Overseas entities which own registered land in the UK must register their details with Companies House to be included on the Register of Overseas Entities (ROE) by 31 January 2023. As the consequences of not doing so are potentially severe, if you have not already addressed this issue it is important to consider whether the legislation affects you and to act quickly to comply.
What do I need to know about the ROE?
Within weeks of the start of the war in Ukraine, long-awaited legislation aimed at tackling economic crime and increasing transparency relating to property ownership in the UK had been hauled back out of the long grass and rushed onto the statute books in the form of the Economic Crime (Transparency and Enforcement) Act 2022 (the act). The act introduced a number of measures aimed at assisting crime enforcement agencies in identifying and seizing assets of those suspected of laundering money in the UK.
A key part of this strategy is the introduction of the ROE. The ROE is a public register, held at Companies House, of all overseas entities (essentially, legal entities not governed by the law of the UK) which own registered land, whether residential or commercial, in the UK. The register contains details of all such overseas entities and their beneficial owners and allocates an ID number to each overseas entity.
With the introduction of the legislation came a six-month transitional period, which expires on 31 January 2023, by which time any relevant overseas entities need to have completed their registration with Companies House. The potential sanctions for non-compliance are severe, as the entity and every officer of the entity will commit an offence under the terms of the legislation. At a more practical level, after that date any overseas entity which is not registered on the ROE will be unable to deal effectively with its registered land.
What do I need to do?
Despite the imminent deadline and the severity of non-compliance, it appears likely that there will be widespread non-compliance immediately after the end of the transitional period. This is in many ways unsurprising given the speed at which the ROE has been introduced, the relatively short timescale for compliance and the complexity around certain areas of the legislation (updated guidance was still being produced by the Department for Business, Energy and Industrial Strategy in the middle of January). Although Companies House says it has written to all overseas entities which may be affected, at the end of December 2022 less than one third of those entities required to register had actually done so.
Nevertheless, early non-compliance may be looked at more favourably where entities have made a real start in engaging with the requirements of the ROE, particularly once an application has been made and is pending with Companies House.
We therefore recommend that you review as soon as possible any asset holding structures which ultimately hold UK land or property. Although the detail of the legislation is beyond the scope of this briefing note, the following information may be useful when considering whether a particular holding structure needs to be looked at more closely:
- The land in question must have been acquired on or after 1 January 1999 and the structure must hold either the freehold interest, or a leasehold interest for a term of more than seven years.
- Overseas entities will include a body corporate, partnership or other entity which is a legal person under the law by which it is governed.
- A trust is not a legal entity, so is not directly caught by the legislation. However, trusts may need to be entered on the ROE for one of two reasons:
- A non-UK corporate trustee will fall within the definition of an overseas entity and will therefore need to register as owner of any UK land held by a trust of which it is trustee.
- Where a trustee (corporate or otherwise) is itself a beneficial owner of an overseas entity (e.g. a shareholder of a non-UK company which holds UK property) its details, together with certain other details about the trust, will need to be entered on the ROE. The information provided about the trust will not be available for public inspection although will be accessible by certain statutory authorities.
Any overseas entity which falls within the scope of the act will need to submit an application to Companies House to be added to the ROE as soon as possible. The overseas entity will need to provide certain prescribed information about itself, as well as confirming that it has taken reasonable steps to identify its beneficial owners and providing further prescribed information about any of those beneficial owners who are in turn registrable under the act.
The legislation is fairly complex and, if there is any doubt about whether an overseas entity needs to be registered on the ROE, or which beneficial owners need to be disclosed on the application to Companies House, advice should be sought as soon as possible.
Before an application can be submitted to Companies House, a UK regulated agent must be appointed to verify the required information about the beneficial owners of the overseas entity. Like most law firms, following advice from the Law Society of England and Wales, we are not offering verification services. However, there are a number of verification agents in the UK who are offering these services. Once appointed, Companies House advises that the application will proceed more quickly and easily if the agent also applies to register the application on behalf of the overseas entity.