Transition period is over for registering Overseas Entities: What is happening now?

Earlier this year, B P Collins property team wrote about the UK Register of Overseas Entities. The Register came into force on 1 August 2022 following legislation because of the Russian invasion of Ukraine. The new register forms a key part of the government’s strategy to tackle global economic crime, so it is imperative for individuals, corporations, and overseas entities to understand the changes and responsibilities associated with this register.

Overseas entities that own UK property or land are required to declare their beneficial owners or managing officers, plus they cannot buy, sell, transfer or lease land, or create a charge against the land in the UK unless they’ve registered with Companies House. Certain overseas entities who already owned property in the UK needed to register within a 6-month transition period, by 31 January 2023. Following that, overseas entities will still need to update their information on the Register every year.

A UK-regulated agent must verify the information provided with the requisite checks and provide their assurance code and an accompanying statement. They must be based in the UK and supervised under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. They can be an individual or a corporate entity, such as a legal professional.

Following the end of the transition period, in March 2023 Companies House announced that whilst more than 26,000 overseas entities had been registered to date, they were in the process of placing restrictions on land titles stopping those entities that had not complied from freely leasing, charging or disposing of their land, and of course, overseas entities cannot purchase any new UK property without a valid registration.

Additionally, Companies House is also writing to those who have not yet registered to remind them what the consequences are if they do not comply. In March they said that those overseas entities that continue to fail to register may also be subject to civil financial penalties or criminal prosecution.

In July, Companies House followed this up by publishing guidance on its approach to enforcement regarding non-compliance with the Register. The guidance stated that when considering offences, Companies House will balance and take account of the following factors:

1. the risk posed to people and the economy;
2. the seriousness of the breach of the law;
3. the impact on the economy, people or the integrity of the register; and
4. the cost and benefit of taking enforcement action and whether it is in the public interest.

Offences

There are a number of offences from the legislation that have to be considered, among others:

1. If an overseas entity was required to register by the end of the transitional period but did not, the entity and every officer of the entity commits an offence.
2. If a registered overseas entity fails to comply with the duty to update the register an offence is committed by the entity and by every officer of the entity who is in default.
3. A person commits an offence if they fail to comply with a warning notice or a penalty notice and cannot provide a reasonable excuse for this failure.
4. It is also an offence for a person to make a false filing in the Register.

Sanctions

As mentioned above there are a number of sanctions Companies House might consider pursuing:

1. Restrictions on selling, leasing or raising charges over land.
2. Referring cases to The Insolvency Service and other law enforcement agencies to be considered for prosecution.
3. Civil financial penalties, which could constitute a fixed penalty; a daily rate penalty; or a combination of both.

Companies House has not yet released information regarding any successful or ongoing sanction statistics, however since the end of the transition period it has now finalised the system for updating information and has announced it will be considering their enforcement approach.

Given the complexities of property transactions and registration requirements, it’s advisable to seek legal guidance to navigate the Register’s post-transition period landscape effectively. Our team of experienced legal professionals can provide valuable insights and assistance in ensuring compliance. For further information on how this could affect a transaction please contact the property team at enquiries@bpcollins.co.uk or call 01753 889995.