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Register of Overseas Entities – 2024 proposals

8th Mar 2024 | Agriculture and Minerals | Banking & Finance | Real Estate | Real Estate Finance
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In August 2022, the UK Government brought into force the Economic Crime (Transparency and Enforcement) Act 2022 (also known as ECTEA) with the aim of tackling economic crime and improving transparency over corporate entities. ECTEA established (among other things) the Register of Overseas Entities (ROE), and compliance with ROE became compulsory in February 2023.

This article provides an overview of the current rules relating to the ROE and details of changes which are expected in 2024.

Current position

What is an overseas entity for the purposes of the legislation?

Any legal entity governed by the law of a country or territory outside the UK. The UK does not include the Channel Islands, Isle of Man, etc.

What does the ROE do?

The ROE holds information about the beneficial owners of overseas entities who own UK property. It applies to the ownership of both commercial and residential property.

ECTEA requires overseas entities to register if they own a ‘qualifying estate’ (being a freehold property or a leasehold interest granted for a term of seven years or more in the UK), wish to acquire one or wish to make certain dispositions of a qualifying estate (transfer, grant of lease for more than seven years, or grant a charge).

This is done via a UK-regulated agent (there are specific companies who are regulated) who must complete verification checks on all beneficial owners and managing officers of an overseas entity before it can be registered. Once registered, the overseas entity will receive an OEID registration number.

OEID registration number – why is it needed?

When the legislation was introduced, all Land Registry titles held by an overseas entity had a restriction on dealings entered.

The restriction notes that an OEID must be shown at the time of registration/application to satisfy the restriction (unless an exemption applies, including things like court orders, insolvency, etc).

If an overseas entity does not provide an OEID, it is likely that it will not be able to sell property, buy, grant leases or charges, etc., and vice versa. If they are purchasing, they cannot register their purchase without producing an OEID. There is also no grace given by HM Land Registry if an application to obtain an OEID is pending.

Ongoing obligations once registered

There is a duty for an overseas entity to update the ROE annually (even if there is nothing to report). If the entity fails to comply, it is not classed as ‘registered’, and its OEID is invalid until the register is updated. Whilst the OEID is invalid, the entity cannot sell property, buy property, grant leases, grant charges, etc. Accordingly, it is vital that renewal dates are diarised and followed up.

It is also worth noting that the process of updating can take time to process. If there are changes, they need to be verified by a verification agent (it is not clear how long it takes; it likely depends on the number and complexity of the changes). If there are no changes, the entity can self-certify.

What is going to change? 

Economic Crime and Corporate Transparency Act 2023 (ECCTA) is a new piece of legislation which is not currently in force. ECCTA widens the scope of the current legislation (as set out above) and aims to tidy up the loose ends and close some loopholes within it. It isn’t clear when these will come into force, but it is expected that it will be during the course of this year.

The first update to the existing legislation is that the requirement to update the ROE annually will be in addition to responding to any compliance notice/request for further information issued by Companies House (specifically known as section 1092A notices). As with the annual updates, any failure to comply will invalidate the entity’s OEID number and restrict any ability to deal with the land.

ECCTA is also changing the requirements for reporting generally, and there will be an ongoing duty rather than just the simple yearly update. This will also include identifying changes in ownership structure and any relevant trust and serving notices on people who have ceased to be beneficial owners.

The way nominees and trustees are dealt with will also change, as the law currently does not cater to this. Where there is a nominee holding the land, their information will need to be included on the register. Similarly, corporate trustees will also become registerable under ECCTA. Where a trustee is a registerable beneficial owner as a result of being a trustee of a trust holding UK land, their information must now also be provided.

Finally, to ensure that all overseas entities are on an equal footing where they held UK land on 28 February 2022, they will be required to retrospectively disclose any changes made to the registerable beneficial owners since that date. Currently, the only entities that need to disclose this far back are those that disposed of UK land at that time.

Are there penalties for failure to register on the ROE?

If an overseas entity fails to register when required, the overseas entity and every officer of it commits an offence punishable by way of a fine, civil penalty and/or potential imprisonment. Companies House is sending out reminder letters and is now imposing fines.

It is, therefore, important that any overseas entity that holds UK land registers on the ROE to avoid any of the above penalties being imposed.

For support and advice on any of the issues covered in this article, contact Gail Bennett, on 0191 211 7963 or email [email protected].

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