Sunlight or shadows – will the Government’s new public register of land ownership be effective in improving transparency?
by Megan MacInnes, Land Adviser with Global Witness
Yesterday the Scottish Government announced that their solution to the problem of not knowing who is behind the opaque corporate structures owning Scotland’s land was to create a public register of those who control land, (media release here and letter to RACCE here) as part of the Land Reform (Scotland) Bill currently passing through parliament. This step should be broadly welcomed and is a significant step forward from the previous proposals in the Bill to improve transparency of Scottish land ownership.
On paper this announcement appears close to the improvements to transparency of land ownership which I blogged about two weeks ago, but is it really as good as it sounds?
No-one disputes that not knowing who is really behind major swathes of land in Scotland is a problem. It prevents local communities living on or affected by land from contacting the true owner if they have a problem (rather than an anonymous shell company), it prevents law enforcement agencies from investigating crimes and it’s ironic that having won the right to roam, Scotland’s citizens don’t have the right to know who truly controls and makes decisions about the land they are walking on.
In a letter accompanying the Government’s announcement, Minister for Environment, Climate Change and Land Reform, Aileen McLeod MSP, describes their intention to “requir[e] the public disclosure of information about persons who make decisions about the use of land in Scotland and have a controlling interest in land”.
However, the devil is certainly in the detail and there are many ways in which this commitment may not provide us with what we really need to know about who truly owns Scotland’s land. The potential for loopholes and exemptions which would render this register meaningless are substantial.
Most importantly (and let’s get the boring technical stuff out of the way first) this register needs to consist of the “person(s) of significant control” of the legal entities owning land in Scotland. This term is the technical definition of what’s more commonly known as “beneficial ownership” and means that what is registered are the names of the individual people who either own or control land in Scotland. This term already applies in Scotland through a UK-wide register of company beneficial ownership which was introduced in 2015. Adopting this technical definition is the only way to ensure the register will include what we need it to.
This register has the potential to finally shine a light on some of Scotland’s most shadowy corporate entities, for example Scottish Limited Partnerships and the shell company structures used to hide land ownership in Scotland in overseas tax havens and secrecy jurisdictions. Therefore, it’s essential that there are no loopholes or exemptions which these kinds of corporate vehicles can exploit.
The register should of course be free and fully publicly accessible.
We also have questions about process. What the Government’s proposal does is push the more difficult discussions into the next Parliament. So it’s important that the Bill describes the register in robust enough language that it cannot be later watered down, as well as introducing a firm duty and deadline by which the regulations providing for this register have to be adopted.
One major question remains however – why the Government has proposed this register to be separate from the Land Register? My earlier guest blog outlined the reasons why expanding the Land Register requirements to include beneficial ownership appears to be the simplest and most administratively straightforward route to achieving this goal.
But still – what a difference a week makes. This announcement has completely changed the terms of the debate about transparency in land ownership in Scotland and this can only be good. What we need now though are tough ideas and quick thinking to close potential loopholes and ensure this commitment once and for all brings Scottish land ownership out of the shadows.
It looks like good news, but the detail will be interesting. I can think of no possible reason for having a separate register though.
Thanks for this, Megan, and in particular for alerting me to the innocuously named Small Business, Enterprise and Employment Act 2015, Part 7 of which (on company transparency) provides not only, as you say, for a register of people with ‘significant control’ over a company (in section 81 and Schedule 3) but also for a qualified ban on company directors being other companies – they must be ‘natural’ persons (i.e. human beings, as opposed to ‘legal’ or artificial persons, such as companies) – which is an equally radical change to UK company law.
Schedule 3 inserts a whole new Part 21A (33 new sections) and Schedules 1A and 1B (altogether 35 pages of new provisions) into the Companies Act 2006, and defines ‘significant control’ (amongst other things) as holding, directly or indirectly, more than 25% of the shares, or more than 25% of the voting rights, in a company.
This Act was passed in the dying days of the Coalition government, last year, and I think could be one of the Lib Dems’ most significant contributions to progressive change in the UK!
The notes at the back of the Act explain that “At the G8 summit in Lough Erne in June 2013 the UK, alongside the rest of the G8 (now G7), committed to a number of measures to enhance corporate transparency in order to tackle the misuse of companies. The Government published a discussion paper on these proposals in July 2013, and published the Government response to the views received on the discussion paper in April 2014. The measures included in Part 7 of the Act (linked to measures in Parts 8 and 9) are intended to deliver these commitments. These include the commitment to introduce a register of individuals who exercise significant control over a company; the removal and prohibition of the use of bearer shares; the prohibition of corporate directors, except in certain circumstances and measures to deter opaque arrangements involving directors and make individuals controlling directors more accountable.”
That’s made my day!
You may also be interested in this programme on tax havens next week ; http://www.bbc.co.uk/mediacentre/proginfo/2016/03/britains-trillion-pound-paradise