News

Overview

The UK's new regime for the registration of overseas entities requires non-UK entities holding UK land interests ("OEs") to register with Companies House by 31 January 2023 or potentially face fines and prison sentences for non-compliance. The criminal sanctions can be imposed on the OE and/or its managing officers. In addition, unregistered OEs will not be able to sell, lease, or charge their UK land interests. OEs would include BVI, Cayman, Guernsey, and Jersey entities.

Collecting the necessary details, notifying beneficial owners, and arranging verification takes time, and it is critical that unregistered OEs take action now before it is too late.

For information on how we can help with verification and registration, please contact us via one of our experts listed.

Background

The UK's new regime for the registration of OEs has been implemented by the Economic Crime (Transparency and Enforcement) Act 2022 ("ECTEA"). The ECTEA provides for a register of OEs to be maintained by UK Companies House and sets out how OEs should register, what information they need to provide, and strict penalties for non-compliance.

The ECTEA is primarily intended to prevent and combat the use of UK land for money laundering by providing transparency over the beneficial ownership of OEs holding UK land. Entities incorporated in the UK are not covered by the new law because their ownership information is already subject to disclosure under the UK's 'people with significant control' ("PSC") regime, which the ECTEA mirrors to an extent.

Scope

The law applies to OEs, including any body corporate, partnership, or other entity which is a 'legal person' governed by the law of a country outside the UK.

It will be necessary for OEs, unless exempt, to be registered with UK Companies House if they hold or deal with interests in UK land which are either freehold or leasehold (with a term exceeding seven years in England and Wales or longer durations in Scotland and Northern Ireland). Specifically, OEs:

• will not be able to register acquisitions or dispositions (including mortgages) of land with the UK Land Registry on or after 5 September 2022, unless they are either registered as an OE with Companies House or exempt. Similar restrictions will apply to Scotland and Northern Ireland.
• should register with Companies House by 31 January 2023; this applies to property acquired on or after (a) 1 January 1999 in England and Wales, (b) 8 December 2014 in Scotland and (c) 1 August 2022 in Northern Ireland. The relevant land registry will enter a restriction against the title of any OE which is not registered or exempt.
• will need to disclose details of transfers of UK property made between 28 February 2022 and 31 January 2023.

The new register will be available for public inspection, but sensitive information such as exact dates of birth and residential addresses will not be disclosed on the public register.

Information required

Before registering with Companies House, OEs will need to identify their registrable beneficial owners and obtain specified information about each of them. Beneficial owners broadly include persons who:

• directly or indirectly hold more than 25% of the shares or voting rights,
• are entitled to appoint a majority of the board,
• exercise or are entitled to exercise 'significant influence or control,' or
• in the case of trustees or members of partnerships (or similar bodies), meet one of the above conditions or are entitled to exercise significant influence or control over the OE.

Beneficial owners will be registrable if they are individuals, legal entities, or governmental authorities. Beneficial owners are exempt if, broadly, their interest in the OE is held through a legal entity which is subject to its own disclosure requirements, under the PSC regime, for example. Similar to the PSC regime, the ECTEA sets out steps which an OE must take to identify its beneficial owners.

An application to register must include certain details relating to the OE and its registrable beneficial owners or, if these cannot be obtained, details of the OE's managing officers. For any registrable beneficial owners who are trustees, information with respect to the trust will be required. On registration, Companies House will allocate an 'overseas entity ID' to the OE.

Verification

Importantly, information relating to an OE's registrable beneficial owners must have been verified by a 'relevant person' who must deliver a statement regarding the OE and its ownership to Companies House in a prescribed form. A relevant person must be regulated under the UK's money laundering regime and must be registered with Companies House for the purposes of verification.

Continuing obligations

The ECTEA also obliges OEs to keep their information up to date and to provide an annual statement as to their registrable beneficial owners. If these change, the OE must provide updated details. An OE will not be permitted to deal with property during any period of non-compliance with the updating requirements.

Penalties

As well as preventing transfers of UK land by or to unregistered OEs, the ECTEA provides criminal offences for non-compliance, with penalties including fines and imprisonment in some cases. Where offences are committed by an OE or other legal entity, the officers of the entity who are in default are generally also deemed to have committed an offence.

Action required

Unregistered OEs will need to act quickly to ensure that they comply with the new law and are able to continue transacting following the upcoming deadline. Many OEs are facing uncertainty around the detailed requirements of the ECTEA and the procedures which it implements and will need to engage professional support quickly in order to verify any registrable beneficial owners. BC Verification Limited, a Bedell Cristin company, can assist in this regard.