Not only of concern to three French hens, but to any overseas entity (OE) that owns or wishes to acquire UK property, the Economic Crime and Corporate Transparency Act 2023 (ECCTA) will introduce a number of new or extended obligations relating to the registration of OEs at Companies House under the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA). In today's blog, we take a look at a few of these changes...
Provision of all title numbers owned by the Overseas Entities
For investors that own a considerable portfolio of property interests, one of the most time-consuming changes is likely to be that which requires the OE to provide Companies House (at the point of registration, and each time it fulfils its annual updating requirement) with a list of all of the title numbers for the qualifying interests in respect of which it is the registered proprietor. For OEs whose principal purpose is the holding of property interests, this could be a sizeable number of titles and it may take some time to carry out the necessary due diligence to verify its holdings. OEs may want to consider commissioning a search of the index of proprietors' names (known as a PN1 search) at the Land Registry in order to help with this exercise. A word of warning however – unlike the more common digital searches of the property register where results can be returned almost instantly, a PN1 search result can take a number of days to be compiled and returned – something which OEs will need to bear in mind when compiling their lists of property interests.
Provision of retrospective beneficial ownership details
Further digging into ownership records will also be required in anticipation of the introduction of new provisions under ECCTA which expand the definition of registerable beneficial owners, whose details will need to be reported to Companies House. In order to try and close a number of ownership and identity loopholes contained in ECTEA, OEs that owned land interests on 28 February 2022, and were therefore required to register at Companies House by 31 January 2023, will have to revisit the details of their ownership structures during that time (known as the Relevant Period).
If the OE holds the legal title to land as a nominee on behalf of another person, that person will now be deemed a beneficial owner, and the OE will have to take a look back to establish if the nominee structure was in place during the Relevant Period. Similarly, all corporate trustee beneficial owners will now (and retrospectively during the Relevant Period) qualify as registerable beneficial owners, even if they are not subject to their own disclosure requirements. As well as reviewing their corporate structures, OE will need to prepare and serve section 12 notices on any newly-identified registerable beneficial owners. Whilst the timing of the introduction of these measures is awaited, ECCTA does specify a transitional period, requiring that any new information in respect of the Relevant Period is included in the next annual update which falls after the end of a period of three months beginning on the date on which these provisions of ECCTA come into force.
Power to strip an overseas entity of its registered status
Perhaps of most concern to OEs will be the new powers granted to Companies House by ECCTA which will enable it to strip an OE of its registered status if it fails to comply with a notice served by Companies House requiring the provision of further information to evidence compliance by the OE with its statutory obligations concerning the delivery of information or documentation. Again, details are awaited as to the timing of this change and how, in practice, OE and those transacting with them, can be certain as to the registered status of the entity, but this will be a key part of due diligence on any transaction involving an OE once ECCTA takes effect.
The developments outlined above are only a taster of the changes that ECCTA will introduce, including updated information filing processes for English limited companies and limited partnerships, and a new failure to prevent fraud criminal offence for corporate entities can be found in our detailed briefing note.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
