The Economic Crime (Transparency and Enforcement) Act 2022 created the Register of Overseas Entities (ROE), requiring overseas entities holding UK real estate to register and provide information regarding their beneficial owners.
Companies House has now announced that it intends to launch the ROE on 1 August 2022, meaning entities within scope will have until 31 January 2023 to comply. Entities that have disposed of interests on or after 28 February 2022 are also required to register by this deadline.
From 5 September 2022, registration on the ROE will be required before an overseas entity can acquire or dispose of UK real estate.
Trustees of trust structures holding (or intending to hold) UK real estate will need to identify whether a registration requirement exists and if so, the information which will need to be provided.
Who needs to register?
The registration requirement is limited to “overseas entities”, defined as legal entities governed by the law of a country or territory outside of the UK. “Legal entity” is defined as a body corporate, partnership or other entity that (in each case) is a legal person under the law by which it is governed.
There is no registration requirement unless the overseas entity is (or is proposing to become) a registered proprietor of a “qualifying estate”. In England and Wales, this is a freehold estate or leasehold estate for a term of more than 7 years acquired on or after 1 January 1999.
Entities that disposed of qualifying estates on or after 28 February 2022 are also required to register and provide details of such disposals.
Different rules apply to estates in Scotland and Northern Ireland.
What are the deadlines and penalties for non-compliance?
With effect from 5 September 2022, overseas entities will need to be registered on the ROE before they can acquire qualifying estates. For overseas entities which hold a qualifying estate, a restriction will be entered on the title register, preventing a disposition of the land unless the entity registers on the ROE.
Upon registration, the entity will receive a unique Overseas Entity ID. This can then be provided to the Land Registry when the entity purchases, sells, transfers, leases or charges UK real estate.
An offence will be committed if on 1 February 2023, an overseas entity holds a qualifying estate and has not made an application to register, potentially subjecting it and its officers to a fine or imprisonment.
This deadline will also apply for overseas entities which disposed of qualifying estates on or after 28 February 2022, even if a restriction has not been entered. Failure to comply will result in a daily fine of up to £2,500.
What does this mean for trustees?
Trustees of trust structures holding (or intending to hold) UK real estate will need to identify whether a registration requirement exists in respect of any overseas entities within those structures and if so, the information which will need to be provided to Companies House.
Detailed guidance on this, together with reporting requirements under the UK’s Trust Registration Service (TRS), can be found in here.