The new Economic Crime (Transparency and Enforcement) Act 2022 came into force on 1 August 2022.
The new Register of Overseas Entities (“Register”) is to be held by Companies House and requires overseas entities that own land or property in the UK to declare their beneficial owners and/or managing officers. An entity to which this applies will need to have an Overseas Entity ID (“ID”), which is a registration number issued by Companies House.
There are also changes to the Land Registration Act 2002 and Land Registry procedures (such as new prescribed clauses in Land Registry compliant documents) to deal with overseas entities. These came into force on 5 September 2022. There will be a 15-month transition period where both old and new forms can be used (but new forms should be used for overseas entities from 5 September).
New dispositions involving overseas entities
No application can be made to register an overseas entity as the proprietor of land at HM Land Registry (“HMLR”) (freehold and leasehold) unless the entity has its ID or is exempt (note: it is unlikely that practitioners will encounter with many exempt entities in property transactions).
Overseas entities who already own registered land
Entities that already own land registered at HMLR since 1 January 1999 have six months (i.e. until 31 January 2023) to make an application to be entered in to the Register. Failure to do this is punishable by fine and/or imprisonment. Both the company and individual officers are liable, personally in the case of the officers.
HMLR will automatically be adding restrictions on to the registers of all properties that are owned by an overseas entity to ensure that following the six-month period, no disposition can be made until the registration of the company on the Register is complete.
Dispositions can be made without the overseas entity being registered during the six-month window. After that, dispositions (including the grant of leases by overseas-incorporated landlords) will be incapable of registration at HMLR.
What is a beneficial owner?
A beneficial owner is:
- a person who holds, directly or indirectly, more than 25 per cent of the shares in the overseas entity;
- a person who holds, directly or indirectly, more than 25 per cent of the voting rights in the overseas entity;
- a person who holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the overseas entity;
- a person who has the right to exercise, or actually exercises, significant influence or control over the overseas entity; or where:
- the trustees of a trust, or the members of a partnership, unincorporated association or other entity that is not a legal person under the law by which it is governed meet any of the conditions specified above (in their capacity as such) in relation to the overseas entity; and
- a person who has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or entity.
Dispositions made pursuant to a contract entered in to before the restriction was entered on the register
Where a contract for sale or agreement for lease was entered in to before the end of the six-month period, the ID will not be required.
How Moore Barlow can help
We are starting to see parties to transactions with overseas entities requesting confirmation of ID. Clients are advised to apply for an ID on the Register before the deadline of 31 January 2023 at the latest, and earlier if they intend to enter into a purchase of leasehold or freehold property.
If you require legal advice or services in relation to these changes, please contact Richard Hughes.