In March 2022, we reported on the new register of overseas entities that hold UK land (the ROE). Created by the Economic Crime (Transparency and Enforcement) Act 2022, it did not come into effect immediately. The ROE has now been set up by Companies House and the new regime came into force on 1 August 2022.
What is an overseas entity?
An “overseas entity” is a legal entity governed by the law of a country or territory outside of the UK. This includes non-UK companies (including non-UK corporate trustees), partnerships or other entities that have legal personality. It does not include individuals.
What triggers registration?
An overseas entity which already held UK land on 1 August 2022 will have to register on the ROE by 31 January 2023, unless the land was acquired before 1 January 1999 in the case of land in England and Wales or before 8 December 2014 in the case of land in Scotland. Land in Northern Ireland acquired before 1 August 2022 will not trigger registration.
An overseas entity which acquires UK land on or after 1 August 2022 will have to register on the ROE at the time of the purchase, otherwise it will not be able to be registered as the owner of the land at HM Land Registry; however, given the speed at which the ROE has been introduced, a short grace period until 5 September 2022 has been allowed where transfers of land to overseas entities will still be processed even if the acquiring entity has not yet been registered on the ROE.
What is the registration process?
The overseas entity must:
1. Take reasonable steps to identify any registerable beneficial owners (see below), which will involve giving an information notice to any person that it knows, or has reasonable cause to believe, is a registerable beneficial owner of the overseas entity;
2. Arrange for the required information about the overseas entity’s registerable beneficial owners (or about its managing officers if it has no registrable beneficial owners) to be verified by a ‘relevant person’ (i.e. a UK agent supervised under the Money Laundering regulations, such as an accountant or solicitor);
3. Apply to Companies House to register on the ROE with prescribed information about the overseas entity itself, its registerable beneficial owners or managing offices and the UK regulated verification agent, together with payment of the £100 registration fee.
Companies House will then issue a unique overseas entity identification registration number (OEID) which will be required by HM Land Registry to process land transactions and which will be registered against the title of the land.
Are there ongoing obligations?
Once registered, the offshore entity must submit annual returns either providing updates to its beneficial ownership or confirming that there have been no changes.
What are the consequences of failing to comply?
The overseas entity will be unable to buy, sell or otherwise deal with the UK property (with some exceptions for short leases). There are also offences for failure to register, applicable both to the overseas entity itself and to its officers, punishable by fines and in some cases conviction and imprisonment.
Who are the registrable beneficial owners?
It is important to stress that the ROE is only concerned with the beneficial ownership of the overseas entity (as opposed to the beneficial ownership of the UK land held by the overseas entity). The new regime mirrors the requirements of the current PSC regime for UK companies.
A person will be a beneficial owner of the overseas entity if they meet any of these five conditions:
1. holding directly or indirectly more than 25% of the shares;
2. holding directly or indirectly more than 25% of the voting rights;
3. holding the right, directly or indirectly, to appoint or remove a majority of the board of directors;
4. having the right to exercise, or actually exercising, significant control or influence over the entity; or
5. having the right to exercise, or actually exercising, significant influence or control over the activities of a trust or entity which is not a legal person under the law by which it is governed but meets any of the conditions 1-4 above.
What information needs to be provided?
Details about the entity itself (such as name, registered address and country of incorporation) and about the beneficial owners of the entity (such as name, date of birth, nationality and which condition of ownership is satisfied).
If the beneficial owner is acting as a trustee, then this triggers disclosure about the trust itself, including details about the trustees, settlor, beneficiaries and interested persons (those with rights in respect of appointment or removal of trustees or the exercise of their functions). This will affect any trust holding an offshore company which in turn holds UK property.
What about nominee arrangements?
If an overseas entity holds UK property as a nominee, the entity itself will need to register and provide details of its beneficial owners but there is no requirement to disclose the underlying beneficial ownership of the actual property.
For example, if the property is held (directly or indirectly) by an offshore trust, using a corporate nominee which is not held by the structure will therefore circumvent the requirement to disclose details of the trust, settlor and beneficiaries to the ROE.
On the face of it, this lacuna would seem to defeat the purpose of the legislation so may be tightened up in the future but, for the time being, using a nominee to hold UK property will continue to provide privacy as far as the ROE is concerned (and of course a UK nominee would not even need to register on the ROE as it would not be an overseas entity). However, since a nominee arrangement is a bare trust, it would be reportable separately with the Trust Registration Service
Will all of the details on the register be public?
No – residential addresses and full dates of birth of beneficial owners or managing officers will not be available to the public, nor will the information provided about trusts. However, Companies House can pass the details about trusts directly to HMRC.
If you would like to discuss any of the issues raised, please do not hesitate to contact the authors or your usual Payne Hicks Beach contact.