When to update?
The transitional period came to an end on 31 January 2023- which means that any overseas entities owning UK land must have registered on the UK’s Register of Overseas Entities at Companies House by 31 January 2023. To get registered and obtain their overseas entity ID, they had to provide verified information about their beneficial owners. To continue to comply with the Act, overseas entities need to keep in mind the annual updating duty. The overseas entity must within 14 days after every 12 months from the date of entry on the register confirm whether there has been an update regarding beneficial owner(s) and provide any required details on any new beneficial owner(s).
As many overseas entities got registered in January this year or late 2022, the anniversary of registration is fast approaching.
A quick reminder of the Key Dates:
28 February 2022: from this date, details of leases of over seven years, charges or transfers of registered leaseholds or freeholds by overseas entities needed to be provided to Companies House.
1 August 2022: the new register of overseas entities opened at Companies House.
5 September 2022: the Land Registration changes took effect. (A restriction was put on the Land Registry title which took effect after 31 January this year and prevents transfers (other than surrenders), long leases and charges unless one of the exemptions applies. The most important exemption is registration at Companies House evidenced by the overseas ID number.
31 January 2023: the transitional period under the Act ended- overseas entities owning UK land had to be registered on the new register.
12 months from registration: annual updating duty applies.
Who
An overseas entity includes a company, certain types of partnership, trustee or other legal entity that is a legal person under its governing law. The overseas entity has to provide information about itself and its beneficial owners. If there are no beneficial owners, the overseas entity has to confirm this and provide information about its managing officers.
A person is currently a beneficial owner if, in relation to the overseas entity, it:
• owns directly or indirectly more than 25% of the shares or voting rights;
• can appoint or remove a majority of the board of directors; or
• has the right to exercise or actually exercises significant influence or control over the overseas entity.
What
Overseas entities owning UK property had until 31 January 2023 to register at Companies House and obtain an ID number. The updating duty will kick in 12 months from the date of registration. That means the first annual update will be due soon for many entities, and there is likely to be another rush to meet the update deadline just as there was for initial registrations. So, overseas entities should check when they first got registered and check whether there have been any changes in their beneficial owners. The overseas entity needs to comply with this updating duty every 12 months from the date of registration in order to continue to be effectively registered at Companies House.
When
Overseas entities should check the details for their updating duty as soon as possible. They must do the update within 14 days after every 12 months from the date of initial entry on the register.
Non-Compliance
An existing overseas entity (and its officers) who owns land but has failed to register at Companies House before 31 January 2023 will already have committed an offence, potentially punishable by imprisonment or a fine or both. If the overseas entity fails to comply with the updating duty or files false information this is also an offence by the entity and every officer who is in default, again punishable by a fine, and in some cases, imprisonment. In addition, the overseas entity ID becomes invalid, meaning the entity will no longer be able to buy, sell, transfer, lease or charge property or land in the UK until it complies. As from 31 January this year, Companies House has confirmed that it would begin to focus on compliance and enforcement activity and look into those overseas entities who are in scope of the legislation and have not complied with it.
A second Economic Crime Act
Overseas entities should also note that on 26 October 2023, over a year after its first reading in Parliament, the Economic Crime and Corporate Transparency Act 2023 finally received Royal Assent. This includes a major shake-up of the reporting requirements for the register of overseas entities, particularly for entities connected with trust structures. Note the changes contained in the 2023 Act have not come into force yet but when they do, they could have a major impact, not only on newly registered overseas entities, but also on entities complying with their annual updating duty or applying for removal from the register.
The Act adds a third requirement for an entity to qualify as a “registered overseas entity” under the regime. In addition to being on the register and complying with its duty to update the register annually, an entity must now also comply with a new duty to provide information to Companies House following a statutory notice. Other changes made by the Act are aimed at closing perceived loopholes in the beneficial owner disclosure regime, particularly where there are nominee structures or trusts.
The changes relating to nominees and trusts will be important to consider for certain structures who previously avoided needing to provide details of trust beneficiaries. Additional analysis of each structure using a nominee or similar arrangement is recommended in light of the new rules.
This is also an area to keep under further review, since the 2023 Act also provides that the Secretary of State may by regulations make further amendments so as to expand the description of persons who are registrable beneficial owners of an overseas entity in circumstances where the overseas entity is part of a chain of entities that includes a trustee.
