The UK’s Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA) came into force on 1 August 2022 and has important implications for beneficial owners and operators of overseas companies which are registered owners of land in the UK. The purpose of this note is to summarise those implications and to remind interested persons to seek appropriate advice as to what they should be doing to ensure compliance with the legislation.
The Overseas Entities Register
Companies House has been tasked with the creation and maintenance of a new publicly accessible register of overseas entities (the ROE) which captures certain information about the beneficial ownership and in some cases, managing officers, of those entities which own land in the UK. Essentially, it is only land which is registered with the UK Land Registry which is relevant for the ROE. An overseas entity will be required to register if it owns land purchased:
- in England and Wales: On or after the 1st of January, 1999;
- in Scotland: On or after the 8th of December, 2014; or
- in Northern Island: On or after the 1st of August, 2022.
Where the overseas entity already owns property in the UK, it must submit their application to register in the ROE before 1 February 2023. The overseas entity cannot transact with its UK property on or after 1 February 2023 until it is registered in the ROE.
Who does the Act apply to?
The Act will apply to non-UK incorporated companies – even if the company is UK tax resident – and LLPs, as well as foreign foundations and non-UK partnerships that, under the laws of the country they are governed by, have a separate legal personality if they are registered as the proprietor of ‘a relevant interest’ in property in the UK.
What is a relevant interest in property?
In England and Wales, an entity is considered to have a relevant interest in property if it holds a freehold or a lease for more than seven years where the application to register the overseas entity as owner or tenant was made on or after 1 January 1999.
In Scotland, a relevant interest in property is ownership of property, a lease for more than 20 years, or an assignation of a lease for more than 20 years where the application to register the overseas entity as owner or tenant was made on or after 8 December 2014.
In Northern Ireland, a relevant interest in property is a freehold or a lease of more than 21 years where the application to register the overseas entity as owner or tenant was made on or after 5 September 2022.
Being the registered proprietor of a charge or standard security does not bring an overseas entity within the regime.
What must the application to Companies House include?
The application must include one of the following statements:
- that the overseas entity has identified any registrable beneficial owners and provided the required information;
- the overseas entity does not believe that it has any registrable beneficial owners;
- the overseas entity believes that it has registrable beneficial owners but cannot provide the necessary information.
Before making the application to Companies House, the overseas entity must give one month’s notice to its beneficial owners. The definition of beneficial owners is quite complex but includes anyone who holds at least 25% of the shares or voting rights in the entity, or who exercises or has the right to exercise significant influence or control over the entity.
Failure to register and failure to update the register are criminal offences. It is also a separate criminal offence to make certain disposals of property without being on the ROE – see below.
Only some of the information registered on the ROE is accessible to the public. Some information about beneficial owners is exempt from inspection.
When do overseas entities have to have registered by?
If an overseas entity has property in the UK, then they must submit an application to register in the ROE before 1 February 2023. The application must include a statement that the entity has not made a relevant disposition of property since 28 February 2022 or must include details of any disposition which has been made.
An overseas entity which acquires property in the UK must be registered on the ROE before it can make an application to register the acquisition in any UK land register on or after 5 September 2022.
What happens when an overseas entity acquires property in the UK?
If an overseas entity is not registered in the ROE when it makes an application to register a qualifying registrable deed, such as a transfer, disposition or lease, to a UK land register, the application will be rejected. Failure to register an acquisition of property or a lease at the relevant UK land register means that the acquisition does not take effect in law.
What happens when an overseas entity disposes of property in the UK?
The entity and its officers will commit a criminal offence if the entity delivers a qualifying registrable deed to a third party without being registered in the ROE.
The third-party purchaser, tenant or lender cannot register the deed in their favour without evidence that the overseas entity which owns the property is registered in the ROE or the disposal falls into one of a limited number of exemptions.
How does an overseas entity register on the ROE?
To register on the ROE, the overseas entity needs to provide information about itself, any registrable beneficial owners and, in certain circumstances, about the managing officers of the overseas entity.
Before an application to register on the ROE can be made, an information notice must be sent to each registrable beneficial owner asking them to confirm that the information the applicant retains is correct and invite them to provide any information which is missing. The registrable beneficial owners have one month to reply to this notice.
The information submitted to Companies House must be independently verified and Animo Associates Limited is registered to act as a verification agent.
The steps overseas entities have to take to comply with the ROE requirements take time to implement, so entities affected are encouraged to gather the necessary information as soon as possible.
Are there any other requirements once the registration on the ROE is done?
Yes. There is an annual requirement to confirm or update the information on the ROE.
If you have any questions, please contact firstname.lastname@example.org.