Source: https://www.gov.scot/publications/delivering-improved-transparency-land-ownership-scotland-consultation-analysis-report/pages/5/
Timestamp: 2019-09-22 06:58:24
Document Index: 514722428

Matched Legal Cases: ['art 1', 'art 2', 'art 3', 'art 4', 'art 5', 'art 1', 'art 1', 'art 2', 'art 3', 'art 4', 'art 5', 'art 5', 'art 5']

4.1 This chapter presents analysis of responses to thirteen consultation questions, as follows:
Questions twelve to fourteen concern Part 1 of Schedule 1 (contractual or other arrangements with an individual).
Questions fifteen and sixteen address Part 2 of Schedule 1 (partnerships).
Question seventeen and eighteen address Part 3 of Schedule 1 (trusts).
Question nineteen to twenty-one address Part 4 of Schedule 1 (unincorporated associations).
Question twenty-two to twenty-four address Part 5 of Schedule 1 (overseas entities).
Part 1 of Schedule 1 - Contractual or other arrangements with an individual
Responses to Question Twelve: Can you provide examples where land is owned or leased by individuals subject to contractual arrangements such as those described in the explanatory document?
4.2 A quantitative summary of responses to question twelve is provided below:
12: Can you provide examples where land is owned or leased by individuals subject to contractual arrangements such as those described in the explanatory document?
4.3 There were six substantive responses this question. Eight left no response. Five participants either answered 'no comment', 'no' indicating they had no examples to share, or explicitly stated that they had no examples to give.
Calls for more detail
4.4 Each of those who provided a substantive response suggested that the current description in the explanatory documents is too vague. They provided a range of examples of contractual arrangements in their responses:
Two noted that those who enter into contracts for the future sale of land, should not be treated as having a controlling interest in the land.
Two called for clarification in relation to crofts and tenancies.
One highlighted that charities may hold land in lieu of tax, or with grant conditions, which they do not believe should be considered a controlling interest.
One called for clarification about the position with regards to those holding options in land ownership.
One made a general comment about the need for greater specificity in contractual arrangements described in the explanatory document.
Responses to Question Thirteen: Are there other contractual arrangements we should be looking to capture?
4.5 A quantitative summary of responses to question thirteen is provided below:
Part 1 of Schedule 1 – Contractual or other arrangements with an individual
13: Are there other contractual arrangements we should be looking to capture?
4.6 There were seven substantive responses to this question. Three participants stated they had no comment to make, nine left no response. Participants reflected on different aspects of contractual arrangements that they wish the Scottish Government to consider. These responses are summarised below:
Two said they were not aware of any such arrangements; another said they had nothing further to add.
Two participants stated that they would object to the addition of any further arrangements being added to the regulations unless they have specifically been defined in the consultation document.
One reiterated a comment elsewhere in their response of the need for greater specificity in contractual arrangements described in the explanatory document.
One participant suggested the '1991 Act, Secure Agricultural Tenancies' as a contractual arrangement that should be captured.
Responses to Question Fourteen: Do you have any comments on the proposal?
4.7 A quantitative summary of responses to question fourteen is provided below:
14: Do you have any comments on this proposal?
4.8 There were eight substantive responses to this question. Three participants stated they had no comment to make and eight did not respond to the question.
4.9 Most of those who provided a substantive response called for more clarity. These comments are summarised below:
4.10 Three participants gave detailed responses to this question all of which requested clarity about who is deemed an 'Associate'. Two of these noted that the text was confusing and one suggested alterative wording for consideration noting 'the statutory guidance for the PSC regime excludes from categories of those deemed to be exercising significant control "[persons providing] advice or direction in a professional capacity" such as lawyers, accountants, tax advisers, financial advisers and others. We suggest this or other similar expression should be adopted in the Regulations'.
4.11 One also suggested that the difference in approach between the treatment of trustees and members of unincorporated bodies was confusing and requested clarity on this.
4.12 Other comments on contractual arrangements varied and are summarised below:
One participant requested that any person with significant control should be named in the Register.
One requested a statement defining whether managing agents are intended to be captured in the Register or Guidance.
One requested clarity about whether the Regulations do not apply to owner occupiers such as a non-entitled spouse.
