The Economic Crime (Transparency and Enforcement) Act 2022
The Economic Crime (Transparency and Enforcement) Act 2022, also known as the ECA, introduces a ‘Register of Overseas Entities’ (ROE) as part of the Government’s move towards transparency in ownership of UK property. What do overseas entities need to do now?
The new requirements
The ECA requires overseas entities that own or acquire property in the UK to register with Companies House. The new ROE is a public register and will require the disclosure of details of the beneficial owners or managing officers of overseas entities. The information held on the ROE is required to be updated annually. The ROE opened on 1 August 2022.
Overseas entities (i.e. any legal entity that is governed by the law of a country or territory outside of the UK – which catches Channel Islands companies) (OEs) must register on the ROE if they own or acquire a qualifying estate in UK land. A qualifying estate is a freehold estate or a leasehold estate for a term of more than 7 years from the date of grant (Qualifying Estate). Once registered, an overseas entity ID number (OEID) will be provided by Companies House. This will be needed for OEs to validly dispose of Qualifying Estates or to be registered as the owner of a Qualifying Estate at HM Land Registry (HMLR).
Non-compliance with these registration requirements will mean that the company’s officers will be committing a criminal offence and will be subject to severe sanctions such as daily fines and/ or prison sentences.
Companies House have started to write to all OEs which already own Qualifying Estates in England and Wales to make sure they know about their new responsibilities.
The effect on land transactions
The OEID will become a key requirement for OEs wanting to acquire and dispose of Qualifying Estates as a result of new land registration requirements imposed by the ECA. So as to allow OEs currently dealing with land transactions time to complete their registrations on the ROE before applying to HMLR, the commencement date for the land registration elements of the ECA is 5 September 2022.
OEs which already own UK qualifying estates
OEs which acquired a Qualifying Estate after 1 January 1999 (and still owned it on 28 February 2022) must apply for registration on the ROE. In these cases, there is a transitional period of 6 months from 1 August 2022 to allow OEs who are caught by this rule to register.
After 5 September 2022, HMLR will automatically enter a transitional restriction on the title register of these existing titles, which will provide that certain dispositions by the OE lodged for registration after 31 January 2023 cannot be registered unless the entity was a registered OE at the time of the disposition. The restriction will catch transfers, leases for a term of more than 7 years, and the grant of a legal charge (Restricted Dispositions).
As an anti-avoidance measure, any OEs disposing of Qualifying Estates between 28 February 2022 and 31 January 2023 must still register on the ROE, though if they dispose of all of their Qualifying Estates in that time, certain information must be provided to the Registrar but a full registration is not required.
OEs acquiring UK qualifying estates after commencement
From 5 September 2022, an OE cannot apply to be registered at HMLR as the owner of a Qualifying Estate without an OEID. In these cases, there are no transitional provisions: from and including 5 September 2022, you may not apply to HMLR for registration of an OE as the legal owner of a qualifying estate without an OEID. There is no exception for transactions completed before 5 September 2022 but which are not lodged at HMLR until afterwards.
On registration of the OE’s title at HMLR, a restriction will be added automatically by HMLR, which will take effect immediately. The effect of this will be that no Restricted Disposition can be registered unless the entity is a registered OE at the time of the disposition. In order to fill the gap created by any delay in the completion of the registration of the OE’s ownership at HMLR, the OE is also, on acquisition of the land, subject to a statutory restriction on making Restricted Dispositions, in effectively the same terms.
What do OEs need to do now?
The ROE is now open. Any OE that is intending to acquire a Qualifying Estate, or which owns one already, should apply for registration at Companies House as soon as possible. An OE will be required to provide basic details about itself, and also to deliver one of three standard statements about its registrable beneficial owners and provide information about those beneficial owners. The information supplied to the registrar is required to be verified.
ECA = The Economic Crime (Transparency and Enforcement) Act 2022
ROE = Register of Overseas Entities
OE = Overseas entity
Qualifying estate = Freehold or leasehold estate for a term of more than 7 years from the date of grant
OEID = Overseas entity ID number
HMLR = HM Land Registry
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