28 February 2022 – from this date, details of leases of over 7 years, charges or transfers of registered leaseholds or freeholds by overseas entities must be provided to Companies House.
1 August 2022 – the register of overseas entities opened at Companies House
5 September 2022 – the Land Registration changes take effect
31 January 2023 – the end of the transitional period
Who, what, when
An overseas entity includes a company, partnership, trust or other legal entity. The overseas entity will have to provide information about itself and its beneficial owners. If there are no beneficial owners, the overseas entity has to state that this is the case and provide information about its managing officers. Information required includes name; country of incorporation; registered or principal office; service address; email address; legal form of the entity and the law by which it is governed; any public register in which it is entered and its registration number on that register.
A person is a beneficial owner if, in relation to the overseas entity, it:
owns directly or indirectly more than 25% of the shares or voting rights;
can appoint or remove a majority of the board of directors; or
has the right to exercise or actually exercises significant influence or control over the overseas entity.
These tests are based on the current persons of significant control register.
Once registered, Companies House will issue a unique identification number (an overseas entity ID) which will allow an overseas entity to apply to be registered at the Land Registry as the new owner of property. This number will not be required for overseas entities who buy or lease or charge relevant land and lodge their (successful) application at the Land Registry before 5 September 2022.
Overseas entities who already own UK property will be given until 31 January 2023 to register at Companies House and obtain an ID number. At some point after 5 September 2022, the Land Registry will place a restriction on the title which will become effective after 31 January 2023 and will restrict transfers (other than surrenders), long leases and charges unless one of the exemptions apply. The most important exemption will be registration at Companies House evidenced by the overseas ID number.
Note that to continue to be effectively registered at Companies House, the overseas entity will need to comply with an “updating duty” at least every 12 months from the date of registration.
Overseas entities should register at Companies House as soon as possible. Overseas Entities should also factor into their timelines the information notice that has to be given to their beneficial owners, requiring them to respond within a month. This is important for an overseas entity who is buying a UK property as they will need to have registered at Companies House before any application can be made to the Land Registry after 5 September. The Land Registry application will be rejected outright if the overseas entity ID number is not provided.
For existing overseas entities who own UK property, any disposals made since 28 February 2022 will be required for registration at Companies House. The relevant disposals will involve a freehold or leasehold granted for a term of more than seven years or a charge.
Amelia Stawpert of our Investment Funds team comments, “We recommend that any investor who uses non-UK companies, partnerships or trusts to hold UK property should consider as soon as possible if they need to make a filing. Identifying the correct registrable beneficial owners, even for commonly used holding structures, may be complex and will require careful analysis. Fund managers should also consider whether any large or influential investors in their funds could be beneficial owners, and if so, how they can obtain the necessary information.”
Verification’s the rub
Certain information about the beneficial owners and managing officers of an overseas entity has to be verified by a “relevant person” as defined in the Money Laundering legislation. These include a wide range of UK based professional including financial institutions, auditors, accountants and independent legal professionals. The verification requirement is a potential stumbling block for overseas entities as it is an offence for a person, without reasonable excuse, to deliver any document that is misleading, false or deceptive in a material way and the verifier will be liable to a fine and potential criminal liability.
Only those with a solid understanding of the new regime, trust law and overseas corporate forms are likely to be comfortable with verifying along with an understanding of the underlying persons of significant control regime which is currently applicable to UK companies.
An existing overseas entity (and its officers) who owns land but has failed to register at Companies House before 31 January 2023, will commit an offence, potentially punishable by imprisonment or a fine or both. Failing to comply with the updating duty is also subject to a fine. .
Overseas entities should register as soon as possible.
Those with active properties such as shopping centres where a number of dispositions have occurred since 28 February, may find the Companies House application process more prolonged at the outset so should allow plenty of time to register.
A second Economic Crime Bill is expected later in 2022 so watch this space. This could prove an opportunity to iron out any issues that arise from the speed at which the current regime has been pushed into the public arena.
Authored by Jane Dockeray and Ingrid Stables.