Another reiterated an earlier response in which they called for more specificity within the definitions of 'controlling interest', with particular reference to the role of paid professional advisors.
Another reiterated an earlier response in which they noted that those who enter into contracts for the future sale of land, should not be treated as having a controlling interest in the land.
Part 2 of Schedule 1 – Partnerships
Responses to Question Fifteen: Does this reflect how land is owned or leased by partnerships or can you provide examples of other ways in which land is owned or leased by partnerships?
4.13 A quantitative summary of responses to question fifteen is provided below:
15: Does this reflect how land is typically owned or leased or on behalf of partnerships or can you provide examples of other ways in which land is owned or leased by or on behalf of partnerships?
4.14 There were eight substantive responses to this question. Five participants stated they had no comment to make and six made no response.
4.15 Two participants made unqualified expressions of agreement that they believe the proposals do reflect sufficiently how land is owned and leased in Scotland. Another two gave qualified agreement. One highlighted the difficulty of determining whether a property is a partnership property in specific situations. They suggested an inclusion of guidance to the regulations in the event that there are no associates linked to the particular property. Another suggested that while they believe the proposals reflect sufficiently how land is owned and leased in Scotland, they feel that the requirement to register would be an unnecessary interference with the running of a business without clear public benefit
4.16 One participant gave a detailed response about the nature of Limited Partnerships and Scottish Limited Partnerships, suggesting that the proposed changes would add unnecessary complexity to these arrangements. Given the level of detail in this response it has been signposted directly to the Scottish Government. Another participant referenced their previous response in which they highlighted the potential for wider than anticipated application of the provisions, such as standard options, exclusivity agreements, and short-term lock-out agreements.
Responses to Question Sixteen: Do our proposals reflect sufficiently how control is exercised over partnerships?
4.17 A quantitative summary of responses to question sixteen is provided below:
16: Do our proposals reflect sufficiently how control is exercised over partnerships?
4.18 There were five substantive responses to this question, six participants stated they had no further comments to make and eight participants did not respond.
4.19 Two participants indicated they agree that the proposals sufficiently reflect how control is exercised over partnerships.
4.20 Three participants described a range of issues in relation to control within partnerships which are summarised below:
One participant expressed concern about how the exceptions in Paragraphs 4, 7 and 10 of Schedule 1 could be interpreted. They suggest that a provision be included in these regulations to specify that any advisor, for example a solicitor, only fall outwith the exception if they are acting as a trustee.
Another suggested that those interested in liaising with 'decision makers' should not automatically seek out the associate as decision making will often rest with the owner or tenant.
One participant described an issue relating to Formation Agents and their supervision in relation to anti-money laundering rules and client requirements. They suggest that the robustness of these systems should be examined.
4.21 Another reiterated a concern expressed in a previous response about the level of interference with business operations without a clear public benefit.
Part 3 of Schedule 1 – Trusts
Responses to Question Seventeen: Do our proposals reflect how land is typically held in trust? Can you provide examples of other ways in which land is held in trust?
4.22 A quantitative summary of responses to question seventeen is provided below:
17: Do our proposals reflect how land is typically held in trust? Can you provide examples of other ways in which land is held in trust?
4.23 There were eleven substantive responses to this question. Six participants did not respond, and two participants stated they had no further comments to make.
4.24 Six participants expressed agreement that the proposals reflect how land is typically held in trust.
4.25 Four participants described complexities about ways in which land is held in trust, as follows:
One called for greater clarification from the Scottish Government about the definitions of controlling interests and how they would be interpreted in the new Register. They outlined a number of complex scenarios for investment; units of investment, collective investment funds, pension funds and overseas trust companies.
One described their organisations' complex ownership arrangements in which titles may be held in numerous different structures.
Another explained that their legal vehicle is a statutory corporation with a board of trustees and noted there will be a number of other bodies with a similar legal basis.
One highlighted challenges of implementing the Register in trusts where the power to appoint or remove trustees resides with another body.
4.26 Two highlighted potential adverse impacts for trusts resulting from the new regulations:
Both suggested that where trustees are not registered owners of the land held by the trust, they will be subject to personal liability, which may discourage individuals from taking on trustee roles.
