UK Update: Guide: Economic Crime (Transparency and Enforcement) Act 2022 – Register of Overseas Entities

The Economic Crime (Transparency and Enforcement) Act 2022 (the “Act”) came into force on 15 March 2022 with Part 1 of the Act making provision for the registration of overseas entities who already own, or want to own, land in the UK, through the creation of a Register of Overseas Entities, which will be managed by Companies House in the UK.

What will the Register cover?

The Register will:

• provide more information for law enforcement to help them to track down those using UK property as a money-laundering vehicle;
• require anonymous foreign owners of UK property to reveal their real identity to ensure criminals can’t hide behind secretive chains of shell companies;
• level the playing field with property owned by UK companies, who already need to disclose their beneficial owners to Companies House;
• impose sanctions for non-compliance, including restrictions on registering or disposing of the title to the land; and
• apply retrospectively to property bought since January 1999 in England and Wales and since December 2014 in Scotland.

What needs to be done?

An overseas entity will be required to identify its beneficial owner(s) and to register them with Companies House.  Information supplied to the register will be required to be verified.  An overseas entity is defined as being a legal entity that is governed by the law of a country or territory outside the United Kingdom, including a body corporate, partnership or other entity that is a legal person under the law by which it is governed.

Once registered, the overseas entity will be given a unique identification number and the entity will be required to update the information held by Companies House on an annual basis, until such time as it successfully applies to be removed from the live Register of Overseas Entities.

Retrospective application

The registration requirement will be retrospective and overseas legal entities that acquired a qualifying estate in land in England and Wales on or after January 1999, or December 2014 in Scotland, will have 18 months to register the land in question.

There will be a transitional period of six months existing for overseas entities owning ‘qualifying estates’ in property to apply for entry on the new Companies House register and provide the relevant details of their beneficial owners. We are yet to see how the Act will correspond with the Register of Persons Holding a Controlled Interest in Land in Scotland in terms of overseas entities.

Who is a beneficial owner?

The overseas entity will be required to identify any beneficial owner who:

• holds, directly or indirectly, more than 25% of the shares in the overseas entity;
• holds, directly or indirectly, more than 25% of the voting rights in the overseas entity;
• has the right, directly or indirectly, to appoint or remove a majority of the board of directors of the overseas entity;
• has the right to exercise, or actually exercises, significant influence or control over the overseas entity; or
• is a person that is trustee of a trust, or member of a partnership, unincorporated association or other entity, that is not a legal person under the law by which it is governed but which meet any of the conditions above in relation to the entity and such person has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or entity.

Statutory statements

Where an overseas entity has no registrable beneficial owners or they cannot be identified, a statement to that effect must be registered, together with information about each managing officer of the overseas entity.

Protected information

While the register of overseas entities will be publicly available, some information will be protected, for example, date of birth and residential address information, in line with protected information for directors of UK companies or individuals who are persons with significant control.

Registered overseas entities can apply to be removed from the register of overseas entities but must deliver specified information to Companies House, including a statement that they are not registered as the proprietor of a relevant interest in land. This will then be checked by Companies House and the application for removal will be refused if they are still so registered.

Sanctions

Compliance will be enforced through restrictions on the title registers of land owned by overseas entities.  There will also be criminal sanctions for non-compliance and delivering misleading, false, or deceptive information.

By Gary Gray, Burness Paull LLP, Scotland, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact ukscotland@transatlanticlaw.com

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