Tick ​​tock: Overseas entities, are you ready to beat the check-in clock? Economic Crime (Transparency and Enforcement) Act 2022 – Real Estate

To print this article, all you need to do is be registered or log in to Mondaq.com.

As widely announced in recent months, the government has accelerated new legislation to “tackle corrupt elites and dirty money” and to “provide transparency about who ultimately owns and controls foreign entities that own land in the UK”.

Enforcement) Act 2022 (“the Act”) received Royal Assent earlier this year and, although the Act dates back to 2016, it was pushed to the top of the legislative agenda following events in Ukraine.

The provisions of the law cover three main areas:

  • introduction of a new register of overseas entities;

  • amendments to legislation on unexplained wealth orders; and

  • amendments to the sanctions legislation.

Here we are looking at the first of these, the new Overseas Entity Registry.

Basically

Broadly speaking, the law requires any foreign entity (essentially a foreign company or other body) that owns or wishes to own relevant property in the UK to register details of its ‘beneficial owners’ on the newly created Register of Entities. foreign. be held by Companies House (and then keep this register up to date).

If the Overseas Entity fails to comply with the provisions of the law (by not registering on time, not updating when necessary, or providing false information), the Overseas Entity -mer itself and its leaders may face criminal liability heightened by severe penalties. The Overseas Entity will also be limited in its ability to dispose of or otherwise deal with the property.

This means that once the new legislation comes into force, foreign entities will not be able to buy, sell, let or mortgage most UK properties unless (i) they have first complied with the new requirements of registration or (ii) an exemption applies.

We don’t yet know when this legislation will come into effect, or even how the registration process will work in practice. But we understand that various government agencies are striving to implement the Overseas Entity Registry as soon as possible and the clock for registration is expected to start ticking imminently.

Some definitions

First, some terminological clarifications can help you determine if you will be directly affected by these new requirements and, if so, the steps to take:

  • Overseas entity For the purposes of the legislation, a “Overseas entity» includes any company, partnership (including LLP) or other body with separate legal personality which is governed by the law of a non-UK country or territory. Unless they fall under exemptions (yet to be published), companies and limited liability companies incorporated in offshore jurisdictions such as Jersey, Guernsey and the Isle of Man, as well as other overseas jurisdictions, may be covered by law.

  • beneficial ownershipBeneficial owners » are defined to include individuals, entities and government agencies. It should be noted, however, that not all beneficial owners of foreign entities will need to be identified; the obligation of identification is limited, broadly, to those:
    • who hold, directly or indirectly, more than 25% of the entity’s shares or voting rights;

    • who have the right, directly or indirectly, to appoint or remove the majority of the members of the entity’s board of directors; Where

    • who have the right to exercise (or in fact exercise) significant influence or control over the entity.


  • Eligible property The Overseas Entity will have a “relevant land interestand will therefore fall within the scope of the legislation if he is, or wishes to be, the registered owner of a freehold domain or a leasehold domain for more than seven years.

    A small detail


  • Existing property Unusually, the law has a significant retrospective scope, encompassing relevant property acquired since January 1, 1999 (for property in England and Wales) and since December 8, 2014 (for property in Scotland). Any foreign entity that owns qualifying property (that it acquired since 1999 or 2014 as the case may be) will need to register with Companies House and obtain an identification number. Once these rules come into force (and it is widely expected that they will be in place in the near future), there will be a transition period of six months for the overseas entity to apply for registration. Any foreign entity which owns relevant property but has not been registered with Companies House within that six month period (even if it disposes of its property within the six month period (or at any time after the 28 February 2022)) will commit a criminal offence; the entity may be subject to a fine and its directors may be fined or imprisoned. As a further incentive to register, HM Land Registry will impose restrictions on the titles of all affected properties prohibiting the transfer, granting of a lease for more than seven years or the granting of a charge unless the overseas entity is registered with Companies House or is exempt (details of exempt entities are expected).

  • Future purchases

Once these provisions come into force, it will no longer be possible for an overseas entity to be registered as the owner of land with the UK Land Registry unless it is listed on the Entity Register. foreign companies with Companies House or that it is exempt from it.

Conclusion

The law is likely to have wide implications on the property market and the implications will not only be felt by overseas entities themselves. Any party seeking to buy, sell or lease property to or from foreign entities may also find that their transactions are delayed or even aborted if the foreign entity they are dealing with has not complied with registration requirements. of the law.

At this stage, uncertainties remain on several important points related to the implementation of the law, in particular when the register will be put online and who will be responsible for certifying the information required for it. Nevertheless, given the limited timeframes involved once the law comes into force, as well as the potentially serious consequences for anyone who does not comply, we recommend that anyone who may be affected should consider now whether such is the case and, where appropriate, to take steps to identify actions that may be necessary to comply with the Act.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

POPULAR ARTICLES ON: UK property and construction

About Lillian Coomer

Check Also

Don’t Fall Prey to “The $43 Billion Scam”: Business Email Compromise Schemes on the Rise for Construction Companies – Construction and Planning

July 14, 2022 Adams and Reese To print this article, all you need …