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Companies House – another day, another register

On 27 July 2022, the Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022 (the Regulations) were published by the Department for Business, Energy and Industrial Strategy (BEIS), the purpose of which is to implement aspects of the new Register of Overseas Entities (the Register). The Regulations came into force on 1 August 2022 and the Register was launched by Companies House on the same day.

This is arguably another move which will increase the transparency of corporate entities and enhance the role and powers of Companies House by further extending the scope in which it operates. 

The Register was created by the Economic Crime (Transparency and Enforcement) Act 2022 (the Act) which was expedited through Parliament in response to the Russian invasion of Ukraine.

The Act requires overseas entities owning, buying, selling or transferring property in the United Kingdom to provide certain information to the Registrar of Companies, including about their “beneficial owners”.

The Act (and by extension the Register) forms part of the Government's strategy to combat economic crime, while making sure that legitimate businesses continue to see the UK as a great place to invest.

According to the ‘Draft Register of Overseas Entities (Delivery, Protection and Trust Services) Regulations 2022: explanatory memorandum’ published on 23 June 2022 (Read the full Memorandum here), the purpose of the Regulations is to implement aspects of the new Register which includes:  

  • Requires certain documents to be delivered to the Registrar of Companies of England and Wales by electronic means;
  • Sets up a protection regime which will allow beneficial owners and managing officers of overseas entities to apply to have their information made unavailable for public inspection and undisclosable, where they can provide evidence that they or someone living with them are at serious risk of violence or intimidation; and
  • Sets out that legal entities governed by the law of a country or territory outside of the United Kingdom that provide trust services are subject to their own disclosure requirements, for the purpose of the definition of registrable beneficial owner.

The Register will enhance transparency around the owners and controllers of overseas entities that own or buy UK property. The Register is designed to:

  • deter and disrupt crime, by making it more difficult to use corporate vehicles in the pursuit of crime;
  • deter criminals from money laundering in the UK;
  • preserve the integrity of the financial system;
  • increase the efficiency of law enforcement investigations, particularly in relation to identifying and tracing the proceeds of crime; and
  • require the same transparency of overseas entities holding land as required from UK companies.

The Register will also protect the information of those at serious risk of harm by others and avoid creating disproportionate burdens or putting off legitimate investors.

Consequences of non-compliance include 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, overseas 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.

What should you do now?

All overseas entities wishing to buy, sell or transfer property or land in the UK, must now register with Companies House and provide details of their registrable beneficial owners or managing officers.

Any overseas entities already owning or leasing land or property in the UK will also need to register with Companies House by 31 January 2023, providing details of their registrable beneficial owners or managing officers.

For more information on how the changes might affect you and your company, please contact a member of the Corporate or Commercial Property team at BPE.

For a copy of the Explanatory Memorandum, please click here.

Read The Law Society’s guidance note here which sets out comprehensive guidance on what members should consider when acting in transactions involving overseas entities, including the risks associated with verification.

For a link to our previous article about the recent Corporate Transparency and Register Reform White Paper, please click here.

For a full copy of the Corporate Transparency and Register Reform White Paper as published on the Government website please click here.

For a copy of the Companies House 2020 to 2025 strategy, under which it seeks to transform digital services, improve security and implement data validation and verification measures, please click here

 

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.

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