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Publication - Consultation Paper

Improving transparency in land ownership in Scotland: a consultation on controlling interests in land

Published: 11 Sep 2016
Part of:
Environment and climate change
ISBN:
9781786523655

Consultation on proposals for the disclosure and publication of information about controlling interests in land owners and tenants.

57 page PDF

1.1MB

57 page PDF

1.1MB

Contents
Improving transparency in land ownership in Scotland: a consultation on controlling interests in land
Annex C

57 page PDF

1.1MB

Annex C

There are a number of different types of companies that can be set up in the UK in accordance with the Companies Act 2006. The table below summarises these different types of companies and explains some of the key factors for each including who makes day to day decisions and who benefits financially, and takes financial risks.

UK companies limited by shares
Relevant legislation Companies Act 2006.
Main governing documentation Memorandum of Association, Articles of Association.
Who benefits financially or takes financial risks? Shareholders.
Who controls day to day decision-making? Director/directors (who could also be shareholders).
Types of property likely to be held Business premises of all scales.

Other considerations

  • Shareholders may be able to influence directors, depending on how many voting rights a shareholder, or group of shareholders, have. For example, to pass a special resolution to change the name of a company or to alter the articles of association that set out the rules that company officers must adhere to, 75% of the votes in favour of the change.
  • Directors have a duty to promote the success of a company for the benefit of all the members of the company.
  • Employees may have an element of control over day to day decision-making on behalf of the company, but, ultimately, they are responsible to the director or directors.
UK companies limited by guarantee
Relevant legislation Companies Act 2006.
Main governing documentation Memorandum of Association, Articles of Association.
Who benefits financially or takes financial risks? Members who act as guarantors, up to a limited amount guaranteed for paying company debts.
Who controls day to day decision-making? Director/directors.
Types of property likely to be held Land or buildings held by non-profit organisations such as sport, community or social clubs.

Other considerations

  • An individual can be both a director and a member.
  • Any profits can get paid to guarantors but usually get paid back in to the company for future investment as companies limited by guarantee are usually non-profit organisations.
Unlimited companies
Relevant legislation Companies Act 2006.
Main governing documentation Memorandum of Association, Articles of Association.
Who benefits financially or takes financial risks? Members (and possibly shareholders) who would have an obligation to meet any liability if the company's assets were not sufficient if the company was to be wound up.
Who controls day to day decision-making? Director/directors (who could also be members/shareholders).
Types of property likely to be held Business premises of all scales, however we understand that these are less common than limited companies and it is unlikely that a limited company would hold premises where trade is being carried out.

Other considerations

  • An unlimited company is not regulated to the same extent as a limited company. Therefore, this method of incorporation may be desirable if there are commercial sensitivities involved.
  • However, certain UK companies are required to maintain a register of persons with significant control of the company under changes made to the Companies Act 2006 by the Small Business, Enterprise and Employment Act 2015.
UK public limited companies ( PLCs)
Relevant legislation Companies Act 2006.
Relevant governing documentation Memorandum of Association, Articles of Association.
Who benefits financially or takes financial risks? Shareholders.
Who controls day to day decision-making? Director/directors (who could also be shareholders).
Types of property likely to be held Larger commercial premises in urban areas. It is unlikely that rural estates and farms would be held by PLCs.

Other considerations

  • Shares can be freely and readily obtained by and sold by the general public. Therefore, in terms of those who benefit financially or take financial risks, it is a great deal more likely that there will be a high number of shareholders who may change more frequently than shareholders in other types of companies.
  • PLCs will have to comply with the PSC regime unless they are subject to part 5 of the Financial Conduct Authority's Disclosure and Transparency Rules (in which case a transparency regime applies by virtue of EU law) or where the shares are admitted on another regulated market.

It is also possible for companies themselves to be shareholders within another company, and for a company to be established to bring together a group of companies (commonly known as "holding companies"). It may be difficult to understand who the director or directors are, or who any shareholders or members may be in relation to any land or buildings held within a complex company structure. It is also possible that a company owning land in Scotland could be formed in accordance with a legal system outside the UK, which may also lead to difficulties in understanding who the director or directors are, or who any shareholders or members may be too.

