The UK government is launching a new Register of Overseas Entities (the “Register”) to be held by Companies House as part of the new Economic Crime (Transparency and Enforcement) Act. Secondary legislation was laid before parliament on 22nd June 2022 and subsequently, Companies House has announced that the new Register is planned to go live on 1st August 2022.
What is the Register of Overseas Entities?
The new Register forms part of the UK government’s strategy to combat economic crime, whilst preserving the UK’s reputation as an attractive place to invest for legitimate businesses.
The legislation was introduced primarily to tackle the increasing flow of unlawful money invested in the UK real estate market, whereby the true beneficiaries are often hidden by the use of overseas companies based in foreign jurisdictions. The new Register requires all overseas entities that own UK land or property to declare their beneficial owners or managing officers. Those who do not comply will face “severe sanctions” including restrictions on buying, selling, transferring, leasing or charging their land or property in the UK.
Who does the Register apply to?
Any company or similar legal entity which is governed by the law of a country or territory outside the UK (the “Overseas Entity”).
The requirement to register will apply to Overseas Entities which bought land:
- since January 1999 in England and Wales
- since December 2014 in Scotland; and
- from the day the Register is launched in Northern Ireland.
Who is a beneficial owner?
A beneficial owner is someone who (directly or indirectly):
- holds more than 25% of the shares and/or voting rights in the entity
- or holds the right to appoint or remove a majority of the board of directors
- or who exercises significant influence or control over the entity.
Are there any exemptions?
Exemptions will be limited to very few exceptional circumstances. For example, when the Secretary of State exempts a person from registering due to the interests of national security and for the purposes of preventing or detecting serious crime.
What does an Overseas Entity need to do to comply?
Overseas Entities who already own land or property in the UK will be given six months to apply and register. Details of their beneficial owners will need to be submitted. The information submitted to Companies House will need to be verified and the six-month timeframe will start as soon as the Register is officially launched.
What if you have recently disposed of land or property?
Overseas Entities who have disposed of (sold, transferred or similar) land after 27 February 2022 will also need to apply to register and provide details of the disposal within the six-month period.
What about new purchasers?
Any new purchasers will need to register with Companies House from the day the Register commences. Once the Register is live, they will need to register with Companies House before applying to register their land purchase with the Land Registry.
How do companies get an Overseas Entity ID?
Companies House will issue the Overseas Entity with a unique Overseas Entity ID as soon as the Overseas Entity has registered and successfully submitted all the relevant information. The ID will need to be shared with the Land Registry whenever the Overseas Entity buys, sells, transfers or charges land in the UK.
The Overseas Entity is required to update its information regarding beneficial owners every year.
Where will the information be displayed?
Following a successful registration, the name of the Overseas Entity and details of the beneficial owners will be publicly available on the Companies House website. Some individuals will be able to protect the information from public disclosure under certain circumstances, but the information will still need to be supplied to Companies House.
What will happen if you fail to register?
Companies House says that Overseas Entities that fail to register or update the information will face sanctions such as fines and blocks on transacting their land. Provision of false information will be a criminal offence leading to a fine or imprisonment – or both. In practical terms, this legislation will introduce a new restriction on the acquisition and disposal of registered land at the Land Registry as it will be necessary on any future registered or registrable disposition to satisfy this requirement. Registrable dispositions generally comprise freehold estates in land and leasehold estates for a term exceeding 7 years. The new legislation essentially gives commercial teeth to anti-money laundering legislation and may impact on the liquidity of property investors that fail to comply.
How 3CS can help
If you have any questions about Overseas Entities or any commercial or residential property matters, please get in touch with your usual 3CS contact.