Background
The Overseas Entities Register was first announced in March 2016 in response to a perceived lack of transparency in relation to the ultimate owners of UK land where the land is registered to an overseas company or other entity.
The principal legislation is set out in the Economic Crime (Transparency and Enforcement) Act 2022 (the “Act”) which received Royal Assent on 15 March 2022 and is now live having come into force on 1 August 2022. There is now a six month transition period for registration.
What is the Register of Overseas Entities?
A new register giving details of the beneficial ownership of all Overseas Entities which own property, whether commercial or residential. There is a requirement to register if the Overseas Entity is the registered owner of a “qualifying estate” in England and Wales. There are similar requirements for land in Scotland and Northern Ireland, but consideration of these is outside the scope of this Briefing Note. A “qualifying estate” means either a freehold estate in land, or a leasehold estate in land granted for a term of more than seven years from the date of grant. The Register will be maintained at UK Companies House and will be publicly accessible.
What is an Overseas Entity?
Under the Act, an Overseas Entity refers to a legal entity that is governed by the law of a country or territory outside the UK. For these purposes a legal entity includes any entity which is a legal person under the law by which it is governed (e.g. non-UK incorporated companies; LLPs, foreign foundations and non-UK partnerships with a legal personality). On this basis non-UK resident trusts are not overseas entities as they do not have a separate legal personality (but those that hold UK property indirectly through an overseas entity will be caught), together with any registrable entity that exercises significant influences and control over the trust (see below).
What do Overseas Entities need to do if they own property in the UK?
Overseas Entities that acquired property in England and Wales after 1 January 1999 or that acquire it in the future must apply for registration on the Register of Overseas Entities (there are corresponding provisions in Scotland and Northern Ireland) unless it is exempt from registration.
What does the registration requirement involve?
Once it has been determined that an Overseas Entity is required to register it is required to make an application to the Registrar of Companies for England and Wales (i.e. Companies House) in relation to such an entity to confirm its beneficial owners and (in some cases) managing officers and any trusts that sit within its corporate structure. The application must include certain information about the Overseas Entity, including its name, address and other basic details. Before registering the Overseas Entity reasonable steps must be taken to identify its beneficial owners. Once they have been identified, certain specific information in respect of the beneficial owners should be included in the application. To obtain this information (to the extent it does not already have it) the Overseas Entity must send an information notice to any person that it knows or has reasonable cause to believe is a registrable beneficial owner. If an individual fails to comply with the request under an information notice, they could be liable to a fine or imprisonment.
Once the required information has been obtained, the Overseas Entity can file its application for registration.
Who is a Beneficial Owner?
A beneficial owner of an Overseas Entity is a person who meets any one of five conditions:
- holds (directly or indirectly) more than 25% of the shares;
- holds (directly or indirectly) more than 25% of the voting rights;
- holds the right (directly or indirectly) to appoint or remove the majority of the board;
- has the right to exercise or is actually exercising Significant Influence or Control (SIOC) over the entity; or
- holds the right to exercise, or is actually exercising SIOC over a trust or partnership the trustees or partners of which meet one of the other conditions.
The concept of SIOC is not defined in the Act. However, SIOC is used in a similar context in the “Persons with Significant Control (PSC) Regime” (which applies to UK entities) and it is expected that similar rules will be applied here. Examples of what would constitute “significant influence or control” are set out in the statutory guidance relating to the PSC regime and include the right to appoint or remove trustees, to direct the distribution of funds, or to revoke the trust.
Individuals are registrable as beneficial owners. Certain corporate entities “that are subject to [their] own disclosures requirement” (e.g. other UK companies or other overseas companies that are registered on the Overseas Entities Register) are also registrable.
Once a beneficial owner has been identified, certain information will need to be included in respect of the beneficial owner. The exact information will depend on the nature of the beneficial owner. This will include the beneficial owner’s name as well as any date of birth or residential address (although dates of birth and residential addresses will not be public) and the date on which the person became a registrable beneficial owner.
Where a beneficial owner of the entity is a trustee in addition to the information described above, certain additional information about the trust needs to be provided to Companies House although that will not be made public. These include the name of the trust, the date it was created and certain information in relation to the current and historic trustees. Information in relation to anyone who has the power to appoint or remove trustees or exercise certain rights over the trustees’ powers, will also need to be included.
Furthermore, as drafted the Act appears to require disclosure of information in relation to any and all Beneficiaries, the Settlor, and any other individual or entity with control over the trust (for example, a Protector).
Consequences of Failure to Comply
An Overseas Entity that acquires property cannot be registered as proprietor at HM Land Registry until it has registered its beneficial ownership, unless an exemption applies. There are also criminal offences for failure to comply.
When did it go live?
The UK Register of Overseas Entities launched on 1 August 2022 at Companies House.
Overseas Entities who want to buy, sell or transfer property or land in the UK must now register with Companies House and confirm the identity of their registrable beneficial owners or managing officers.
Overseas Entities who already own or lease land or property in the UK will also need to register with Companies House to confirm their registrable beneficial owners or managing officers.
Entities within scope have until 31 January 2023 to comply and Entities that have disposed of interests from 28 February 2022 are also required to register by then. From 5 September 2022, registration will be required before an Overseas Entity can acquire or dispose of UK real estate.
STEP has already produced guidance to assist members with the verification process that is required for the new register of overseas entities. In addition, the Government has now published guidance.
UK Agent
Before an Entity registers its beneficial owners or managing officers on the Register a UK supervised “relevant person” will need to verify the required information about them as set out under the Act. These verification checks must be carried out by a suitable UK based agent which must have its own Agent Assurance Code. This firm has already applied for and received its Code from Companies House to enable it to carry out such checks.
For any advice and assistance relating to this or any other Wealth Planning matter, please contact Robert Drysdale or another member of our Wealth Planning team.
