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Home / News and Insights / Blogs / Real Estate / 228: The Register of Overseas Entities – Update

Following their article in 2021, Emma Roche and Hollie Gallagher provide an update on the introduction of the Register of Overseas Entities.

What is it?

Expedited by the events unfolding in Ukraine following Russia’s invasion, the Government has announced that it will fast-track legislation to introduce a ‘Register of Overseas Entities’ (‘Register’) through the  Economic Crime (Transparency and Enforcement) Bill.

It is part of a strategy to combat economic crime, while ensuring legitimate businesses continue to see the UK as a great place to invest.

The Register will require anonymous foreign owners of UK property to reveal their beneficial ownership. The Register will be public and held by the UK’s registrar of companies at Companies House.

Who should be interested in the Register?

The Register will have a significant impact for overseas investors in UK property and lenders that take security over property.

As a result, professionals facilitating transactions need to get up to date now with the impending regulations.

Once the Register comes into effect, it will apply retrospectively to property bought since January 1999 in England and Wales and since December 2014 in Scotland.

What is disclosed and who falls within the definitions of ‘overseas entity’ and ‘beneficial owner’?

All overseas entities that are purchasing land, already own land, or have a lease over land for longer than seven years in the UK will be required to:

  • identify its beneficial owner(s); and
  • provide information about itself, its beneficial owners and managing officer(s) to Companies House.

Examples of information that will be disclosed include:

  • the name;
  • registered office of the overseas entity;
  • beneficial owner; and crucially
  • the basis on which the named entity / individual is considered a registrable beneficial owner.

Therefore, the new regime means that individuals who own UK property through an overseas entity will now see their personal information on a public register.

It is intended that Companies House will establish and maintain the Register, and provide registered entities with an ‘overseas entity ID’, which will be required in order to deal with the land. The information must be reviewed and updated annually.

An overseas entity is:

  • a body corporate;
  • a partnership; or
  • other legal person governed by the law of a country or territory outside the UK.

A ‘beneficial owner(s)’ may be an individual, legal entity, government or public authority which:

  • owns more than 25% of the shares or voting right in the overseas entity;
  • has the right to appoint or remove a majority of the board of directors; and
  • exercises, or has the right to exercise, significant influence or control.

What about trusts and foundations?

Trusts and foundations do not have legal personality and so do not fall within the definition of overseas entity. However, where there is a trust or similar structure with an overseas entity and the trust meets the beneficial ownership conditions in relation to the overseas entity, it will be necessary to look and see if there is an individual who exercises, or has the right to exercise, significant influence or control over that trust or foundation, as is done for the ‘Persons with Significant Control’ legislation.

What are the penalties for non-compliance?

The most significant property-related consequences for non-compliance are that:

  • an overseas entity that purchases UK property will not be able to register as the proprietor at the Land Registry until it has complied (ie got an overseas entity ID);
  • an overseas entity that owns UK property which is already registered at the Land Registry as the proprietor will not be able to register any disposal of the property if it has not complied by the expiry of the eighteen month permitted transitional period;
  • it will be a criminal offence both for the overseas entity and each of its officers to make a disposition of the UK land that is restricted, to fail to provide an update on the information on the register annually, or to deliver (or cause to be delivered) misleading, false or deceptive information to the registrar; and
  • non-criminal financial penalties may also apply in the alternative.

What does it mean for anyone buying or selling property?

Overseas entities should start preparing now. It will take time to identify all registrable beneficial owners and comply with the registration requirements. This includes any overseas entities contemplating entering into a contract now.

The land registration requirements will involve adding a restriction to the registered title of property owned by an overseas entity and preventing registration of transactions where an overseas entity has not complied with the regime.

Third parties entering into property contracts with overseas entities should:

  • identify the contracting parties early in a transaction so that relevant checks can be made in good time;
  • check that any overseas entity has a valid ID number;
  • check that the annual validity period will not expire before exchange, completion or registration of the property; and
  • consider contractual obligations including termination rights to ensure overseas entities comply with the new regime.

Key takeaway

In light of the severity of the penalties and practical implications for non-compliance, any overseas entity purchasing UK property needs to be aware of and properly advised in relation to these new stringent registration requirements. As a minimum, this should include:

  • building additional time into a transaction to enable more rigorous due diligence of the seller; and
  • putting in place contractual safeguards in the documentation to ensure compliance and a means of recourse in the event of a breach.

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