New Register of Overseas Ownership of UK Property

The Economic Crime (Transparency and Enforcement) Act 2022 (‘the Act’) was given Royal Assent on March 15, 2022. The Act includes a new requirement for overseas entities to register their details, and details of their beneficial owners and controllers, at Companies House. Companies House and HM Land Registry are working to establish the new register, and these provisions will come into force on a day to be appointed by Regulations made under the Act, once the register is ready to operate.

What types of overseas entity will need to register?

Registration is mandatory and will be required by any overseas entity (body corporate, partnership or other entity governed by the law of a territory or country outside of the UK) that holds a ‘qualifying estate’.   A ‘qualifying estate’ includes a freehold estate, or leasehold estate granted for more than seven years.  The requirement to register under the Act is retrospective – it applies to subsisting interests which were acquired at any time after 1 January 1999.   Overseas entities will be allowed a six-month transitional period from the relevant part of the Act coming into force to register their interest.   

What is the requirement to register beneficial owners and controllers?

Overseas entities holding a qualifying estate must register their beneficial owners and controllers and this registration requirement will not cease until the entity no longer holds the qualifying estate. Regulations made under the Act may exempt certain overseas entities from the requirement to identify beneficial owners and controllers, including where an overseas entity has provided equivalent information to a public registry in its country of formation.   

To prevent overseas entitles and their beneficial owners and controllers from avoiding disclosure, all overseas entities making dispositions during the six-month transitional period will still be required to provide the beneficial information required by the Act.

The regime for identifying beneficial owners of registrable overseas entities is very similar to the existing PSC (people with significant control) register requirement for beneficial owners of UK companies. A beneficial owner is any individual, legal entity, government or public authority that has significant control or influence over the overseas entity through:

• Directly or indirectly holding 25% or more of the shares or voting rights; 
  
  
• Directly or indirectly having the right to appoint or remove a majority of its directors; or 
  
  
• Otherwise having significant control or influence over the entity (including through a trust arrangement). 

How does an overseas company collect this information?

If information is not forthcoming from an overseas owner or controller, overseas entities are required to send an information notice to relevant persons giving them up to one month to confirm their ownership and provide the relevant information for the register. The entity can also send an information notice to someone they know is not a beneficial owner but who they believe could know who the beneficial owner is, or could know someone who may know the relevant information. 

What are the ongoing filing requirements?

Overseas entities will need to provide an updated statement to Companies House within 14 days of the end of each 12-month period following the initial registration date.   Overseas entities can apply to be removed from the register when they dispose of the relevant UK property interest.  

What are the sanctions for non-compliance?

If a registrable overseas entity has not registered with Companies House and is not up-to-date with its filings, then restrictions will apply on the transfer of property within England and Wales.  There are a couple of scenarios that could apply:

1. The overseas entity will be prevented from being registered at the Land Registry as the owner of a freehold or leasehold interest of more than 7 years unless it has complied with its obligations under the Act or is exempt from doing so;
   
   
2. The Land Registry must enter a restriction on the registered title to any estate owned by an overseas entity who became the registered owner by an application made on or after 1 January 1999 and has not complied with its obligations under the Act. The restriction will take effect from the end of the six month transitional period and will prohibit the registration of any dispositions, being a transfer, the grant of a lease for more than 7 years or the grant of a legal charge.

These scenarios would considerably hinder an overseas entity from dealing with property in England and Wales if it is not in compliance with its obligations under the Act. The position is similar for property in Scotland and Northern Ireland.

There are potential criminal offences under the Act for the overseas entity and for its officers (such as directors), including for failing to register, failing to take reasonable steps to identify beneficial owners and controllers, providing false information and failing to update the register.  Potential punishments range from fines to (for individuals) imprisonment for up to 5 years.  If a beneficial owner or controller fails to respond to an information notice without a reasonable excuse, or responds with information they know to be false, this is also a criminal offence punishable by imprisonment.