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As part of the response to the Ukraine conflict, UK Government has fast-tracked The Economic Crime (Transparency and Enforcement) Act 2022 on 15 March 2022 to create a register of overseas entities that own U.K. land. This Act will have a significant impact on commercial real estate in the U.K.
Register of overseas entities that hold UK land The Act establishes a new Register of Overseas Entities, to be maintained at Companies House.
Overseas entity, as defined as a legal entity governed by the law of a non-UK country or territory which owns or plans to own a "qualifying estate" in UK property must apply to become a "registered overseas entity" on this register. A "qualifying estate" in England means a freehold or a leasehold estate granted for more than seven years. (In Scotland, the relevant property interests are ownership, and leases of more than 20 years.). The information an overseas entity must provide the overseas entity’s name, country of incorporation and registered office and the date of birth, nationality, residential address and service address of each beneficial owner, or in some cases the managing officer(s) of the entity. This information must be updated regularly.
"Beneficial owner" under the Act is similar to that the Persons with Significant Control (PSC) register for UK companies which is maintained at Companies House. It includes individuals, entities and government bodies who hold, directly or indirectly, more than 25% of the shares or voting rights in the entity, have the right, directly or indirectly, to appoint or remove a majority of the board of directors of the entity, or have the right to exercise (or actually exercise) significant influence or control over the entity. The definition of “significant influence or control” in this context will need to be clarified but if it follows the PSC guidance, it would include a person (for example a protector) with a right to appoint or remove trustees, to direct the distribution of assets, to amend the trust deed, or to revoke the trust. Where the beneficial owner is the trustee of a trust (or non-UK arrangements of similar character), the overseas entity must also submit information in relation to the trust. This includes the name of the trust and the date it was created, details of the current (and some former) trustees, and the names, dates of birth, nationalities and addresses of the settlor, the beneficiaries and any person with rights in respect of the appointment or removal of trustees or the exercise of their functions.
The information will be verified by and registered at Companies House, which will have powers to check and monitor the information it receives. Once an overseas entity is registered, it will be issued with an overseas entity ID number and will be required to update the information on the register of overseas entities annually.
The information on the register will be publicly available.
The overseas entities owning existing properties have to become registered within 6 months from the date on which Companies House will be required to open the overseas register under the Act as the transitional period.
It is important to note that the register is not a register of the beneficial owners of the land itself, but rather the beneficial owners of overseas entities that hold UK land.
Restriction on overseas entity from disposing of its property? The requirement to register only applies if the overseas entity became the registered owner on or after 1 January 1999 in England and Wales (or 8 December 2014 in Scotland).
The Land Registry will be taking steps to identify the properties currently registered in the name of oversea entities and will place a restriction on every registered titles, effective from the end of the transition period, preventing disposal of the property unless the overseas entity is registered at the Companies House (or its otherwise those with exemption).
Exemptions The only exemption is where the UK Government chooses to exempt an entity on the basis of national security or for the purposes of preventing or detecting a serious crime.
Penalties for non-compliance Failure to comply with the Act is a criminal offence punishable by fines (the daily fine stands at £2,500 for both the overseas entity itself and each officer of it which is in default) and in some cases, prison sentences of up to 5 years.
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Disclaimer: Whilst reasonable care has been taken in provision of information above, it does not constitute legal or other professional advice. INTERSHORES does not accept any responsibility, legal or otherwise, for any error omission and accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, readers are advised to take appropriate professional advice before committing themselves to any involvement in jurisdictions, vehicles or practice.
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