When is the deadline for registration?
As we have outlined in previous newsletters on 29th July 2022, 21st October 2022 and 11th November 2022, the ROE requirements came into effect on 1st August 2022 as part of the new Economic Crime (Transparency and Enforcement) Act (“the Act”), and 31st January 2023 is the registration deadline.
Time is running short for registration and we encourage all overseas companies subject to the ROE requirement to act as soon as possible to meet the deadline. Companies House has indicated that, as long as overseas companies have taken relevant steps to start the registration process before the 31st January deadline (e.g. by instructing a verification agent), they may exercise their discretion not to bring enforcement action against overseas companies for failure to complete registration by the deadline. However, considering the possibility of civil and criminal penalties for those who ignore this deadline, we continue to recommend that all registrable overseas companies should have completed the registration process by 31st January 2023.
What is the Register of Overseas Entities?
The new Register requires all overseas companies (or similar legal entities) governed by the law of a country or territory outside the UK that own UK freehold land or property or who are tenants of a lease of more than seven years in length (residential or commercial), to declare their “beneficial owners” or “managing officers”. Those who do not comply will face "severe sanctions", including cumulative fines and blocks on transacting their property. In addition, knowingly providing false information risks a criminal offence leading to a fine or imprisonment.
Property Registration and Disposal
It will not be possible to register title to property acquired by relevant overseas entities nor to dispose of such properties without an overseas entity ID. For existing qualifying properties the Land Registry has entered a restriction preventing the right of an overseas owner to dispose of such property without complying with the requirements of the Act.
Who is a Registrable Beneficial Owner?
A beneficial owner is someone who (directly or indirectly):
- holds more than 25% of the shares or voting rights in the overseas 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.
Where there is a registrable beneficial owner (or more than one), relevant information must be obtained, independently verified, and made public.
What happens if there is no Registrable Beneficial Owner(s)?
Where there is no registrable beneficial owner, for example, because the shareholdings do not reach the threshold, S.4 of the Act requires that the relevant information be provided about "each managing officer". The Companies House guidance also states, "… [if] no beneficial owners have been identified, you will need to tell us about each managing officer…"
So, who is a Managing Officer?
S.44 of the Act stipulates that "managing officer" includes "a director, manager or secretary [of the overseas entity]".
3CS believes that the interpretation of "managing officer" should be made case-by-case. Essentially, we are looking for those officers who "manage" the business. It is clear to us, however, that all (and not just some) directors should be included.
Verification and getting it wrong
- Regulation 6 of the Registration of Overseas Entities (Verification and Provision of Information) Regulations 2022 provides that the relevant information needs to be verified (e.g. through appropriate documentation and objective checks).
- S.32 of the Act makes it a potential criminal offence to provide a statement under the legislation that is "misleading, false or deceptive". Providing information on only some directors rather than all, or deliberately providing insufficient information, for example, would run the risk of being caught by this section.
Shortage of ROE verifiers?
The verification agent must be UK based and supervised under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. One issue is that most UK law firms (but not 3CS) and accountants have opted to refrain from registering as verification agents. Given the consequences of getting it wrong, the Law Society and the Institute of Chartered Accountants have warned their members that this is an area to avoid unless they are confident about having the necessary expertise.
How 3CS can help
3CS is an authorised UK verification agent, and our London-based team has considerable experience in dealing with overseas companies and international group structures and can assist with registration and the verification process required for compliance. 3CS can also report on the potential impact of the
Act on any pending property transactions. However, please note that demand is increasing rapidly due to the impending deadline; therefore, urgent action is needed. For further help and advice, please get in touch with your usual 3CS contact.