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Article:

Property ownership and public contracting by foreign companies: improving transparency

04 April 2016

Having introduced a requirement for a register of people with significant control (PSC) showing who really owns and controls UK companies (see Business Edge February 2016), the Government has recently issued a discussion paper consulting on proposals to improve the transparency of ownership of foreign companies that purchase property or participate in public contracting in England and Wales.The discussion paper notes that, as with UK companies, the overwhelming majority of foreign companies contribute productively to the UK economy, abide by the law and make a contribution to society. But there are exceptions and the Government wishes to make it easier to identify them. The discussion paper is the first stage in that process. The consultation was only open for a short period and closed on 4 April.

There will be a formal consultation if the Government chooses to proceed with any of the ideas in the discussion paper. It will also be necessary to consider the UK’s obligations under the existing EU framework.

The Government believes there are important benefits to UK businesses from extending the requirement to provide beneficial ownership information to include foreign companies that are active here. Requiring non-UK companies to provide their beneficial ownership information for public contracts could also make it easier for UK businesses to require the same information from foreign companies in private contracting processes if they choose to do so.

The new approach would be based on requiring foreign companies to provide information on their beneficial ownership before they are able to buy land or property in England or Wales, or enter into public procurement contracts in England. The Government’s starting assumption is that the obligations placed on foreign companies should be broadly similar to those being placed on UK companies.

One option for holding the information would be to establish a further register managed by Companies House alongside the UK PSC Register. Alternatively, the new register could be operated by another independent public body, or by a private sector organisation.

Once the UK PSC Register is operating, it should be possible to cross-reference the beneficial ownership and control of most UK companies with the land and property they own using Land Registry records. The Government believes there is a strong case for ensuring similar transparency in the case of property owned by foreign companies. It is considering exempting foreign companies incorporated in jurisdictions which already have an accessible central register of beneficial ownership information (holding adequate, accurate and current information) from providing similar information to a UK foreign company beneficial ownership register.

For example, it may be appropriate to exempt all non-UK EU companies from providing similar information to the UK foreign company beneficial ownership register given the provisions of the 4th Money Laundering Directive (4MLD). The Government will consult later this year on the measures that it proposes to bring forward to meet the 4MLD requirements, including changes to PSC legislation where required.

Obtaining beneficial ownership information about all companies (UK and foreign) bidding in a procurement process would improve the ability of public bodies to account for the public money that they spend and to know how (and with whom) it is being spent.

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