One participant expressed concern with the premise of the question, explaining their view that trustees should not exert control over each other and that this is supported by a body of case law establishing the duties of a trustee.
Responses to Question Eighteen: Do our proposals sufficiently capture how control is exercised over trusts including through financial interests?
4.27 A quantitative summary of responses to question eighteen is provided below:
18: Do our proposals sufficiently capture how control is exercised over trusts including through financial interests?
4.28 There were seven substantive responses to this question. Four participants said they had no comment to make and eight did not respond to this question.
4.29 Two participants answered 'yes' indicating agreement that the proposals sufficiently capture how control is exercised over trusts.
4.30 Two participants expressed concern that any disclosure of associates in relation to trusts could hold information about a corporate vehicle rather than a person. They explained that this may cause difficulty in sourcing information about those who ultimately hold controlling interests of any land or property in question. By not disclosing information about specific individuals, they suggested the Register is at risk of not being able to achieve the objective of transparency and could create loopholes for those who wish to retain their anonymity. They suggest the regulations be reviewed to ensure this is not the case.
4.31 Three described differing concerns which are summarised below:
One participant reiterated a concern expressed in their response to question sixteen that those interested in liaising with 'decision makers' should not automatically seek out the associate as decision making will often rest with the owner or tenant.
One participant referred to their detailed response to question seventeen in which they indicated that the objectives in relation to trusts are not clear. They outlined a range of investment structures in which the controlling interests may differ and called for more clarity about how the regulations would apply.
Another participant reiterated their concern with the premise of the question, explaining their view that trustees should not exert control over each other and that this is supported by a body of case law establishing the duties of a trustee. They further discussed the duties of a trustee in relation to the Charity and Trustees investment (Scotland) Act 2005 and expressed a fear that if further sanctions are introduced charities may continue to struggle to engage trustees.
Part 4 of Schedule 1 – Unincorporated Associations
Responses to Question Nineteen: Do our proposals reflect how land is owned or leased by unincorporated associations. Can you provide examples of other ways in which it is leased or owned on their behalf?
4.32 A quantitative summary of responses to question nineteen is provided below:
19: Do our proposals reflect how land is owned or leased by unincorporated associations. Can you provide examples of other ways in which it is leased or owned on their behalf?
4.33 There were five substantive responses to this question. Five participants said they had no comment to make and nine did not respond to the question.
4.34 Two participants indicated agreement that the proposals reflect how land is owned and leased on behalf of unincorporated associations but did not provide examples of any other ways which land is owned or leased on their behalf.
4.35 One participant expressed understanding of the purpose of the regulations but explained that they do not reflect the situation in charity law. The participant also signalled that despite the regulations possibly easing the administrative duties of charities they may hinder educational work taken to ensure that charity trustees understand that trustees are all equally responsible for decision making. Furthermore, this participant highlighted a view that the regulations may impact the diversity of office holders within boards, in terms of their skills and experience, for example by limiting 'healthy turnover' of office holders.
4.36 In the remaining two responses participants referenced their answers to previous questions, summarised below:
One participant referred to their response to question fourteen where they called for more clarity as to the meaning of the words 'control' and 'significant influence'. They expressed concern that specific definitions in the Regulations are not applicable to all circumstances. They also discussed that it is the duty of trustee to manage the trust estate in the ways enumerated and were therefore concerned that this means that every trustee is a person who 'has significant influence or control' as currently stated in the Regulations.
Another participant expressed they had no further comments beyond what they had already discussed in response to questions sixteen and eighteen; which was that those interested in liaising with 'decision makers' should not automatically seek out the associate as decision making will often rest with the owner or tenant.
Responses to Question Twenty: Are there other types of groups than those mentioned who may be affected by these proposals? If so, please provide examples.
4.37 A quantitative summary of responses to question twenty is provided below:
20: Are there other types of groups than those mentioned who may be affected by these proposals? If so, please provide examples
4.38 There were four substantive responses to this question. Ten participants did not respond to the question and five participants stated they had no further comments.
4.39 Two participants indicated that they were supportive of the regulations as they were sufficiently broad.
4.40 Another participant said they were not aware of any other types of groups than those mentioned who may be affected by these proposals.