Where land is owned in trust, or by a partnership, it is usually the case that the legal title will be held by the name of a firm or by natural persons, in their capacity as trustee. From this, it is not necessarily apparent from the legal title who the person or persons with a controlling interest in the land owner or tenant is. Therefore, the regulations brought forward should enable any person with a controlling interest in the party who is named as the legal proprietor to be revealed.

The table below sets out some detail as to who controls day to day decision-making and who benefits financially or takes financial risks in a number of different types of partnership that can exist in Scotland. It also includes some detail about trusts.

Limited liability partnerships ( LLPs)
Relevant legislation Limited Liability Partnerships Act 2000
Limited Liability Partnerships Regulations 2001 - contains implied terms for partnership agreements.
Main governing documentation Partnership agreements.
Who benefits financially or takes financial risks? Members - default status is that each member has equal stake in business and equal voting rights.
Who controls day to day decision-making? Members.
Types of property likely to be held Business premises, in particular professional service organisations.

Other considerations

  • All changes to membership in an LLP must be notified to Companies House.
  • LLPs generally have to comply with the PSC regime.
General partnerships
Relevant legislation Partnerships Act 1890.
Main governing documentation Partnership agreement.
Who benefits financially or takes financial risks? Partners.
Who controls day to day decision-making? Partners.
Types of property likely to be held Business premises of all scales.

Other considerations

  • In Scots Law, partnerships have their own legal personality and can take title to land in name of firm but, typically, title is taken in the names of trustees for the general partnership.
  • Partnerships formed in other parts of the UK do not have their own legal personality.
  • Usually there is a partnership agreement in place to govern the responsibilities of each partner, the management of the business and share of the profits.
  • It is likely that this document that will ultimately reveal who has benefits financially and who has decision-making control.
Limited partnership
Relevant legislation Limited Partnerships Act 1907.
Main governing documentation Partnership agreement.
Who benefits financially or takes financial risks? Limited partner whose liability is limited to their capital contribution to the partnership. They cannot control decision-making, otherwise the partnership loses its status as a Limited Partnership.
General partner whose liability is unlimited.
Who controls day to day decision-making? General partner has full management power over the business, as well as unlimited personal liability.
Types of property likely to be held Business premises of all scales.

Other considerations

  • A limited partnership must be registered at Companies House.
Trusts
Relevant legislation Trusts (Scotland) Act 1921.
Relevant governing documentation Trust deed.
Who benefits financially or takes financial risks? Dependent on the terms of the trust deed, but typically the beneficiaries in a trust arrangement will financially benefit and decision-making and financial risks are taken by trustees in accordance with the terms of the trust deed.
Who controls day to day decision-making? The extent to which trustees have decision-making power in relation to land assets held by the trust will be determined in the trust deed.
Types of property likely to be held Business premises of all scales, and possibly residential property too.

Other considerations

  • There are different types of trust but, typically, a title will be taken in the name of the trustees on behalf of a beneficiary as a trust is not a legal entity in itself and does not have its own legal personality.

It can be seen that with partnerships, the terms of any partnership agreement will reveal who has decision-making control in relation to land assets. Moreover, depending on the type of partnership in question, it may be the case that a partner, or member in the case of a Limited Liability Partnership, will benefit financially, take financial risks as well as having control of decision-making in relation to the assets of the partnership.

Trusts differ, as generally it will be the trustees who have control of decision-making in relation to the assets of a trust, but it will be the beneficiaries, in accordance with the terms of the trust deed, who will benefit financially from the assets of the trusts. Beneficiaries may not have any power to make decisions, for instance they may be a minor or lack legal capacity to make decisions.

Please note that documentation in relation to partnerships and trusts including partnership agreements and trust deeds are often private documents and may not be publicly available.


Contact

Email: Stephen Krzyzanowski, LandReform@gov.scot