Search

A Guide to the Register of Overseas Entities and its impact on Real Estate transactions

The Register of Overseas Entities (“Register”) is incorporated into the Economic Crime (Transparency and Enforcement) Act 2022 (“Act”), the Bill for which, in response to Russia’s invasion of Ukraine, was expedited through Parliament with the Act receiving Royal Assent on 15 March 2022. The Act, as well as including requirements relating to registering overseas entities which own land in the UK, also amends existing legislation in relation to sanctions and addresses changes to the UK’s wealth orders regime.

This guide covers the practicalities of the new Register, including who it applies to, how to make an application to the register, associated deadlines and sanctions for failure to comply.

What is the function of the Register?

The new Register, to be kept and maintained through Companies House, will contain certain details of overseas entities and their beneficial owners which own UK land or property in order to reveal their identities, to aid the government in fighting economic crime and encourage greater transparency. This should reduce illicit transactions and, as an example, prevent multiple shell companies being used to disguise the real owner sat behind such companies. 

Where can I find the new Register?

As of 28 March 2022, the Register, although envisaged to be available to view on the Companies House website (excluding some personal data), has not yet been fully implemented. The government notes though that “implementation will proceed at pace” so it would be prudent to prepare for the Register’s requirements in order to make applications soon after it is active.

Who will the Register apply to?

The register applies to Overseas Entities and their Beneficial Owners (including managing officers in lieu of Beneficial Owners).

An “Overseas Entity” is a legal entity (corporate body, partnership or other entity that has separate legal personality under the law by which it is governed such as an LLP) that is governed by the law of a country or territory outside of the UK.

A “Beneficial Owner” is an individual, government, public authority or other legal entity who falls into at least one of the following conditions:

  • directly or indirectly holds more than 25% of the shares in the Overseas Entity;
  • directly or indirectly hold more than 25% of the voting rights in the Overseas Entity;
  • has the direct or indirect right to appoint or remove a majority of the board of directors of the Overseas Entity;
  • has the right to exercise significant influence or control over the Overseas Entity.

Please note though, that the Register is not aiming to contain details of all beneficial owners of the relevant land; it exists to provide information regarding beneficial owners of the Overseas Entity which holds the land.

Does the Register apply to trusts or partnerships?

If trusts and partnerships do not have legal personality under the law by which they are governed, but the trustees of a trust, or members of a partnership, meet any of the beneficial owner conditions above, then there will be a requirement to register and provide certain details about the trust.

Trusts may also be required to register with the Trust Registration Service (“TRS”), as well as on the Register, creating  a degree of duplication. This would be the case where a corporate trustee that is not a UK resident, for example, acquires land directly in England and Wales and is thus required to register with both the TRS and on the Register.

Are there any exemptions?

Yes there are certain exemptions for Beneficial Owners. If a Beneficial Owner holds an interest directly through an entity which is subject to its own disclosure requirements, then it does not need to be registered (such as the Beneficial Owner holding its interest through a company which is registered on the PSC Register, or which is itself an overseas entity which must be registered under the Act).

The Secretary of State may also exempt a person from certain aspects of the registration requirements in the interests of national security, or preventing serious crime.

Does the Register apply to all land?

The requirement to register applies to any “Qualifying Estate” owned by an Overseas Entity, which is:

  • a freehold estate in land, or
  • a leasehold estate in land, granted for a term of more than seven years from the date of the grant.

How do I make an application to the Register?

The application is made to the Registrar of Companies (known as Companies House) as follows:

  1. The Overseas Entity confirms the details of its Beneficial Owners. If it does not have all these details, it must send an information notice to any person that it knows, or has reasonable cause to believe, is a registrable Beneficial Owner.
  2. Once the Overseas Entity has all the required details for its Beneficial Owners, the application is made, along with the details for the Overseas Entity, and the name and contact details of someone who may be contacted about the application, together with one of these three statements:
  3. (i) That the entity has identified one or more registrable beneficial owners and that is has no reasonable cause to believe there are others, and (ii) that the entity is able to provide the required information about each registrable beneficial owner it has identified.

    The associated information for statement 1 includes: i) the required information about the Overseas Entity, and ii) the required information about each registrable Beneficial Owner that the Overseas Entity has identified.
  4. A statement that the entity has no reasonable cause to believe that it has any registrable beneficial owners.

    The associated information for statement 2 includes: i) the required information about the Overseas Entity, and ii) the required information about each managing officer of the Overseas Entity.
  5. A statement: (i) that the entity has reasonable cause to believe that there is at least one registrable beneficial owner that it has not identified, (ii) that the entity is not able to provide the required information about one or more of the registrable beneficial owners it has identified, or (iii) that paragraphs (i) and (ii) both apply.

    The associated information for statement 3 includes: (i) the required information about the Overseas Entity, (ii) the required information about each managing officer of the Overseas Entity, (iii) the required information about each registrable beneficial owner that the Overseas Entity has identified or so much of that information as it has been able to obtain.

What information do I need to include in the application?

The required information about an Overseas Entity includes:

  • Name;
  • Country of incorporation;
  • Registered or principal office;
  • A service address;
  • An email address;
  • The legal form of the entity and the law by which it is governed; and
  • Any public register in which it is entered and, if applicable, its registration number in that register.

Where a registrable Beneficial Owner is an individual, the required information includes:

  • Name, date of birth and nationality;
  • Usual residential address;
  • A service address; and
  • The date on which the individual became a registrable Beneficial Owner in relation to the Overseas Entity.

