Registration of Overseas Entities Bill – update

Following our initial article, we had the pleasure of meeting with policy officials from BEIS working on the Draft Registration of Overseas Entities Bill (the Bill) to discuss progress and our concerns with the Bill.

The central topic of discussion was how information provided about overseas entities and their beneficial owners to Companies House could be verified. If the information is not verified, there is a risk that overseas entities and their beneficial owners could easily subvert the purpose of the register. Equally, an onerous verification process could clearly increase the compliance burden on such entities or their advisers.

Verification was an issue raised in the Joint Committee Report. It was recommended that beneficial owners of overseas entities be verified by professionals regulated under the Anti-Money Laundering Regulations 2017. In particular, two proposals are being considered to address the issue of verification.

Companies House verification

One consideration was whether Companies House could be provided with the financial and administrative resource to carry out verification checks of information itself. However, Companies House does not currently have the statutory powers to do this and it is unlikely that there will be sufficient time in the Parliamentary timetable for it to be granted such powers before the register goes live.

Whilst this may be a long-term solution, it is one that currently stands little chance of coming to fruition.

Verification by legal and/or other professionals

Given that the majority of overseas entities seeking to invest in UK property will use a UK professional regulated under the Anti-Money Laundering Regulations 2017 (the MLR), the Government is considering whether to require overseas entities seeking to register with Companies House to provide evidence that they have a relationship with a regulated professional and have therefore undergone the verification processes required under the Money Laundering Regulations 2017. This could take the form either of a certificate from the relevant professional or the professional directly confirming with Companies House that the entity and its beneficial owners have been verified (as far as it is practicable to do so). A potential extension to this would be to have the details of the certifying professional being available on the public register.

From a law firm's perspective, the concern with this is that, whilst the firm may be willing to share information it has obtained as part of its own client due diligence procedures (subject to the relevant client's consent), it would be a step too far to certify the veracity of that information. Although such information will already be certified by a professional in the appropriate jurisdiction, the imposition of risk and liability on legal professionals that would be created by a direct certification process would place a disproportionate burden on the legal industry, and its insurers.

If legal professionals were willing to provide information they had obtained as part of their own client due diligence procedures to Companies House, but without any certification or otherwise accepting any liability, the issue would remain that there would be no guarantee that the information on the register would be accurate. This is a point that was picked up on by the Former Chairman of the Joint Committee on the replies to the GoReal estate disputesvernment response. The Government does not intend that any additional responsibilities should be imposed on regulated professionals over and above that already contained in the MLR in relation to carrying out client due diligence. However, this is unlikely to provide complete assurance to legal professionals, as the level of due diligence required by the MLR is already set at a high threshold.

Our thoughts

The Government is keen to strike a fair balance between implementing the register for the purposes of preventing money laundering and, conversely, avoiding implementing procedures that act as a deterrent for overseas investment into the UK. It is yet to be seen how this will take shape but Taylor Wessing will continue to liaise closely with the Government to ensure that the proposed solutions are cost-effective, efficient, and workable in practice.