Beneficial ownership disclosure for UK land and properties: the next step in the march towards transparency?
In Singapore on Wednesday David Cameron made clear his determination for the UK not to become a safe haven for corrupt money, saying that “when you have companies whose ownership isn’t known you allow a shroud of secrecy behind which people can do bad things, sometimes terrible things, with no accountability.”
The movement towards greater business transparency has continued to gather pace. With beneficial ownership disclosure in relation to UK companies becoming mandatory next year, the focus is now on extending transparency requirements to overseas investment in the UK.
The first step: beneficial ownership transparency for UK-incorporated companies
As of April next year, the UK will become the first major country to establish a publicly accessible central registry showing who really owns and controls all British companies (please see our briefing note and previous blog entries for further details of the new UK company law regime).
As David Cameron pointed out in Singapore, however, this regime will only apply in Britain and only to British companies, and so the aim is for other countries to follow: to tackle corruption effectively, data needs to be traceable from one country to another. The UK government will continue therefore to make the case for transparency with its international partners, including the Overseas Territories and Crown Dependencies. The prime minister has now stated, however, that he is willing to go further and “take concrete steps to force the pace“, which includes looking at whether we can get foreign companies investing in the UK to step up to the same level of transparency.
The next step: transparency for foreign companies investing in UK properties
£122 billion worth of property in England and Wales is owned by offshore companies and, according to Transparency International research, approximately three-quarters of properties whose owners are investigated for corruption are held through offshore companies.
The UK government acknowledges that there may be a number of ways of making property ownership by foreign companies more transparent, for example by extending what is currently asked of UK companies to foreign companies too. The government intends to consult on the best way forward and in the meantime has asked the Land Registry to publish this autumn data on which foreign companies own which land and property titles in England and Wales.
Some, including campaign group Global Witness, are calling for all companies (including those incorporated overseas) that own UK property to be required to tell the Land Registry who their beneficial owners are. Global Witness also feel it is important for the UK to convince the British Overseas Territories and Crown Dependencies to create their own public registers.
If a beneficial ownership disclosure regime were implemented at the Land Registry, careful consideration would need to be given to the mechanics. For example, would a buyer of a property be required to provide beneficial ownership information as a pre-condition to the Land Registry registering that buyer as the owner? Would owners of properties that are already on the register be required to provide the information and keep it up to date on an annual or rolling basis? What happens to properties whose owners cannot or will not disclose beneficial ownership?
The UK continues to lead the way on transparency, but foreign support will be crucial
The UK is hosting an Anti-Corruption Summit in London next year, where David Cameron hopes the whole world can work together to strengthen the tools available to tackle corruption. The government is also going to look at the case for insisting that any non-UK company wishing to bid on a contract with the UK government should also publically state who really owns it; the idea being to use the government’s buying power as “battering ram” for greater corporate transparency around the world. The UK will therefore continue to be at the forefront of increased transparency. Whatever route the government ultimately takes to make foreign investment in the UK more transparent, it is clear that international support will crucial to the UK’s efforts fully succeeding.
Saul Sender, Corporate partner, commented: “The public register of beneficial owners of companies arriving next year is already a fundamental change in UK law, but in some ways an equivalent register for UK properties might be the next logical step in the transparency story.”
Ian Paul, Real Estate partner, said: “This is a far-reaching proposal which will affect many honest investors who value their privacy, as well as those with something to hide.“