Where the registrable Beneficial Owner is a legal entity other than a government or public authority, the required information includes:

  • Name;
  • Registered or principal office;
  • A service address;
  • The legal form of the entity and the law by which it is governed;
  • Any public register in which it is entered and, if applicable, its registration number in that register; and
  • The date on which the entity became a registrable Beneficial Owner in relation to the Overseas Entity.

Where the Beneficial Owner is a trustee, the required information includes:

  • Name of the trust;
  • Date the trust was created; and
  • Information regarding current and historic trustees, as well as information regarding any person that has the power to appoint or remove trustees or exercise certain rights over a trustee’s powers.

Are there any sanctions for failure to comply with the new registration requirements?

Yes. If an Overseas Entity fails to comply with the registration requirements, the Overseas Entity and each of its officers will have committed a criminal offence.

An offence will also be committed where a recipient of an information notice from an Overseas Entity fails to comply with such a notice, or makes false statements (either intentionally or recklessly) in purported compliance with any of the obligations. These offences can result in fines and criminal sanctions, with up to 5 years’ imprisonment.

How will the Register impact Real Estate transactions?

If an Overseas Entity doesn’t apply to have its details on the Register and obtain the necessary verification, it will impact on the Overseas Entity’s ability to sell, register leases of more than seven years, or charge the land it owns.  There could also be title restrictions on the registration of any disposals or transactions involving the land.

The effects on land due to failure to register will result in scenarios such as:

  1. The Overseas Entity will not be able to obtain legal title to the land.
  2. Any unregistered land will not be able to be registered (either voluntarily or in response to a trigger to registration).
  3. If a disposition is made by an Overseas Entity to a third party, such as a transfer of the estate, but the Overseas Entity is not registered, is not exempt and no other exceptions apply, then the disposition will not be registrable and the third party cannot be registered as the proprietor at HM Land Registry; the third party will only have an equitable interest in the land. The Overseas Entity and its officers will also be guilty of a criminal offence.

To avoid these scenarios, it is important that:

  • as an Overseas Entity, it is registered by the date of completion of a transaction, having obtained an Overseas Entity ID provided by Companies House; and
  • as a third party entering into a transaction with an Overseas Entity, to confirm that the Overseas Entity is either exempt or registered with the appropriate ID by the date of completion of a transaction.

Title restrictions, due to an Overseas Entity failing to register, will prohibit the registration of any disposition unless any of the following apply:

  • The entity is an exempt overseas entity, at the time of the disposition;
  • The disposition is made due to a statutory obligation or court order, or occurs by operation of law;
  • The disposition is made due to a contract formed before the restriction is entered in the register;
  • The disposition is made in the exercise of a power of sale or leasing conferred on the proprietor of registered security over the land or a receiver appointed by such a proprietor;
  • The relevant minister gives consent to the registration of the disposition; or
  • The disposition is made by a specified insolvency practitioner in specified circumstances.

Will there be a requirement to register a Qualifying Estate retrospectively, or is the Register just for newly acquired Qualifying Estates?

Yes, the requirements will apply to all Qualifying Estates acquired since January 1999 in England and Wales (and December 2014 in Scotland).

Overseas Entities will need to register to acquire any Qualifying Estate as soon as Part 1 of the Act comes into force, otherwise, without registration, it will not be possible to become legal owner of the property as registration won’t be accepted at HM Land Registry and the Overseas Entity will only have an equitable interest in the land.

WHAT IS THE TIME FRAME FOR REGISTRATION?

Retrospective applications for Qualifying Estates acquired since January 1999 in England and Wales have a transitional six month period for registrations to be completed once the Register comes into force.

Applications for registration made within the six month transitional period will also need to provide information to Companies House where there has been a disposition of land between 28 February 2022 and the end of the six month transitional period (the date for the six month period has not yet been confirmed as the relevant parts of the Act have not yet come into force as at 2 May), or confirm that there have been no such dispositions.

Once registration is complete, is there a requirement to keep the Register updated?

Yes, the Overseas Entity will need to update the Register every 12 months to make changes to information previously provided or confirm that there have been no changes.

Updates must be given within 14 days of each anniversary of the initial date of registration.

If an Overseas Entity fails to comply with the updating requirements, the Overseas Entity and its officers will  commit an offence, and are liable to a fine.

What about removal of registered Overseas Entities from the Register?

Until a registered Overseas Entity applies to be removed from the Register as it is no longer the registered owner of UK land, its details will remain publicly accessible.

An Overseas Entity should request that the buyer notify them and their legal advisors once the transfer of land has been registered at HM Land Registry, so that the selling Overseas Entity has confirmation of when it is able to make an application for removal from the Register.

There is not currently a deadline by which an application for removal must be completed, but given the obligation to update the Register, it is presumed that an application can be made in conjunction with the annual deadlines to update the Register.

Action Points

Given that implementation of the Register is imminent, it would be prudent to:

  • Identify any UK land held, and whether such land is held directly or indirectly by an Overseas Entity including nominee companies or trusts with corporate trustees.
  • Collate the required information in respect of the Overseas Entity and Beneficial Owners, sending out information notices to third parties as necessary.
  • Compile final information ready to make an application for registration before the end of the 6 month transition period.
  • Create a table to list the Overseas Entities ID and registration details when provided by Companies House.
  • Create a note to set a reminder to update the Register on the anniversary of each application that is approved.

If you would like any further advice or assistance, please contact a member of our Corporate team or Real Estate team.

Send us a message