Summary
- The Register of Overseas Entities (ROE) came into force on 1 August 2022.
- Overseas entities that acquire a freehold or leasehold interest of over 7 years in land or other property in the UK (a "qualifying estate") must register with Companies House and provide information in relation to their registrable beneficial owners or managing officers in order to obtain an overseas entity ID.
- Since 5 September, the Land Registry has required an overseas entity ID in order to register an overseas entity as proprietor of an interest in land.
- Overseas entities that already own a qualifying estate registered on or after 1 January 1999, will also need to register with Companies House and provide the same relevant information by 31 January 2023, the end of the transitional period.
- Overseas entities that have disposed of a qualifying estate on or after 28 February 2022 (and do not continue to retain another such estate) do not need to register, but must provide a statement and information to Companies House by the same deadline.
- Criminal sanctions apply for non-compliance.
Background
The long-awaited Register of Overseas Entities (ROE) was introduced in the Economic Crime (Transparency and Enforcement) Act 2022 (the Act), enacted on 15 March 2022. The Act also includes provisions relating to Unexplained Wealth Orders and financial sanctions. Information about Unexplained Wealth Orders may be found here.
About the Register of Overseas Entities (ROE)
What is the aim of the ROE?
The aim of the ROE is to prevent individuals from obscuring their ownership of an interest in UK property and land by acquiring it through an overseas entity.
The Act applies to property situated anywhere in the UK, but this note looks at the provisions as they relate to property in England and Wales.
What is an Overseas entity?
An overseas entity is a legal entity that is governed by the law of a country or territory outside the UK. In this context, a legal entity is a body corporate or other such legal person (such as a limited partnership or foundation).
How does the ROE work?
The ROE is held by the Registrar of Companies at Companies House (the registrar), and records specified information about an overseas entity, including details of its "registrable beneficial owners" and of its managing officers (directors, managers or secretary).
Once an overseas entity has registered, the registrar issues an overseas entity ID.
What is a registrable beneficial owner for the purposes of the ROE?
A "registrable beneficial owner" is a beneficial owner that is not exempt from being registered under the terms of the Act.
A beneficial owner includes a person that holds more than 25% of the shares or more than 25% of the voting rights in the entity. It also includes anyone who has the right (directly or indirectly) to appoint or remove a majority of the board of directors of the overseas entity, or to exercise significant influence or control over that entity.
Where a trustee meets the requirements to be a registrable beneficial owner in relation to an overseas entity, required information must also be provided about the trust, the trustees and, in addition, about beneficiaries, the settlor and any "interested person" in relation to the settlement. An "interested person" is one who, under the terms of the trust, has rights in respect of the appointment or removal of trustees or the exercise by the trustees of their functions. Accordingly, this would potentially include a Protector.
In addition, any person who has the right to exercise, or actually exercises, significant influence or control over the activities of such a trust or another entity that is not a legal person, such as a partnership or unincorporated association, would also be a beneficial owner for the purposes of the Act.
How is the requirement to provide information enforced?
An overseas entity is obliged to identify registrable beneficial owners. Having done so, it must give the relevant person an information notice, requiring the recipient to provide certain specified information.
A recipient of an information notice must comply with it within one month. Failure to do so without reasonable excuse, or knowingly or recklessly providing false information, is an offence punishable with a maximum of 2 years' imprisonment or a fine (or both).
To what extent is information on the ROE publicly available?
The ROE is publicly accessible. However, some information is "protected information" and will not be publicly available. For individuals, protected information includes their residential address and the day of the month of their birth.
In contrast, information about beneficiaries, settlors and other interested persons in relation to trusts where the trustee is a registrable beneficial owner will generally be restricted to HMRC and other persons with functions of a public nature that may be designated by the Secretary of State.
The Act provides for the Secretary of State to be able to make provision for information regarding a specified individual to be unavailable for public inspection. However, the grounds for such an application are limited.
The role of the Land Registry
How has the process of registering ownership of land been amended to ensure overseas entities are registered?
A restriction is to be placed on the register of any "qualifying estate" in land or property of which an overseas entity is the registered owner and has become so at any time on or after 1 January 1999. A "qualifying estate" includes a freehold interest or a lease of over 7 years.
The Land Registry must do this by 31 January 2023 (i.e. 6 months from 1 August 2022, the date on which the ROE came into force) where the overseas entity applied to become the registered proprietor of the estate after 1 January 1999 and before 1 August 2022.
Subject to certain exceptions, no disposition of the estate (such as a sale or grant of a lease for over 7 years) may then be registered at the Land Registry unless the overseas entity is either registered on the ROE and is able to show its Overseas Entity ID provided by the Registrar of Companies, or is an exempt overseas entity, as defined in the Act. This requirement took effect from 5 September 2022.
It is an offence (carrying a maximum prison term of 5 years, or a fine, or both) for an overseas entity to make a registrable disposition of a qualifying estate if there is a restriction on the register.
It is also an offence (carrying a maximum prison term of 2 years, or a fine, or both) for an overseas entity to be the registered proprietor of a qualifying estate as a result of an application made on or after 1 January 1999, but not to be registered as an overseas entity, or to have made an application to be so registered (unless exempt) by the end of the transitional period.
What, if any, action is required if you, or a trust with which you are connected, already owned property through an overseas entity prior to 1 August 2022?
Where an overseas entity made an application to be registered as proprietor of a "qualifying estate" in land between 1 January 1999 and 1 August 2022, it will be required to register on the ROE prior to the end of the transitional period, 31 January 2023.
Since 5 September, the Land Registry only registers a disposition of a qualifying estate acquired by an overseas entity if the overseas entity provides it with an overseas entity ID. However, if an overseas entity disposes of a qualifying estate between 28 February 2022 and 31 January 2023, the overseas entity will not have to apply for registration, but will have to provide certain statements and information about the disposition and the beneficial ownership of the overseas entity to Companies House by 31 January 2023. The information required is essentially the same as is required to make an application for registration.
Accordingly, if they have not already done so, overseas entities that may be caught by the new rules, whether in relation to existing land ownership, or in anticipation of a forthcoming transaction, should take the necessary steps to identify relevant ownership structures and begin the registration process, where necessary.
Verification and registration
The rules are complicated, and the end of the transitional period for overseas entities that hold UK property to register with Companies House is fast approaching. To avoid any risk of missing the deadline, action should be taken as soon as possible.
In common with most UK law firms, we will not be able to carry out the verification and registration process, as we are not in a position to verify the accuracy of the information required. However, for those for whom it would be helpful, we are able to suggest a number of third-party providers who are registered to carry out this work.
And finally…
We are able to analyse structures, and advise whether an overseas entity is registrable or otherwise. Accordingly, if you have any questions in relation to the new legislation, please get in touch with your usual contact at Howard Kennedy.
Please also do so if you are considering acquiring a property in the UK and would like advice on different structuring options, particularly with a view to protecting your and your family's privacy from full public access.
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