From 5 September 2022 any overseas entities acquiring registrable land interests (including taking leases of seven years or longer) will need to be registered on the new UK register of overseas entities (ROE) before applying to become the registered owner of the land (with limited exceptions).
The ROE opened on 1 August 2022 and overseas entities that own registered land have been receiving notices from Companies House about the requirement to register (although the notice is for information only – registration is required whether or not it is received). Companies House has published the form of letter online here.
Existing overseas owners will have a new restriction added to their land titles on or shortly after 5 September 2022. The restriction will prevent registration of transfers, leases of seven years or more or charges of the land after 31 January 2023 (with limited exceptions) unless the overseas entity owner is registered on the ROE at Companies House.
We expect that many administrators dealing with overseas entities are (or will be) offering registration services. We recommend that you have used an overseas entity to directly hold UK land that you make enquiries of your administrator to begin the process of registration and any considering acquisitions should take steps to register as soon as possible to avoid any delays to transactions.
In some cases, consideration will also need to be given to whether any trust arrangement in the structure needs separate registration with the HM Revenue & Customs (HMRC) Trust Registration Service (TRS) following the recent expansion of the requirement to register taxable trusts to cover a much wider range of non-taxable trusts. Among other things this will capture the majority of nominee property holding Special Purpose Vehicle (SPVs) (whether they are UK or overseas entities) and may also extend to English limited partnership structures. Further details are on HMRC's Trust Registration Service website.
What is the Register of Overseas Entities?
Part of Government's efforts to deal with foreign criminals using UK property to launder money is the introduction of a new ROE at Companies House to introduce a new level of transparency to UK property ownership. The principal legislation is the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA 2022).
Government has introduced the regime extremely quickly. Ideally Companies House and HM Land Registry (HMLR) would have had more time to implement it and overseas entities given more time to register. Unfortunately, the speed of introduction may well lead to some challenges in registration process which could then impact the ability to deal with land assets.
The register (including the information supplied) will be generally open to public inspection. There is some scope for protecting information about certain individuals but that involves a separate application process and may delay registration of the overseas entity.
Details and further information are available on the Companies House website here.
Which overseas entities are affected?
ECTEA 2022 defines overseas entities as "a legal entity that is governed by the law of a country or territory outside the UK". This means the regime covers companies incorporated in the Channel Islands and Isle of Man as well as other common overseas locations for property holding companies (such as Luxembourg and British Virgin Islands). A legal entity is any body which is a legal person under the law by which it is governed meaning all non-UK investors and property holding non-UK SPVs will be caught by the regime.
The requirement to register in the ROE applies to:
- overseas entities that own registered land (acquired on or after 1 January 1999) (which must register on the ROE before 31 January 2023), and
- any overseas entity acquiring registered land (including take a lease of seven years or more) from 5 September 2022.
What does the Land Registry restriction mean?
Existing overseas entity owners will not be able to dispose of their land after 31 January 2023 unless they are registered on ROE (subject to a limited number of exceptions). HMLR will add a restriction to these titles on or shortly after 5 September 2022.
Overseas entities will not be able to register new acquisitions of land after 5 September 2022 until they are registered on ROE. When new acquisitions are registered, a new restriction will automatically be added limiting the ability to dispose (but this restriction will take effect immediately).
ECTEA 2022 also makes it a criminal offence for an overseas entity (and every officer of that entity) if the entity makes a prohibited registrable disposition.
How to register?
Companies House has launched the ROE and it is now possible to register.
Registration is an online process via this website. Authorised agents can deal with registrations on behalf of overseas entities if they have been issued with assurance credentials from Companies House.
In order to register, an overseas entity needs to:
- identify registrable beneficial owners and serve notice on them;
- provide details of registrable beneficial owners to Companies House; and
- have all the information verified by certain UK-based agents supervised for money laundering purposes (including credit institutions, auditors and lawyers).
Details of which beneficial owners are registrable and the information that needs to be provided are set out below.
Although these steps may be undertaken by the provider who deals with the registration, overseas entities should prepare to:
- identify UK land interests in their portfolio,
- identify beneficial owners and managing officers,
- prepare the information listed below in relation to the overseas entity and collect the information relating to beneficial owners,
- send the necessary notices (although the person dealing with registration may do this as part of the service), and
- identify which of your usual UK based consultants (probably auditors and/or corporate service providers) could be a "relevant person" to verify the information (which is also part of the service being offered by providers).
Which beneficial owners are registrable?
Essentially a person or entity (X) will be a beneficial owner of an overseas entity (Y) if one or more of the following conditions are met:
- X holds (directly or indirectly) more than 25% of the shares in Y
- X holds (directly or indirectly) more than 25% of the voting rights in Y
- X holds the right (directly or indirectly) to appoint or remove a majority of the board of directors of Y
- X has the right to exercise, or actually exercises, significant influence or control over Y
- The trustees of a trust, members of a partnership or unincorporated association meet any of the conditions above in relation to Y, and X has the right to exercise, actually exercises, significant influence or control over that trust or entity.
The provisions for calculating shareholdings and voting rights and situations where ownership is joint with another person, indirect or trust involvements are set out in the legislation.
Details are also required for "managing officers" (essentially directors and those equivalent roles or control).
What information is needed to register?
- Country of formation
- Registered office and correspondence address
- Email address
- Legal form and governing law
- Public register it appears on and registration no (if applicable)
- Date of birth
- Usual residential address
- Which of the conditions is met to be registrable
- Whether or not trustee
- Whether individual is designated person within s9(2) Sanctions and Anti-Money Laundering Act 2018
- Service address
- Date on which individual became beneficial owner
Trustee beneficial owner
- Name of trust (or description)
- Date of trust
- For trustees – name, date on which trustee became / ceased to be registrable beneficial owner
- For each beneficiary of trust – name, date of birth, nationality and address
Companies House has confirmed that although most of the information will be made publicly available, the register will not show the home address, full dates of birth (only month and year will be shown), email addresses, date of verification checks or information about trusts. (Note trusts may be subject to separate to registration regimes in the relevant jurisdiction – but where that is the HMRC's Trust Registration Service, most information will only be available to those with legitimate interest.)
Duty to update
Following registration, the information must be kept up to date. Every 12 months (beginning with the date of the overseas entity's registration), or more frequently if the overseas entity desires, the overseas entity must either confirm that there has been no change in the beneficial owners during that period, or provide information about anyone who has either become, or ceased to be, a registrable beneficial owner during that period.
Compliance with the duty to update is a condition of being able to dispose of land assets so this will be an ongoing compliance burden for overseas entities which are active in UK land assets.
In some cases, failure to comply with the requirements is a criminal offence by both the entity and officers. The most severe financial penalties are unlimited and individuals can face prison sentences for serious breaches.
Please speak to your usual Gowling WLG contact if you are concerned about registration or the implications for existing structures or proposed transactions.