In our previous article, we covered DPAs – what they are, why they are being introduced, the draft legislation and the implications for Jersey. The legislation- The Criminal Justice (Deferred …
The UK’s Register of Overseas Entities
The UK Register of Overseas Entities (the “Register”) was launched at Companies House on 1 August 2022, pursuant to the Economic Crime (Transparency and Enforcement) Act 2022 (the “Act”). The legislation is long overdue, with a public beneficial ownership register for UK property first being announced by Prime Minister David Cameron back in 2016.
The Act eventually fast-tracked through Parliament in March 2022, amid concern about unlawful funds arriving in the UK from Russia following the invasion of Ukraine. An important step towards transparency in property ownership, the Register is amongst other measures included in the Act aimed at upholding the global framework for fighting economic crime.
Failure to comply will have criminal consequences, and Channel Islands/Isle of Man entities that are caught by the legislation should prioritise taking steps to ensure that they and their structures are compliant.
An overseas entity which purchases, leases or charges UK property will need to register in advance at Companies House before applying to register its transaction with the UK Land Registry. This applies to transactions that will be registered at the Land Registry on or after 5 September 2022.
Overseas entities already holding land in England or Wales which was purchased on or after 1 January 1999, land in Scotland which was purchased on or after 8 December 2014 or land in Northern Ireland which was purchased on or after 5 September 2022 will have until the end of the ‘transitional period’ (being 31 January 2023) to apply to be registered.
An overseas entity that has since 28 February 2022 already sold a “relevant interest in land” (see below) by way of a “relevant disposition” must register details of their beneficial owners before the end of the transitional period.
What UK property is covered?
For the purposes of the Act, an overseas entity is registered as the proprietor of a “relevant interest in land” if:
- It holds a freehold or a lease for more than seven years in England and Wales, and where the application to register the entity’s proprietary interest was made on or after 1 January 1999.
- It holds a lease for more than 20 years or an assignation of a lease for more than 20 years in Scotland, and where the application to register the entity’s proprietary interest was made on or after 8 December 2014.
- It holds a freehold or a lease of more than 21 years in Northern Ireland, and where the application to register the entity’s proprietary interest was made on or after 5 September 2022.
What is an “overseas entity”?
An overseas entity is a legal entity that is “governed by the law of a country or territory outside the United Kingdom”. “Legal entity” means a body corporate, partnership or other entity that (in each case) is a legal person under the law by which it is governed. For example this would capture Guernsey or Jersey companies, foundations, and partnerships with a legal personality.
The definition of overseas entity does not include legal arrangements such as trusts. However, the trustees of a trust could still be classed as “registrable beneficial owners” for the purposes of the regime (for example, where a trust holds UK property through an underlying overseas entity). In this case, it will be necessary to provide certain information in respect of the trust and its key parties (please see below).
What information is required?
An overseas entity will need to provide Companies House with (amongst other information) its name, country of incorporation, registered office, and address for service. It will also need to provide certain information on its registrable beneficial owners, or, if there are none, its “managing officers” (i.e. its directors, managers and secretary).
Where a registrable beneficial owner is the trustee of a trust, the required information includes certain information on the trust itself (e.g. name, date of establishment). An entity must also provide details of the settlor, beneficiaries and any other person who, under the terms of the trust, has rights in respect of the appointment or removal of trustees or the exercise by the trustees of their functions (such as a protector).
The Act does not specify what types of beneficiaries an entity must provide details on (e.g. whether unascertained members of a class and contingent beneficiaries are captured). Specific advice should be sought on this issue.
In the case of individuals, the required information includes (amongst others) their name, date of birth, nationality and residential address. For entities, it includes (amongst others) its name, registered office and service address.
Entities should be aware that the Act prescribes an “updating duty” and this information will need to be updated annually.
Who is a beneficial owner?
The Act states that a person (“X”) is a “beneficial owner” of an overseas entity (“Y”) (such that X’s details need to be registered) if one or more of the following conditions are met:
- X holds, directly or indirectly, more than 25% of the shares in Y.
- X holds, directly or indirectly, more than 25% of the voting rights in Y.
- X holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of Y.
- X has the right to exercise, or actually exercises, significant influence or control over Y.
- Where X is the trustees of a trust, or the members of a partnership, unincorporated association or other entity, that is not a legal person under the law by which it is governed:
- they meet any of the conditions specified above (in their capacity as such) in relation to Y; and
- X has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or entity.
Is all information public?
Details of an overseas entity’s beneficial owners and managing officers will be made publicly available on the Register. However, Companies house will only publish the month and year of an individual’s date of birth, and they will also not publish residential addresses nor contact details of individuals. In addition, information about trusts will not be publicly available (although it may be shared with HMRC).
Consequences of non-compliance
Failure to comply is potentially a criminal offence and could result in a fine or imprisonment for both for the entity and its officers.
We are aware that this will impose considerable obligations on financial services businesses in Jersey, and might also require further analysis of your client book.
Should you require any advice or further information in respect of the above, please do not hesitate to contact Lydia Emery in the first instance https://www.oben.je/people/lydia-emery/.