Owing to an increased focus on property and assets possessed by overseas entities in light of the Ukraine Crisis, the UK Government has passed the Economic Crime (Transparency and Enforcement) Act 2022 (“the Act”). The Act, receiving royal assent on 15 March 2022, seeks to tackle illicit finance through the identification and registration of beneficial owners of overseas entities which currently, or plan to in the future, own property in the UK.
Greater transparency of overseas entities will be achieved through a newly established Beneficial Ownership Register (“the Register”) at Companies House. The Act defines an overseas entity as a legal entity including a body corporate, partnership or other entity. Any overseas entities with a ‘qualifying estate’ (any freehold interest or a lease exceeding 7 years) in England must apply to be registered on the Register. The process of registration will involve entities submitting details of any beneficial owners, including their date of birth and residential address, to Companies House. A ‘beneficial owner’ is someone who holds 25% or more of the shares or voting rights in a company or has the right to appoint or remove the majority of the board of directors.
For entities which already own property in the UK, a deadline for registration will be 6 months from the commencement date of the Register at Companies House as required under the Act. This is known as the transitional period. It is not yet known exactly when the new Register will come into force.
For property acquired on or after 1 January 1999, the Land Registry will place a restriction on all registered titles which are owned by overseas entities, capturing any attempted disposition (a transfer, a lease of more than 7 years or a legal charge) from taking place unless the entity on the title is registered as an overseas entity on the Register at the time of the disposition. The restriction will only take effect at the end of the transitional period and will not impact the legal title of the property.
An overseas entity cannot evade the restriction by disposing of qualifying estate before the Register comes into force as the Act requires that any oversea entities disposing of a qualifying estate must apply to register within the transitional period.
Key features of the Act:
- A registration requirement on overseas entities to submit their information to the Register
- Creates an annual obligation on overseas entities to keep their information updated on the Register;
- New powers at the UK’s Land Registries to impose restrictions on titles, limiting the ability of non-compliant overseas entities to proceed with registration and preventing any entities from evading the rules by disposing of any property before the Register is established;
- The legal title of properties owned by overseas entities will not be impacted, but the ability to dispose of the title will be restricted until formal registration of the entity on the Register has taken place.
If you believe you have been affected by the Act, please contact the Real Estate team who will be happy to assist.