• David Rudge, Head of UK at ZEDRA


• 09.01.2023 09:30 am
#financialcrime

In March 2022, the UK Government introduced a new piece of legislation called the Economic Crime (Transparency and Enforcement) Act 2022 (the ‘Act’). This legislation’s main aim is to create a public register of overseas entities owning UK property.

What is an Overseas Entity?

An overseas entity is any legal entity governed by the laws of a county or territory outside the UK; this includes companies and partnerships in the Isle of Man, Jersey, Guernsey and/or other jurisdictions. Trusts with a Corporate Trustee will also be within scope.

What Property is in Scope?

UK property includes freehold and leasehold interests originally granted for a term exceeding seven years and covers:

• property acquired in England and Wales since 1 January 1999;
• property acquired in Scotland since 8 December 2014; and
• property acquired in Northern Ireland from the day the register comes into effect.

What does registering involve?

Effective from 1 August 2022, overseas entities are required to provide greater transparency over their beneficial ownership to crack down on money laundering. Overseas entities transacting with property or land in the UK must now register with Companies House and identify their beneficial owners. In addition, the overseas entity will also need to make an annual statement to Companies House confirming any changes in the previous 12 month period.

There are criminal penalties for failing to comply with the requirements which include fines and possible jail sentences for certain offences under the Act which could apply to the directors and officers of the entity. On a practical level, the failure to register an entity will also mean an inability to dispose of or lease a property in the future until the entity has been registered. For entities acquiring property in the UK, the acquisition cannot be entered onto the Land Registry until such time as the overseas entity has complied with provision of the Act.

What information is reported?

The overseas entity will need to make certain statements as part of the registration. These statements include certain declarations containing details of beneficial owners where these beneficial owners are identifiable.

What is a Beneficial Owner?

Beneficial Owners include anyone who holds more than 25% of the shares or voting rights in the entity; or otherwise directly or indirectly holds the right to appoint or remove the majority of the board of the overseas entity; or has the right to exercise or actually exercises significant influence or control of the overseas entity.

The information on beneficial owners to be included on the registration includes:

• Date of Birth
• Nationality
• Usual Residential Address
• Service Address
• Business Occupation (if any)
• Date they became a registerable Beneficial Owner

Although this information is publicly available on the register; the home address and date of birth are not public information (although month and year are public). Individuals can apply to protect their information from being publicly available if it could place them at serious risk of violence or intimidation.

Where a company is owned by a Trust, certain information on the Trustees, Settlors and Beneficiaries will also need to be included on the register.

Where the property is owned directly by the non-UK Trust; a Corporate Trustee will need to register and report details of the Corporate Trustee’s beneficial owners, but will not need to report details on the parties to the Trust.

The overseas entity must also ensure it has correctly identified its beneficial owners that need to be registered and must serve notices to obtain the information on any person that needs to be registered. It is a criminal offence for beneficial owners of overseas entities to fail to respond to information requests to enable the overseas entity to fulfil its obligations under the legislation.

Are there any other practical issues?

On a practical level, we would expect lawyers dealing with property transactions may start to include clauses in contracts to deal with this legislation.