Registration of Overseas Entities Bill
As we enter (hopefully) a properly post pandemic era, we can expect to see a number of legislative proposals which haven’t progressed over the past two years, re-appear.
One such proposal is the Registration of Overseas Entities (ROE) Bill.
What is the ROE and why did it come about?
In brief, the intention is to achieve transparency of UK property ownership, where any UK land is held by an overseas entity. At present there is no public register of the beneficial owners of overseas entities holding UK land.
The ROE was first suggested at a very high level in 2016, following the London Anti-Corruption Summit in May of the same year. Having introduced the Persons with Significant Control (PSC) register, which seeks to ensure beneficial owners of UK companies, where those beneficial owners meet the requirements of the PSC register, are publicly disclosed, the intention was to achieve the same level of transparency for beneficial owners of UK property.
What has happened to date?
In brief, progress has been slow. While a draft bill was published in July 2018, which had been anticipated to be in operation by 2021, that has not happened.
However it appears interest in the ROE has been renewed, and in the autumn last year the government announced it was committed to establishing a register of beneficial owners of foreign companies and other overseas entities owning land in the UK. This week, a private members bill was presented to seek to establish the ROE. While this will almost certainly not result in the ROE being introduced, it does tell us that there is increasing parliamentary focus on achieving transparency for ownership of UK land.
What does the ROE propose?
The ROE proposes that Companies House will establish and maintain an Overseas Entities Register, and overseas entities will have to register to acquire an overseas entity ID, which ID will be required for the entity to deal with land.
In terms of public information, where the beneficial owner is an individual the information required will be aligned with that currently required to be disclosed under the PSC rules, including name, date of birth, and nationality. This would be publicly available information.
This contrasts with the position for trust holding UK land directly, which have an obligation to register with the Trust Registration Service, but importantly the Trust Register is not public in most cases.
Who would have to be shown as the beneficial owner?
In the draft ROE the proposal mirrors the approach to who is a PSC, such that a person who holds directly or indirectly more than 25% of the shares or more than 25% of the voting rights in the overseas entity would be registered.
Further a person who has the right to directly or indirectly appoint or remove a majority of the board of directors of the overseas entity, a person who has the right to exercise, or actually exercises, significant influence or control over the overseas entity, and the trustees of a trust, the members of a partnership, unincorporated association or other entity meets any of the above conditions, the person who has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or entity would all be registered.
What should be done?
At present little can be done, however it would be sensible for overseas entities holding UK land to consider, applying the above tests, which persons would be registered as beneficial owners. It is proposed that existing entities would have an 18 month transitional period to register or to dispose of the UK land.
The ROE is simply another step in the road to ever greater international transparency, and it is important that overseas entities and their beneficial owners understand the likely impact of the ROE in terms of disclosure. It is important to emphasise that at present there is no certainty as to when the ROE will come into effect, however given the government statement in November and the headlines this week about the UK and money laundering, it is reasonable that anticipate that there will be a desire to introduce the ROE sooner rather than later.
How we can help
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Sophie Dworetzsky is a Partner at Charles Russell Speechlys' London office, advising high net worth individuals on wealth planning, with a particular focus on advising non-domiciliaries on tax efficiency for UK assets and for offshore assets.