Register of overseas entities: considerations for property transactions in England and Wales
On 1 August 2022, the Register of Overseas Entities (the Register) opened in the UK, in accordance with The Economic Crime (Transparency and Enforcement) Act 2022. As there are different dates for Northern Ireland and Scotland, the position that follows is that for England and Wales.
The UK government has established the Register with the intention of increasing ‘transparency’ and to allow ‘law enforcement agencies to investigate suspicious wealth more effectively’.
What does this mean?
In practice this means that if overseas entities own property (if acquired on or after 1 January 1999) or intend to own property in England and Wales, either as freehold or a leasehold estate in land granted for a term of more than seven years (both Qualifying Estates) they are required to register their details and details of their beneficial owners on the Register which will be managed by Companies House.
What information is required for the Register?
Information required for the Register is the overseas entity’s name, country of incorporation or formation, registered or principal office and correspondence address, and the identity of all registrable beneficial owners of the entity (or a confirmation it does not have any).
A beneficial owner is broadly anyone holding more than 25 per cent of the shares or voting rights in the overseas entity, anyone having the right to appoint or remove a majority of the board of directors of the overseas entity and anyone with the right to exercise, or who actually exercises, significant influence or control over the activities of the overseas entity. In instances where the beneficial owner is a trustee or are trustees, the overseas entity will be required to identify and provide details of any person (eg, a protector or appointor) who has the right to exercise, or who actually exercises, significant influence or control over the activities of the trust in question. A corporate entity which is a beneficial owner is not a registrable beneficial owner unless it is itself an overseas entity required to register on the Register (or in certain other circumstances). If itself on the Register, such corporate entity would have to identify and report its own registrable beneficial owners.
This information will need to be verified by a UK regulated agent no later than three months before the application before it can be processed by Companies House. As the required verification process is not exactly aligned with the requirements of anti-money laundering regulations, overseas entities may find they are required to provide more detailed information than is ordinarily required for transactions.
On registration the overseas entity will be allocated an ID number and provided with evidence from Companies House confirming their registration. A fee of £100 is payable to Companies House. The information on the Register must be updated or confirmed annually and such information must also be verified by a UK-regulated agent.
Failure to comply with these new provisions is a criminal offence, with fines of up to £2,500 per day or be given a prison sentence of up to five years.
The position as of August 2022
The Register went live on 1 August 2022, so overseas entities can now apply to Companies House to be admitted. Indeed, all overseas entities owning property in England and Wales since 1 January 1999 have been sent a letter by Companies House advising of the need to register.
We are currently in the transitional period and all overseas entities which held property or a Qualifying Estate in England and Wales on 1 August 2022 need to apply for registration on the Register by 31 January 2023 or face a criminal offence. This registration obligation applies to overseas entities who acquired UK property after 1 January 1999.
From 5 September 2022, overseas entities will not be able to register a freehold interest or a lease exceeding seven years at the Land Registry unless they are on the Register or an exemption applies.
The Land Registry is placing a restriction on the title to any Qualifying Estate owned by an overseas entity acquired on or after 1 January 1999 in England and Wales. This restriction will prevent the registration of any relevant disposition of land unless the Land Registry has seen evidence that entry on the Register has been made, or that an exemption applies. This means that legal title will not pass unless the restriction on title has been complied with. If an overseas entity intends to make a disposition of a Qualifying Estate after 5 September 2022, they need to have registered with Companies House before completion so that they can prove to the Land Registry that they are compliant or that an exemption applies.
There are certain limited exceptions to compliance with the restriction, such as where the disposal is made in the exercise of a power of sale by the owner of a legal charge, or by an insolvency practitioner in specified circumstances which are to be set out in future regulations.
It is therefore most important that anyone acting for an overseas entity which intends to acquire or holds property in England and Wales is aware of the importance of the Register and its requirements. As this is still being rolled out, some information and details are yet to be established.
 One exception: if an overseas entity has disposed of property in England and Wales between 28 February and 5 September 2022 such that it no longer holds any property in England and Wales now, then it does not need to apply to be on the register to obtain an ID, but just has to provide details to Companies House of the disposition and its beneficial owners.