Concerns arising from the lack of transparency displayed by overseas entities purchasing and/or holding real estate assets in the United Kingdom and the suspected use of such property for money laundering purposes has resulted in new Register of Overseas Entities (Register) created by the Economic Crime (Transparency and Enforcement) Act 2022 (Act) which came into force on 1 August 2022. The Register arises in order to combat these suspicions, the publicly available register of beneficial owners of such real estate is held by Companies House. The deadline for compliance is 31 January 2023.
The Act is retrospective and overseas entities that already own or lease property or land in the UK must register such entity by the deadline, together with informing Companies House who their registrable beneficial owners or managing officers are.
When the Act was launched, Companies House Chief Executive Louise Smyth said: "The launch of this new register is a significant milestone in the history of Companies House and marks a turning point in our transformation as we look to play a much greater role in tackling economic crime."
The Actapplies to all property in the UK, however, there are variations across the UK as follows:
- all property owned by foreign entities in England and Wales from 1 January 1999,
- all property owned in Scotland from 8 December 2014 and in Northern Ireland to properties bought after 1 August 2022.
Failure to comply with the new regulations may amount to a criminal act, and attract severe sanctions with fines of £2,500 per day or unlimited fines as well as a prison sentence of up to five years. Furthermore, the owners of property that fail to comply will have their property rights severely restricted in future.
Gonzalo Butori, a partner, commented "the Act obliges all overseas entities to register their UK property ownership and the retrospective nature of the Act together with the extensive and detailed nature of the information may be burdensome for some organisations." Gonzalo further commented. "it is possible that many legitimate foreign entities that run the risk of being caught by the Act if they do not act quickly. Also, it should be noted that there are parameters on the nature of the professionals that can assist with an application. "
There is a provision where individuals may apply to the Registrar to prevent their protected data from being available for public inspection under certain circumstances. An application may be made if the individual has reason to believe that if the protected information is available for public inspection it will put them or another person living with them at serious risk of violence or intimidation.
Zahir Iqbal, senior associate, commented "real estate contracts, such as the sale of freehold land, grant of a seven-year or more lease, assignment of leases over seven years or a charge over UK real estate if the organisation holding the charge is an overseas entity will need to include an obligation to apply to the Registry to become a registered overseas entity together with the supply its Oversea Entity ID."
Broadly, the steps a foreign entity owning property in the United Kingdom should now take are as follows:
The Registrable beneficial or managing officer
The registrable beneficial or managing officer must register with the Register of Overseas entities. Depending on the type of entity – an individual, public authority, trust or a corporate body – the beneficial or managing officer must have significant influence over the organisation, people with significant control (PSC) such as company members holding at least 25% of shares (directly or indirectly) and have voting rights.
The submission of the information
The information submitted to the register is submitted online in English by a relevant person who will verify the province of the information. A relevant person is a person complying with section 3 and section 8 of The Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017). Such a person could be a legal professional, an auditor or person within a financial institution.
The relevant person will, once the information has been verified, inform the Companies House Registrar that the verification has been completed in accordance with the new Act and regulations and deliver a statement in compliance with Part 2 (5) of The Register of Overseas Entities (VPI) Regulations 2022.
The information must be retained for a period of five years by the relevant person.
When the application has been successful the identity of the organisation will be published on the public register and a unique Overseas Entity ID will be assigned. The Overseas Entity ID will always be required by the Land Registry before any further transactions involving real estate in England & Wales.
A requirement of The Economic Crime (Transparency and Enforcement) Act 2022 is that the information is updated annually.
The lawyers within Giambrone & Partners corporate and commercial department can assist any foreign entity that owns real estate in the United Kingdom with all aspects of an application under The Economic Crime (Transparency and Enforcement) Act 2022 and can act as a relevant person on its behalf.
Gonzalo Butori is a partner and highly regarded for his capacity to resolve high-stakes cross-border disputes through alternative dispute resolution(ADR) by evolving pragmatic solutions aimed at his clients best interests. He represents both claimants and defendants across a wide range of jurisdictions. Gonzalo has acted as co-advocate in international commercial disputes under ICC rules as well as in other alternative dispute resolution (ADR) proceedings.
Gonzalo's expertise also extends to cross-border inheritance matters, including complex contested high-value matters. As well as advising on cross-border family law together with complicated issues involving child and financial arrangements. Together with advising on all aspects involving real estate purchase and immigration.
Additonally, Gonzalo leads the expansion into Latin America, managing the LATAM Desk in London, advising both UK and South American companies planning to enter the LATAM or UK market respectively. He can also assist individuals with issues such as inheritance, family matters and divorce.
Gonzalo is admitted in England & Wales as a Registered Foreign Lawyer (RFL), as an Abogado, a Spanish-qualified lawyer in Spain, as well as Avvocato Stabilito in Italy.
Zahir Iqbal is a senior associate and has a wide-ranging expertise encompassing most aspects of commercial and private client litigation and dispute resolution. Zahir regularly appears before a variety of courts from small claims court to the high court and other tribunals including those overseas. Zahir advises in high value complex disputes.
On graduating from Queen Mary, University of London, where he read Computer Science and Mathematics, Zahir then undertook his conversion +course into Law at the College of Law, London.
Zahir obtained Higher Rights of Audience enabling him to appear before a wider range of courts representing clients in a full scope of matters.
Zahir is always conscious of the commercial needs of his clients, and develops a comprehensive understanding of our clients' issues enabling him to focus on achieving the best outcome in order to achieve their objectives.
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.