Key Points Summary
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- An overseas entity which acquires UK property is required to register in advance at Companies House (providing beneficial ownership information that will be publicly available) prior to any application to register the acquisition with the Land Registry.
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- Any overseas entity currently holding land in England and Wales that was purchased on or after 1 January 1999 (on or after the 8 December 2014 in Scotland or after 5 September 2022 in Northern Ireland) needs to register with Companies House prior to 31 January 2023.
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- Disposals of UK property between (and including) 28 February 2022 and 31 January 2023 by overseas entities will require the registration of details regarding the disposition and the identity of the registrable beneficial owners immediately prior to the disposition to be submitted to Companies House by 31 January 2023. The information submitted will be available to the public for a minimum of two years.
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- Failure to register or to update the register will impact upon the ability of overseas entities to deal with their property, i.e., transfer, grant leases or charge the property. This applies to all entities based outside the UK to include those located in the Channel Islands. Failure to comply with the new regime is potentially a criminal offence for the entity and its officers, punishable by a fine and/or imprisonment.
Background
The latest in a series of parliamentary interventions to create greater transparency around the beneficial ownership of UK property has arrived. First announced back in 2016, the Register of Overseas Entities (“ROE”) came into force in the UK on 1 August 2022 through the new Economic Crime (Transparency and Enforcement) Act 2022. Note, this isn’t a register of beneficial ownership of UK land. The ROE is a register of those who control entities owning UK land.
Registration – the position moving forward
Going forward, an overseas entity must apply to be registered on the ROE in order to become the legal owner of UK land. Overseas entities which are already the legal owners of UK land will need to make an application to register under the new regime before the end of January 2023.
Overseas Entities
As noted above, the registration requirement for the ROE is applicable only to “overseas entities”. There are defined as legal entities governed by the law of a country or territory outside of the UK. The term “legal entity” is itself defined, as a body corporate, partnership or other entity that (in each case) is a legal person under the law by which it is governed. An individual would not be subject to the registration requirement under the ROE.
Application process
If a registration requirement exists, an application must be made to the registrar of companies. The registration fee is £100. This application will require certain information on the entity such as its name, address and other basic details to be provided. Information regarding any registrable beneficial owners, managing officers and a UK regulated agent that carries out the verification checks will be required at the application stage and will need to be updated annually.
Confirmation that the entity has identified one or more registrable beneficial owners (defined below) and that it has no reasonable cause to believe there are any others is also required.
If this confirmation can’t be provided, then the entity must confirm that it has no reasonable cause to believe that there are any registrable beneficial owners (which is often the position where there the entity is held by multiple individuals) or that it has reasonable cause to believe that there is at least one registrable owner that it has not identified. To the extent possible, the required information in respect of each registrable beneficial owner must also be provided.
Beneficial Owners – who are they?
A beneficial owner is
- is an individual person, other legal entity, government, or public authority that:
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- holds, directly or indirectly, more than 25% of the shares in the entity;
- holds, directly or indirectly, more than 25% of the voting rights in the entity;
- holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the entity;
- has the right to exercise, or actually exercises, significant influence or control over the entity; or
- has the right to exercise “significant influence or control” over the activities of a trust, partnership, unincorporated association or entity that is not a legal person, and the trustees of that trust or members of that other entity meet one or more of conditions above.
Verification
Before an overseas entity registers its beneficial owners or managing officers on the ROE, a UK-supervised “relevant person” will need to verify the required information about them. These verification checks must be carried out by a UK-based agent supervised under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017.
Supervised agents will need to provide an agent assurance code (the equivalent of a signature) and an overseas entity verification checks statement to Companies House to confirm that the appropriate procedure is followed. It is most likely that these verification checks can be undertaken by law firms on your behalf.
Penalties
Penalties for not complying with the ROE filing obligations include fines of up to £2,500 per day or a prison sentence of up to five years, along with restrictions when buying, selling, transferring, leasing, or charging property in the UK.
Action Points
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- If you have a current or imminent UK property transaction involving an overseas entity you will need to take immediate action to assess whether the ROE applies and if so, proceed through the application process.
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- Those who already hold UK property within overseas entities or have disposed of it since 28 February 2022 need to be aware of the above and discuss this with their legal advisers.
The Future
The Register of Overseas Entities does not appear to be the end of the road for disclosure around land ownership. Part 9 of the Levelling-up and Regeneration Bill is slowly passing through Parliament currently. If this is enacted as it is currently drafted it may require disclosure of the following two categories of information:
1. Information about ownership and control of land:
This includes any information that would be useful to identify persons who (from time to time):
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- own relevant interests in land;
- have relevant rights concerning land; or
- have the ability to influence (directly or indirectly) the owner of a relevant interest in land, or a person with a relevant right concerning land, in the exercise or that ownership or right,
together with information that would be useful to ascertain the nature, extent or duration of that ownership, those rights or that ability.
Parties can have “control or influence” by reason of interests or rights in or under a company, partnership, trust or similar legal structure or arrangement. “Relevant interests” and “relevant rights” are widely defined and are not restricted to proprietary interests.
2. Transactional information
This would be information relating to instruments, contracts or other arrangements:
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- creating, altering, extinguishing, evidencing or transferring relevant interests in land; or
- conferring, amending, assigning, terminating or otherwise modifying relevant rights concerning land.
With the information required potentially including:
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- details of the parties to a transaction;
- details of the persons on whose behalf or for whose benefit the parties to the transaction are or were acting;
- details of the terms of the transaction;
- details of persons providing professional services in relation to a transaction;
- details of source of funds or other consideration given in connection with the transaction; and
- copies of documents evidencing the transaction.