Overseas Entities which own UK land – Act now to avoid criminal liability
Companies House opened the register of overseas entities (ROE) in the summer of 2022 as a result of the Economic Crime (Transparency and Enforcement) Act 2022. Overseas entities have a duty to register on the ROE by submitting details of their beneficial owners. If they wish to buy, sell, lease or charge property in the UK, they are restricted from doing so unless they are registered – some restrictions are in effect already and the remainder come into force on 31 January 2023. In summary (and using the dates and references which apply to England and Wales), an overseas entity:
- which owns a qualifying estate in UK property (which it acquired between 1 January 1999 and 31 July 2022) must apply to become registered on the ROE by 31 January 2023 and is required to update this registration annually;
- which disposes of qualifying UK property between 28 February 2022 and 31 January 2023 (or, if earlier, the date the entity applies to be registered on the ROE) must disclose details of the dispositions to Companies House by 31 January 2023, together with details of the entity’s beneficial owners immediately prior to the disposal (even if the entity no longer owns any UK property after the disposal);
- (unless one of a limited number of exemptions applies) is unable to make certain disposals of qualifying UK land either on or after 5 September 2022 (where it acquired the land on or after 1 August 2022) or after 31 January 2023 (where it acquired the land between 1 January 1999 and 31 July 2022) unless it is registered on the ROE at the date of completion of the disposal;
- is free to make a disposal of land before 31 January 2023 (where it acquired the land between 1 January 1999 and 31 July 2022) without being registered on the ROE at the date of completion but only if the related application to HM Land Registry is also submitted before 31 January 2023, so completions taking place towards the end of January must be managed carefully;
- which applies to register the acquisition of a qualifying estate in UK land on or after 5 September 2022 must be registered on the ROE in order to become registered proprietor at HM Land Registry (and therefore have legal title to the land in question).
Registration by 31 January 2023
Failure to register the overseas entity by the deadline and failure to disclose disposals which have taken place since 28 February 2022 is a criminal offence and could result in a fine, a prison sentence, or both.
The 31 January 2023 registration deadline is fast approaching. We understand from HM Land Registry that there are about 31,500 overseas entities which own qualifying UK land. It appears from the Companies House website that only 7,615 entities (just under 25%) have been registered to date. This leaves a large number of registrations to be done in a short space of time. We understand that it is currently taking about 2 working days for Companies House to process registrations but it wouldn’t be hard to imagine this turnaround time increasing if the number of applications increases significantly over the coming weeks.
Before an overseas entity is even in a position to submit an application to Companies House, there is a potentially lengthy review process that must be undertaken. As part of its application, the entity must submit details of its registrable beneficial owners to Companies House. In complex cases, it may take some time to analyse the beneficial ownership structures to understand which beneficial owners must be disclosed. In addition, notices must be served on potential beneficial owners and they must be given one month to respond. Overseas entities should also be aware that they will need to enlist the services of a UK-based verification agent to verify and submit the application for registration. All of this means that overseas entities should start the registration process now, if they haven’t already, or they run a real risk of missing the 31 January 2023 deadline.
Entities who have sold all UK land but still hold legal title as the disposal has not been registered at HM Land Registry
There is a potential trap for overseas entities who have sold their only or last UK property but the disposal has not been registered by HM Land Registry by 31 January 2023. Whilst they may, understandably, believe that the legislation does not apply to them, they will technically be required to register on the ROE. Until registration of a disposal, the selling entity retains legal title to the land. This means that the overseas entity would still technically hold legal title to qualifying UK land as at 31 January 2023 and so would be required to register, even if they would not be required to do so if the disposal had been registered by HM Land Registry. Please get in touch if you think you are in this situation. It may be possible to request that the application for registration of the disposal be expedited by HM Land Registry (in the hope that it might be completed before the 31 January 2023 deadline) and we would, in any event, be happy to discuss your options with you.
For a more detailed note on the register of overseas entities, please see our article “The Register of Overseas Entities: What does it mean for commercial real estate in the UK?” or get in touch with William Naunton or your usual DLA Piper contacts.