March 14, 2022
What is an overseas entity?
Broadly speaking this is a corporate entity, partnership or such other entity that is a separate legal person governed by the law of a country other than the United Kingdom. This does not cover trusts set up overseas or overseas individuals who own property in the UK through a UK entity.
Requirement to register at Companies House
The Bill will require an overseas entity to register itself on the new register of overseas entities at Companies House. If they are a registered proprietor at the Land Registry and became so on or after an application made on 1 January 1999, they will have 18 months from the commencement of the legislation to be registered.
As part of the registration process the overseas entity will be required to provide details of their beneficial owners. Who is a beneficial owner largely mirrors the person with significant control or PSC register for UK companies, with those having more than 25% of the voting rights or shares in an entity, or have significant control over the entity, needing to be identified.
The overseas entity will be required to update this information on an annual basis.
Land Registry requirements for overseas entities owning property in the UK
The Bill requires the Land Registry to enter a restriction on a freehold, or leasehold title over more than 7 years, registered to an overseas entity that became the registered owner on or after an application made on 1 January 1999.
The restriction will prohibit a disposal by way of transfer, grant of a lease for more than 7 years or the grant of a legal charge, subject to exceptions.
The exceptions include:
the entity is a registered overseas entity or an exempt overseas entity at the time of the disposition;
the disposition was made pursuant to a contract dated before the restriction was entered in the register;
the disposition is pursuant to a statutory obligation or court order;
the Secretary of State gives consent; disposition was made in the exercise of a power conferred on the owner of a registered charge or a receiver appointed by them; or
the disposition is made be a specified insolvency practitioner in specified circumstances.
The Land Registry will enter the restriction on the register within 12 months of the commencement of the legislation, but the restriction will only come into effect 18 months after the commencement of the legislation.
If an overseas entity became registered by virtue of an application made before 1 January 1999, this does not apply to them.
Land Registry requirements for overseas entities acquiring property in the UK
In order to be registered at the Land Registry as the owner of a freehold property or a leasehold property of more than 7 years the overseas entity must be registered at Companies House or be an exempt overseas entity. If neither applies then it cannot be registered at the Land Registry.
Enforcement
If an overseas entity attempts to make a prohibited disposal capable of being registered, it will not be registered at the Land Registry. In addition, the entity and every officer of the entity will commit a criminal offence that is punishable by a fine and/or imprisonment for up to 5 years.
This would not cover non-registrable dispositions, such as leases of 7 years or less or licences.
If an overseas entity who is a registered proprietor prior to the new legislation commencing fails to become a registered overseas entity within 18 months of the legislation commencing, or there is no application for registration pending at that time, the entity and every officer of the entity commits a criminal offence. This will be punishable by a fine and/ or imprisonment of up to 2 years.
What to do?
Overseas entities who are registered proprietors of property in the UK will no doubt be keenly watching the legislation as it passes through Parliament, particularly as this legislation is now proceeding at pace. They will need to be aware of the requirements likely to be placed upon them and consider their options regarding their current and future property holdings in the UK.
If you have any questions about the Economic Crime (Transparency and Enforcement) Bill, or another related matter, please contact Oliver Morris on omorris@darwingray.com or 02920 829 123, for an initial free, no obligation chat.