4.41 One participant suggested that paid advisors such as solicitors or accountants should not be considered associates of recorded persons unless they meet other conditions in addition to their paid role. They expressed concern that a paid advisor who is acting for a client may be liable to the regulations, requesting clarity as to when a paid advisor would be considered to have met the requirements to become an associate as there are some situations where solicitors and accountants will act as trustees within the Regulations.
Responses to Question Twenty-One: Do our proposals sufficiently capture how control is exercised over unincorporated associations?
4.42 A quantitative summary of responses to question twenty-one is provided below:
21: Do our proposals sufficiently capture how control is exercised over unincorporated associations?
4.43 There were five substantive responses to this question. Eight participants skipped the question and six participants stated they had no further comments.
4.44 Two participants expressed concern that members of unincorporated bodies may not be aware of their duty to comply with the regulations. They also noted aside from the bodies suggested in the regulations that control may not be exercised consistently by the same individuals but may be carried out only when necessary by who is available.
4.45 Other concerns in relation to identifying control are summarised below:
One participant expressed concern about differing circumstances in which they would like provisions made such as if an unincorporated body cannot identify who should be Registered as an associate.
One participant called for greater definition in the regulations of the words 'significant' and 'control'.
Another participant expressed concern that the regulations may not accommodate the full range of unincorporated bodies across Scotland in relation to their land interests as decision making responsibility will differ.
One participant noted that small unincorporated bodies may be run by volunteers and therefore may be subject to regular personnel changes.
Part 5 of Schedule 1 – Overseas Legal Entities
Responses to Question Twenty-Two: Do our proposals reflect how land is typically owned or leased by over overseas legal entities. Can you provide other ways in which it is owned or leased by over overseas legal entities?
4.46 A quantitative summary of responses to question twenty-two is provided below:
22: Do our proposals reflect how land is typically owned or leased by over overseas legal entities. Can you provide other ways in which it is owned or leased by over overseas legal entities?
4.47 There were six substantive responses to this question. Seven participants did not respond to the question, five stated they had no further comments and one suggested that other participants may be better placed to respond to this question.
4.48 Three participants called for Part 5 of Schedule 1 to be deleted. They suggested that due to the publication of the Overseas Entities Bill by the UK government this would create dual reporting requirements for overseas entities.
4.49 Two participants explicitly agreed that the proposals reflect how land is typically owned or leased by overseas entities. They also requested that the Scottish Government should regularly review the implementation of these regulations in line with changing future circumstances. These participants also expressed concern that the application of the twenty-five percent threshold for voting rights could create a loophole through which controlling interests could remain anonymous, and suggest lowering the voting threshold to ten percent. They also refer to a previous response where they express an overarching concern with the requirements.
4.50 Another participant said they had nothing further to add to the proposals.
Responses to Question Twenty-Three: Do our proposals sufficiently capture how control is exercised over overseas legal entities. Are there other examples that you are aware of?
4.51 A quantitative summary of responses to question twenty-three is provided below:
23: Do our proposals sufficiently capture how control is exercised over overseas legal entities. Are there other examples that you are aware of where control is exercised over an overseas legal entity?
4.52 There were five substantive responses to this question. Nine participants did not respond to the question and five stated they had no further comments.
4.53 Two participants noted that they were not aware of any mechanisms through which control is exercised which would fall out of the scope of these regulations but reiterated their request for the implementation of the regulations to be reviewed.
4.54 One participant reiterated their response to the previous question in which they suggested deletion of Part 5 of Schedule 1.
4.55 One participant echoed a concern shared by others in their response to the previous question; that separate UK and Scottish registration requirements may impose double reporting requirements from overseas entities.
4.56 One participant observed that these proposals were similar to those of the PSC Regime.
Responses to Question Twenty-Four: Are there examples where transparency is lacking as to control over a legal owner or tenant of land that we have not taken into account?
4.57 A quantitative summary of responses to question twenty-four is provided below:
24: Are there examples where transparency is lacking as to control over a legal owner or tenant of land that we have not taken into account in our proposals?
4.58 There were three substantive responses to this question. Nine participants did not respond to the question and seven stated they had no further comments.
4.59 All three participants that commented on the question gave concise replies to suggest that they were satisfied that the relevant scenarios have been identified.