The new Economic Crime (Transparency and Enforcement) Act ("the ECA") provides for a register of overseas entities and their beneficial owners. It requires overseas entities who own or acquire land to register, with the aim of improving the transparency of the financial system.
1. What is the new register?
The new register of overseas entities will be set up by Companies House and will contain a list of registered overseas entities and documents relating to them ("the Register"). Importantly, the Register will also include information about the beneficial owners of overseas entities. From a practical perspective, it is not yet clear when the Register will be up and running.
2. What is an "Overseas Entity"?
An "Overseas Entity" is any body corporate, partnership or other legal person or entity governed by the law of a country or territory outside the United Kingdom.
3. What is a "Beneficial Owner"?
In broad terms a Beneficial Owners is anyone who: (a) holds, directly or indirectly, more than 25% of the shares or voting rights in the relevant overseas entity; or (b) has the right to exercise, or exercises, significant influence or control over the entity; or (c) holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the entity.
4. What about trusts?
Trusts don't have "legal personality" so they can't hold land directly. Instead, trustees hold the land on behalf of the trust. Overseas entities holding land as a trustee will need to register and will need to provide certain prescribed information about the trust. The trust itself may also need to be registered with the Trusts Registration Service.
5. What information must be provided for Overseas Entities?
Overseas Entities must provide the following: (a) name; (b) country of incorporation; (c) registered office; (d) service address; (e) email address; (f) details of the legal form of the entity and the law by which it is governed; and (g) details of any public register in which it is entered and, if applicable, its registration number in that register.
The information must be updated every 12 months and failure to do that can result in a daily default fine.
6. What information must be provided for Beneficial Owners?
If there are any Beneficial Owners, the required information for them is: (a) their name, date of birth and nationality; (b) their usual residential address; (c) a service address; (d) the date on which the individual became a registrable beneficial owner in relation to the Overseas Entity; (e) on what basis they are deemed to be Beneficial Owners; (f) whether they are a Beneficial Owner by virtue of being a trustee; and (g) whether they are a "designated person" for the purposes of certain sanctions and anti-money laundering legislation. If the Beneficial Owner is not an individual, similar, but not identical, information is required.
Again, the information must be updated every 12 months.
There are some limited exemptions, but generally these relate to circumstances where disclosures have already been made to public registers or regulatory authorities, or if needed for UK national security reasons.
7. Who can view the Register?
The information on the Register will be open to the public (barring limited personal data).
8. Do I have to register newly acquired property?
Yes. From the commencement of the ECA, Overseas Entities will need to register to acquire UK property (freehold or leases of seven years or more (a "Qualifying Estate")). If they don't register, they won't be able to become legal owners of the property, because they won't be able to register their acquisition at the Land Registry.
In addition, the Land Registry will put a restriction on the title to the Qualifying Estate which will prevent it from being transferred, charged, or let in the future unless registration as an Overseas Entity is maintained.
9. Do I have to register existing property?
Yes. If an Overseas Entity has acquired a Qualifying Estate since 1999 then they will need to register. There is a six-month window from the commencement of the ECA to get registered. Whether Companies House and the Land Registry will be able to cope with the volume of registrations remains to be seen.
Note that Overseas Entities can't get round the registration requirement by having a quick sale. For sales after 28 February, the overseas entity will still (post sale) have to apply for registration and provide the relevant information.
10. What if I don't comply?
As well as the inability to acquire or deal with Qualifying Estates the ECA establishes a number of offences for non-compliance, several of which are potentially punishable by fines and imprisonment.
This is a broad overview and a lot will depend on your individual facts and circumstances. For advice about how the ECA affects you or for further information please get in touch.