The UK’s Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA) came into force on 1 August 2022 and has important implications for beneficial owners and operators of overseas companies which are registered proprietors of land in the UK.

The purpose of this note is to summarize those implications and to remind interested persons to seek appropriate advice as to what they should be doing to ensure compliance.

The Overseas Entities Register

Companies House in the United Kingdom has been tasked with the creation and maintenance of a new publicly accessible register of overseas entities (the ROE) which captures certain information about the beneficial ownership and in some cases, managing officers, of those entities which own land in the UK.

Essentially, it is only land which is registered with the UK Land Registry which is relevant for the ROE. This is freehold land or leasehold land in England and Wales where the lease runs for longer than seven years (in Scotland the lease must run for longer than 20 years and in Northern Ireland, the period is 21 years).

An overseas entity will be required to register if it owns land purchased:

• in England and Wales: On or after the 1^st of January, 1999;
• in Scotland: On or after the 8^th of December, 2014; or
• in Northern Island: On or after the 1^st of August, 2022.

As part of the registration process, the overseas entity is required to disclose information about itself, its registrable beneficial owners and in some cases, its managing officers. Importantly, this information needs to be independently verified by an appropriately authorised person before an application for registration on the ROE can be made.

The rules surrounding beneficial ownership and who is registrable are complex; and the entity itself is required to take reasonable steps to identify any registrable beneficial owners and to obtain the required information about each registrable beneficial owner and in respect of any registrable beneficial owner who is a trustee, the required information about the trust.

How does an overseas entity comply with these obligations?

The overseas entity is required to give an “information notice” to any person it knows or has reasonable cause to believe, is a registrable beneficial owner in relation to the entity and which requires that person to comply with the notice by confirming or supplying the necessary information about themselves to the overseas entity within one month of the date of the notice.

The overseas entity can also give an information notice to anyone else that is likely to have knowledge of the identity of its registrable beneficial owners. This could be a beneficial owner in relation to the overseas entity (e.g. a minority shareholder) or the registered agent of the overseas entity who in many cases, will already have an obligation to disclose information about beneficial owners to its regulatory authority in the relevant jurisdiction.

In broad terms, according to Companies House, subject to any applicable exemptions, the persons who need to be identified and reported on are:

Any beneficial owner that is an individual person, other legal entity, government or public authority who:

• holds, directly or indirectly, more than 25 per cent of the shares in the entity;
• holds, directly or indirectly, more than 25 per cent of the voting rights in the entity;
• holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the entity; or
• has the right to exercise, or actually exercises, significant influence or control over the entity.

Specific disclosure rules apply to registrable beneficial owners who hold their interest via trusts and there are limited exemptions from registration (for example, if the individual or legal entity doesn’t meet one of the conditions above or they have already disclosed their identity as a beneficial owner to Companies House because of a holding in another entity).

The overseas entity will then need to provide information about itself and its registrable beneficial owners to a relevant person in the UK who has been authorised and is able to verify the information disclosed to it by the entity and to make the application for registration on the ROE.

Once an overseas entity has registered, it will receive an overseas entity number (an OEN). The OEN will be needed in connection with any future registrations at the Land Registry involving the land (including where the land is being mortgaged).

What is the deadline for registration?

All relevant overseas entities have until the 31^st of January, 2023 to register on the Register of Overseas Entities – ROE.

What happens if the overseas entity has recently disposed of/transferred its property?

If a “relevant disposition of land” (as defined in the ECTEA) occurred after the 28^th of February, 2022, certain transitional arrangements will apply.

If, as a result of the disposition, the relevant entity no longer holds land in the UK, it has until the 31^st of January, 2023 to notify Companies House of the transaction using a Form OE1. The entity does not need to apply to be on the register and obtain an OE but it will need to disclose details of the transaction and about the land in question.

What if there are plans to sell or mortgage the property in the future?

If the transaction is due to be completed after the 31^st of January, 2023 or the overseas entity will continue to hold land following completion of the transaction (even if before the 31^st of January, 2023), it will need to have registered on the ROE and obtained an OEN which will be submitted to the Land Registry at the time the relevant transaction is submitted for registration.

What steps should be taken now if the ROE is relevant to you?

1. Ensure your overseas entity is in good standing in its jurisdiction of incorporation and has not been struck off or dissolved. This is particularly relevant for BVI companies as the rules relating to striking off are changing with effect from the 1^st of January, 2023 and it may not be a straightforward process to re-instate your company. We strongly advise checking in with your registered agent in the BVI as soon as possible.
2. Identify a service provider in the UK who can provide verification and registration services for your entity in the UK (the UK Agent).
3. Issue your information notice(s) and start gathering KYC on anyone who is a registrable beneficial owner of your overseas entity and arrange for it to be appropriately certified as advised by your UK Agent.
4. Arrange for the UK Agent to make the application for registration on your behalf prior to the 31^st of January, 2023; otherwise daily fines and penalties might be imposed.

Are there any other requirements once the registration on the ROE is done?

Yes. There is an annual requirement to confirm or update the information on the ROE.

If you have any questions, please contact us at quijano@quijano.com.