beneficial ownership onto a new public register, according to a leading corporate lawyer.
“Most UK companies are required with effect from 6 April 2016 to maintain a so-called “PSC” register setting out details of those persons or entities who exercise significant influence or control over the company”, says Philip Round, a partner based at the Wolverhampton office of George Green LLP. “In most cases, this means those persons who hold more than 25% of a company’s share capital or who are entitled to exercise more than 25% of the voting rights. From 30 June, companies will be obliged to make this information available to Companies House when they file their annual confirmation statement”.
Mr Round continues, “earlier this year the Government published a discussion paper inviting responses to its proposal to extend this obligation to overseas companies, as part of its ongoing agenda to combat corruption by improving transparency in ownership of companies acting in the UK. This is particularly relevant given that property ownership provides a convenient vehicle for holding the proceeds of crime. Given the Prime Minister’s announcement at the London anti-corruption summit, it appears that this proposal will be implemented”.
Mr Round explains, “such a measure gives rise to difficult questions regarding implementation and enforcement. The Fourth Money Laundering Directive, published by the EU in June 2015, requires Member States to ensure that entities incorporated in their territories maintain adequate information on beneficial ownership, to be held in a central register and made available to law enforcement agencies and others with a legitimate interest. It is possible that EU companies whose details are entered into their own territory’s central register will be exempt from the requirement to register such details in the UK; this depends, however, on the precise manner in which the relevant Member States give effect to the Fourth Money Laundering Directive. The Government will also need to ensure adequate methods of enforcement, particularly given the difficulty in enforcing criminal penalties against overseas companies. The Government is, for example, considering imposing restrictions on a company’s ability to acquire new UK property or dispose of existing UK property for so long as it defaults in complying with the new regime. With regard to public procurement, the Government might make the award of a contract conditional on the provision of beneficial ownership details”.
Mr Round concludes, “significant practical issues will need to be resolved before such a proposal is enacted. It is clear, however, that investors in UK property will no longer benefit from the perceived anonymity derived from using a special purpose vehicle incorporated overseas”.
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