The Register of Overseas Entities – What you need to know

Originally promised “by 2021”, the war in the Ukraine has finally booted the Register of Overseas Entities onto the statute book as part of a global push towards transparency in property ownership.

As we reported in December 2020, most UK entities have been required to provide information about their ultimate owners since June 2016, but plans to cast the net wider to catch overseas entities seemed to have stalled over the last two years. Now, domestic and global pressure to crack down on Russian oligarchs has given the UK Government the motivation to include the Register of Overseas Entities as part of a wider package of measures in the fast-tracked Economic Crime (Transparency and Enforcement) Act 2022. These new measures are intended to increase transparency and aid effective enforcement. Here are answers to the key questions.

Question: What is the Register of Overseas Entities?

Answer: A new register giving details of the beneficial ownership of all overseas entities who own UK property, whether commercial or residential. The Register will be maintained at UK Companies House and will be publicly accessible.

Question: What is an ’overseas entity’?

Answer: A legal entity that is governed by the law of a country or territory outside of the UK (note, this captures entities formed in the Channel Islands). For these purposes a ‘legal entity’ includes any entity which is a legal person under the law by which it is governed (for example, non-UK incorporated companies; LLPs; foreign foundations and non-UK partnerships with a legal personality). Non-UK trusts are not ‘overseas entities’ as they do not have a separate legal personality (but those that hold UK property indirectly through an overseas entity will be caught).

Question: What do overseas entities need to do if they own property in the UK?

Answer: Overseas entities that acquired property in England and Wales after 1 January 1999 or that acquire it in the future must apply for registration on the Register of Overseas Entities (there are corresponding provisions in Scotland and Northern Ireland). 

The overseas entity will need to provide basic details about itself (name, country of incorporation/formation, registered/principal office, service address, legal form and applicable governing law, details of any overseas public register which it is entered on and any registration number). The entity will also need to deliver one of the following three statements about its registrable beneficial owners and the required information for that statement:

	Statement	Required information
Statement 1	(a) The entity has identified one or more registrable beneficial owners and that it has no reasonable cause to believe there are others; and (b) The entity is able to provide the required information about each registrable beneficial owner it has identified.	The required information about each registrable beneficial owner of the entity (see below).
Statement 2	The entity has no reasonable cause to believe that it has any registrable beneficial owners.	The required information about each managing officer of the entity (see below).
Statement 3	(a) The entity has reasonable cause to believe that there is at least one registrable beneficial owner that it has not identified; or (b) The entity is not able to provide the required information about one or more of the registrable beneficial owners it has identified; or (c) Paragraphs (a) and (b) both apply.	The required information about each managing officer of the entity (see below). The required information about each registrable beneficial owner of the entity that has been identified (or as much as has been obtained) (see below).

 

Where an application for registration as an overseas entity discloses that a registrable beneficial owner is a trustee, it must also include a statement as to whether the entity has any reasonable cause to believe that there is required information about the trust that it has not been able to obtain (together with the required information about the trust -see below).

In addition, during the 6-month transition period (see below), an overseas entity must state whether or not it has made any relevant disposals of land since 28 February 2022.

The following information is required in relation to every registrable beneficial owner if Statement 1 or Statement 3 applies:

Individuals	Governments and public authorities	Other legal entities
- Name, date of birth and nationality; - Usual residential address; - A service address; - The date on which the individual became a registrable beneficial owner in relation to the overseas entity; - An explanation as to why the individual qualifies as a ‘beneficial owner’ (see below); - Whether the individual is a trustee; - Whether the individual is a designated person (within the meaning of section 9(2) of the Sanctions and Anti-Money Laundering Act 2018), where that information is publicly available.	- Name; - Principal office; - A service address; - Its legal form and the law by which it is governed; - The date on which the entity became a registrable beneficial owner in relation to the overseas entity; - An explanation as to why the entity qualifies as a ‘beneficial owner’ (see below); - Whether the entity is a designated person (within the meaning of section 9(2) of the Sanctions and Anti-Money Laundering Act 2018), where that information is publicly available.	- Name; - Registered or principal office; A service address; - The legal form of the entity and the law by which it is governed; - Any public register in which it is registered and any registered number in that register; - The date on which the entity became a registrable beneficial owner in relation to the overseas entity; - An explanation as to why the entity qualifies as a ’beneficial owner’ (see below); - Whether the entity is a trustee; - Whether the entity is a designated person (within the meaning of section 9(2) of the Sanctions and Anti-Money Laundering Act 2018), where that information is publicly available.

 

Where an application for registration as an overseas entity discloses that a registrable beneficial owner is a trustee, it must also include information about the trust, such as the name or, if it does not have a name, a description, of the trust, the date of the trust’s creation; and details of the settlor, grantor, beneficiaries and other interested persons (name, date of birth, nationality, usual residential address, service address for individual; similar information is required for entities).

Where an overseas entity has made relevant disposals of land since 28 February 2022, it must provide information about the entity’s beneficial ownership immediately before the disposal.

