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A proposed new regime for the public disclosure of the beneficial ownership of overseas entities owning UK property is likely to necessitate increased due diligence by lenders to such bodies, according to a corporate and banking lawyer. “The Government has recently sought views on detailed proposals for a register of beneficial ownership of overseas entities that own UK property or engage in UK Government procurement, as first announced last year,” says Philip Round, a partner at George Green’s Wolverhampton office.
“Failure to comply with the requirements within the relevant timescale will impede an overseas company’s ability to sell or grant security over UK property, with obvious consequences for lenders.”
Mr Round continues, “the regime will be similar to the requirement for UK companies to maintain a PSC register. Overseas entities that own or wish to acquire UK property must supply beneficial ownership information to Companies House and apply for a registration number, without which registration of title to property will not be permitted. There are likely to be transitional arrangements under which overseas entities that already own UK property will have 12 months to obtain a registration number. Where the overseas owner is not fully compliant, the title register will be subject to a restriction prohibiting the sale of the property or the grant of a long lease of, or charge over it.”
According to Mr Round, the Government intends to permit legitimate lenders to enforce security over property, even where an overseas entity is in breach of the registration requirements. “It would be disastrous if lenders were unable to enforce existing security over property granted by an overseas entity prior to the introduction of the regime, and the Government intends to provide for this, whilst at the same time avoiding the possibility of a beneficial owner circumventing regulatory requirements by taking security over the relevant property and thereby benefiting from the carve-out.”
Mr Round concludes, “it will be interesting to see how the Government legislates to protect the position of legitimate third party lenders whose security might otherwise be prejudiced by a borrower’s infringement of the new requirements. This does not alter the position that it will not be possible to take new security over property if the owner is not in compliance with the regime at the relevant time. A lender’s adviser will therefore need to check whether this is the case before significant time is incurred in progressing properties lend.”