LMA responds to the UK BEIS Call for Evidence on a Register of Beneficial Owners of Overseas Companies and Other Legal Entities that own UK Property
16 May 2017The Loan Market Association (LMA) has responded to the UK Department for Business, Energy and Industrial Strategy's (BEIS) Call for Evidence on a register of beneficial owners of overseas companies and other legal entities that own or buy UK property (the "Register"). The call for evidence sets out BEIS's plans to create a register of beneficial ownership which aims to ensure that the UK remains an open and transparent place to do business when investing in the UK property sector.
The LMA response raises a number of concerns in relation to the impact of the Register with regard to real estate finance lending and encourages BEIS to fully consider any impact on lenders, in particular recommending a staged approach to implementation to ease the burden on the UK property market and prevent a negative impact on property transactions.
The LMA also recommends that it would be easier and more efficient to incorporate the Register's requirements within the Persons with Significant Control (PSC) regime. This would remove the possibility of inconsistency and undue administrative burden and also enable the PSC regime to be strengthened and consolidated. Furthermore, the LMA reiterates that it continues to have specific concerns on the current form of definition of PSC and urges that BEIS ensure that the same issues do not arise in the context of the Register.
The LMA goes on to identify a number of practical problems for lenders which should be considered in the context of the Register, particularly with regard to existing assets in respect of which finance may have already been provided under existing loan agreements, as well as potential issues in relation to the enforcement of distressed assets.
The City of London Law Society (CLLS) has also submitted a letter to BEIS in support of the LMA's response. Commenting on the Call for Evidence, Dorothy Livingston of Herbert Smith Freehills LLP, Chairman of the CLLS Financial Law Committee, said: "This is an important piece of legislation which, if not handled correctly, could have some chilling effect on real property financing, not just by means of syndicated loans. The Committee is pleased to support the analysis made by the LMA and hopes it will contribute to well thought-out legislation which achieves its aims without adding unnecessary burdens or increasing legal uncertainty."
Commenting on the LMA's response to the call for evidence, Amelia Slocombe, LMA Director, commented:
"Real estate finance in the UK is a vital contributor to economic growth. We would therefore urge that BEIS consider how the Register will impact the provision of finance and the supply of investment to UK property. In particular, genuine third party lending and security arrangements should be appropriately and clearly carved out, and compliance with the Register should not create any undue burden from a time, cost or administration perspective.
She added:
"Should there be any risk of sanctions (direct or implied) against parties involved in the provision of finance on genuine arm's length terms, this could have a severely detrimental impact on the availability of finance to the UK real estate sector."