The following information is required in relation to the managing officers if Statement 2 or Statement 3 applies:

Individuals	Non-Individuals
- Name, date of birth and nationality; - Any former name (unless changed before the age of 16 or more than 20 years previously); - Usual residential address; - A service address; - Business occupation; - A description of the officer’s role.	- Name; - Registered or principal office; - A service address; - The legal form of the entity and the law by which it is governed; - Any public register on which it is entered and any registration number; - A description of the officer’s role; and - The name and contact details of any individual who may be contacted about the managing officer.

 

Question: What is a ‘beneficial owner’?

Answer: An individual, government, public authority or other legal entity who meets one or more of the following conditions in relation to the overseas entity:

Condition 1 - they hold (directly or indirectly) more than 25% of the shares in the overseas entity;

Condition 2 - they hold (directly or indirectly) more than 25% of the voting rights in the overseas entity;

Condition 3 - they have the right (directly or indirectly) to appoint or remove a majority of the board of directors of the overseas entity;

Condition 4 - they have the right to exercise or actually exercise significant influence or control over the overseas entity; and

Condition 5- in relation to trusts, partnerships and other entities that are not legal persons under the law by which they are governed: if the trustees of the trust or members of the partnership, unincorporated association or other entity meet any of Conditions 1 to 4, then the beneficial owner will consist of any person who has the right to exercise or actually exercise significant influence or control over the activities of that trust or entity.

Question: Are there any exemptions?

Answer: Yes, but they are narrow. For example, in the case of overseas entities who have provided beneficial ownership information to registers in their own jurisdiction, if the government considers those registers to be equivalent to the Register of Overseas Entities, it may make regulations to exempt these entities. The Act also allows the government, on a case-by-case basis, to exempt someone from registering if it is necessary to do so in the interests of national security or for the purpose of preventing or detecting serious crime.

Question: What will Companies House do with the information?

Answer: The registrar will publish it on the Register of Overseas Entities and issue an Overseas Entity ID to registered overseas entities (which the overseas entity will need to deal with any registered property in the UK). To maintain a valid Overseas Entity ID the entity will need to comply with its updating obligations, which include reconfirming the required information and statements to Companies House at least every 12 months.

Companies House will not publish the day of the month on which an individual beneficial owner was born (just the month and year). They will also not publish residential addresses nor contact details of individuals. In addition, information about trusts will not be publicly accessible although it may be passed on to HM Revenue and Customs.

Question: What are the deadlines to register with Companies House?

Answer: There is a short transition period of 6 months from the commencement date under the Act to allow overseas entities who already own UK property to submit their registration to Companies House. 

The commencement date under the Act is, as yet, unknown, but the government has said that it is committed to rapid implementation, so we expect it to be soon.

Question: What are the consequences of not complying?

Answer: Failure to comply results in criminal sanctions, ranging from fines of £2,500 a day (for example, for failure to update the register) to unlimited fines (for example, for making materially false statements) and prison sentences of up to 5 years. 

Without a current Overseas Entity ID, entities will not be able to make certain dispositions of their UK property (including sales, mortgages and leases of more than 7 years) because these dispositions will be incapable of registration at HM Land Registry. 

If an overseas entity does not have a current Overseas Entity ID, then it cannot be registered as the legal owner of the property at HM Land Registry, so this will effectively prevent it from acquiring new property.

Question: So will this result in complete transparency of land ownership in the UK?

Answer: Inevitably not. In particular, critics have pointed out that the impact of the Act on non-UK trusts and on nominee arrangements is less than perfect; and that the share ownership condition allows for too much wriggle room, such that fairly major beneficial owners will not have to be registered.

Non-UK trusts that own land directly will not be caught by the new registration requirements because a trust does not have a separate legal personality (such trusts are likely to be required to register under the Trust Registration Service (TRS), but this is not a public register). Also, even though the Act does require information to be provided about non-UK trusts that own land indirectly through overseas companies (including details of beneficiaries), where the trust is a discretionary trust, this will not necessarily mean that individual beneficiaries can be identified.

Where a nominee arrangement is in place, the picture is murky too. Where an overseas entity owns UK property as a nominee for an individual (who does not own shares in or have significant influence or control over that overseas entity), then that individual (who is actually the beneficial owner of the property) would not need to appear on the register because the Act does not require the identification of the ultimate beneficial owner of the property.

And finally, the share ownership condition of more than 25% of the overseas entity’s shares means that where there are multiple owners with less than 25% of the shares, there will be no beneficial owner who must be recorded on the register.In addition, there is no definition of ‘connected persons’ in the Act so, for example, a family of 6 where each member owned 16.66% of the shares would not be caught by the share ownership condition (unless some sort of ‘joint’ arrangement were in place).

Question: Is there anything else in the Act we should know about?

Answer: Yes. There are also changes to the basis for unexplained wealth orders, which is a whole topic in itself!

For more, see Clyde & Co’s ‘Crisis in Ukraine’ hub which offers insights into the impact of the crisis in Ukraine and focuses on the implications of sanctions, flight bans and many of the other direct and indirect consequences of the conflict.

Crisis in Ukraine