The Economic Crime (Transparency and Enforcement) Act 2022, which became law on 14 March 2022, introduces a new requirement for overseas entities holding (or intending to hold) UK land and property to register with Companies House, and to provide details of their beneficial ownership. Information contained in this new Overseas Entities Register will be publicly available.
The legislation was introduced in response to concerns that overseas companies are being used to hide the beneficial ownership of UK property, and – although the precise timing of the legislation was driven by the actions of the Russian government in Ukraine – the measures are part of a wider drive to increase transparency over the ownership of assets and sources of income.
The requirements are broadly similar to the requirements of the existing register of people with significant control (the PSC Register), which has applied to UK companies since 2016. As well as potential financial and criminal penalties for non-compliance (which are a feature of the PSC Register), failure to be properly registered on the new Overseas Entities Register will also prevent the entity from registering transactions with the Land Registry – effectively preventing it from transacting in UK property.
To help ensure the quality of the data on the Overseas Entities Register, there is a requirement for entities to update information annually and for all information submitted (both for the initial registration and the annual updates) to be independently verified.
Which overseas entities need to register?
An overseas entity will need to register if it is governed by the law of a country or territory outside the UK and is a legal person under that law. Partnerships, for example, will be required to register where they have legal personality in their governing jurisdiction. In the case of offshore trusts that directly own UK property, any offshore corporate trustees will need to register on the Overseas Entities Register. The trust itself will need to be registered on the UK’s Trust Register. If an offshore trust holds UK property through a company, then it will be the company that must register.
Most entities already holding UK property will be required to register, although this depends on when the property in question was acquired, with the dates varying depending where in the UK it is situated:
- England and Wales – property acquired on or after 1 January 1999.
- Scotland – property acquired on or after 8 December 2014.
- Northern Ireland – property acquired on or after 1 August 2022.
Deadlines for registration
Overseas entities holding UK property must register by 31 January 2023. From 5 September 2022, any entities wishing to acquire UK property (or those already holding property who wish to sell it, or carry out another transaction which needs to be registered with the Land Registry, such as registering a new charge against the property) must register before they can complete the transaction.
The registration process may be time consuming – if the overseas entity does not hold all the required information on its registrable beneficial owners it will need to request it from them, and all information will need to be independently verified. Overseas entities contemplating a UK land transaction should, therefore, make sure that they register well in advance of their required completion date.
Once an entity is registered it will be given a registration number that can be used when recording relevant transactions with the Land Registry (ie there is no need to re-register ahead of every transaction). The information on the Overseas Entity Register must be updated annually, however, and entities will need to ensure that their registration remains current to avoid restrictions on their ability to carry out land transactions in future (as well as potential financial and criminal penalties).
Which beneficial owners need to be registered?
The new rules do not require all beneficial owners to be registered. Only those who (in broad terms) hold more than 25% of shares or voting rights (directly or indirectly) or who have the ability to exercise significant influence or control over the entity, must be registered.
In the above scenario only Shareholders 1 and 2 would need to be registered (assuming that Shareholder 3 does not hold more than 25% of the voting rights or have the ability to exercise significant influence or control).
What if there are no registrable beneficial owners?
There will be scenarios where there are no registrable beneficial owners.
In this example there are no shareholders with a 25% or greater interest and, again assuming that none of the shareholders qualifies as a registrable beneficial owner by virtue of their voting rights or ability to exercise significant influence or control, Overseas Entity 2 does not need to provide their details as part of its registration.
Overseas Entity 2 is, though, still required to register and must provide information on its managing officers. Entities are also required to provide information on their managing officers when they are unable to provide all the required information in respect of one or more of their registrable beneficial owners.
Specific provisions apply where one or more of the registrable beneficial owners of the overseas entity is a trust. In these cases, as well as providing information on the trustees, there is also a requirement to disclose information on any beneficiary, settlor, grantor or interested person who meets the definition of registrable beneficial owner. This additional information will not, however, be visible in the public register.
Companies House is writing to those overseas entities that it believes hold UK property to let them know that they need to register. Whether or not you receive such a letter, if you currently hold UK property through an overseas entity, or are thinking about acquiring one, you should make sure that you are ready to register and have identified a suitable UK agent to carry out the verification.
At Saffery Champness, although we are generally only able to undertake verification as part of broader services provided, we would be more than happy to discuss any questions or concerns you may have about the Register of Overseas Entities, including what the rules mean for you, and suggested ways to approach the new compliance requirements. Where relevant, we can also discuss ways we may be able to assist you, such as registration with Companies House, verifying information on beneficial owners, and the ongoing annual updates required. If you would like to discuss this further, please get in touch with Robert Langston or your usual Saffery Champness contact.