What is it?
The Register of Overseas Interests (the “Register”) follows the passing of The Economic Crime (Transparency and Enforcement) Act 2022 earlier this year.
It sets up a register of overseas entities (maintained by Companies House) that own property in the United Kingdom and requires them to disclose details of their beneficial ownership.
An overseas entity is any body corporate, partnership or other entity that is not governed by UK law. It will therefore apply to entities based in the Channel Islands and other offshore jurisdictions. It applies to all entities that hold a qualifying estate – freehold or leasehold in excess of seven years (“Qualifying Estate”).
What are the timings and implications?
The register opened on 1 August 2022 but the obligation to register will begin on 5 September 2022. The six months transitional period expires on 31 January 2023.
Overseas entities that already hold land (acquired since 1 January 1999) must apply for registration by the end of the transitional period.
Overseas entities cannot apply to the Land Registry to register a Qualifying Estate unless they are registered on the Register at the time the application is made.
The Land Registry will add a restriction on the title to a Qualifying Estate owned by an overseas entity preventing a future disposal unless the overseas entity has complied with the registration requirements. The Land Registry will also add a restriction on all existing titles held by overseas entities but these restrictions will not take effect until 1 February 2023.
Land Registry prescribed forms will be updated to include a requirement to enter the registration number of the overseas entity and the Land Registry prescribed clauses will be updated as well.
Overseas entities must disclose to Companies House details of any disposition which took place from 28 February 2022 to 31 January 2023. The purpose of this is to avoid a rush by entities to dispose of property prior to 5 September 2022.
Disclosure Requirements
The overseas entity will be required to disclose to Companies House the identity of its beneficial owners – broadly any person who directly or indirectly holds 25% or more of the shares or voting rights or who otherwise has the right to exercise significant influence or control over the entity.
There will be provisions relating to an annual updating duty but these are not covered by the commencement order so will follow later.
Exemptions from the restriction on title
The following dispositions will not be caught by the restriction on title:
- those that are pursuant to a statutory obligation or court order;
- those that are pursuant to a contract made before the restriction was entered on the register;
- where the disposition is made in exercise of a power of sale;
- dispositions made by an insolvency practitioner (in specific circumstances); or
- where the Secretary of State consents to the registration.
Penalties
A failure to register will constitute a criminal offence punishable by fine or imprisonment of the directors.
Does it affect UK registered companies?
Although aimed at overseas entities these requirements will affect any UK entities dealing with overseas entities.
If selling to an overseas entity you will need to ensure that the buyer/tenant has complied with its registration requirements as otherwise the buyer/tenant will not be able to register its interest at the Land Registry and the UK entity will remain the legal owner.
When acquiring property from an overseas entity the buyer/tenant’s advisor will need to check that the overseas entity has complied with its registration requirements to ensure that the buyer/tenant can comply with the terms of the restriction placed on the title to the property. If the buyer/tenant cannot comply with the terms of the restriction it will not be registered as the legal owner. Checking the registration status of overseas entities will become a standard part of due diligence on property transactions.
Clients will need to update their precedent leases to include updated Land Registry prescribed clauses.