Iryna Vale, TMF UK, explains the Register and what foreign entities should do if they fall within its scope.
The new Economic Crime (Transparency and Enforcement) Act 2022 (the “Act”) brought the Register into effect in the UK. Any overseas entity (defined below), which owns or will acquire freehold or long-term leasehold land in the UK, must register their ownership with Companies House. The declaration must be signed by the managing officers or beneficial owners and must be submitted by 31 January 2023.
According to the UK government, an overseas entity is “a legal entity such as a company, or other organisation that has legal personality and which is governed under the law of a country, territory, or outside of the UK.” The Republic of Ireland is an example of an overseas jurisdiction.
If one or more of these conditions are met, an individual or entity can be considered a beneficial owner.
- They own, directly or in part, more than 25% of shares in an overseas company
- They own, directly or in part, more than 25% the voting rights in an outgoing entity
- They have the power to directly or indirectly appoint or dismiss a majority of the directors of an outgoing entity’s board of directors
- They can exercise significant influence over or actual control of an overseas entity.
- Are trustees of trusts, members of a partnership or unincorporated association, or any other entity that meets one or more of these conditions?
- A person who has the power to exercise or is actually able to exercise significant influence or control on the activities of a trust or entity
Before the Act’s introduction earlier this year, only UK-based entities had to reveal their owners on a public registry. The new rules will require anonymous foreign owners to disclose their identities and records to be updated annually. It will be easier for authorities to identify beneficiaries and controlling parties of an organization once it is implemented and to monitor and prevent fraud.
The new rules will require anonymous foreign owners to disclose their identities and records to be updated annually.
Companies House won’t publish any personal information of beneficial owners due to the strict data protection laws in the UK. Although it is required to provide information such a full date of birth, residential address, and email address, these are only for data collection purposes.
All overseas entities that have bought property or land after 1 January 1999 in England or Wales, or 8 December 2014 or more in Scotland are subject to the Act.
The Act applies retroactively to land or property sold in the UK after 28 February 2022, in order to prevent non-disclosure.
Although you might not be in one of the above categories, you will need to show your compliance with the Act for any future sale and provide your registration to the buyer.
Non-compliance with the Act could result in fines up to PS2,500 per day or five years imprisonment. There will be restrictions on the purchase, sale, transfer, leasing, charging, and other activities that may affect land or property.
Any overseas entity that falls within the defined parameters of the law must provide information about the entity and its ultimate beneficial owners. In cases where it is impossible to determine a beneficial owner, information about the managing director of an entity must be shared. If a foreign trust owns UK real property, the trustees of the trust are considered beneficial owners and must be disclosed. The UK government guidance provides more information about the requirements.
Before a UK-regulated agent can register an entity, it must verify the beneficial owners and managing officers.
Companies House has shown that the process of completing Register filings is not always straightforward. Sometimes, it can be more difficult to register, especially if the sale condition is involved. Due to the complexity of this process, registration must be completed by 31 January.
Another complex situation is when trustees of a trust have registrable beneficial owner status. You will need to provide information about the trust, including:
- Beneficial owners, past or present
- Beneficiaries
- Settlors
- Grantors
- Persons who are interested
It is not surprising that there are only 2,299 registered entities at the time this article was written. This is less than 10% of the entities within the scope. Registering now is a must for entities in scope to avoid non-compliance or any additional restrictions during future sales.
Iryna Vae, Head Corporate Secretarial Services
Iryna Vale is Head Corporate Secretarial Services at TMF UK. She is a chartered company secretary and has over 15 years of experience in company secretarial work. Her previous experience includes managing portfolios for up to 600 clients.
TMF Group provides international administrative services. Through the 120 offices around the globe, its 9,100 employees provide administrative services for legal, financial and employee matters.