It has been a year to the day since Companies House launched the Register of Overseas Entities (ROE) pursuant to the Economic Crime (Transparency and Enforcement) Act 2022 (the Act). The Act was introduced to address concerns regarding a lack of transparency around who ultimately owns land in the UK, and has consequences for both existing owners of real estate in the UK and prospective buyers who are overseas entities.
As we discussed in our blog post (here) and client briefing (here), the Act requires all overseas entities owning a "qualifying estate" in England and Wales to be registered on the ROE (unless exempt). Applications for registration must include details of the overseas entity’s ultimate beneficial owners or managing officers (depending on their ownership structure). Failure to register will result in restrictions on an entity’s ability to deal with its land, as well as potential criminal sanctions, such as fines and the imprisonment of the entity’s officers.
The Act contains an annual updating duty. Each year registered overseas entities have to deliver updated information to the registrar or confirm that their information on the ROE is up to date. An annual update statement is required even where there has been no change to the filed information. Failure to comply with this updating obligation will be a criminal offence committed by both the entity and every officer of the entity who is in default. The maximum penalty is an initial fine and a daily default fine of £2,500.
Guidance from Companies House makes clear that Overseas Entity IDs (issued upon the registration of an overseas entity on the ROE) will become invalid if an entity does not file the update statement in time (and will not become valid again until the update statement is filed). Without an Overseas Entity ID, the entity will be unable to deal freely with its land in the UK.
From today, the annual updating duty will begin to fall due for registered overseas entities. However, the majority of overseas entities don’t need to fret. The deadline to provide updated information is 14 days after the end of the “update period”, being:
(i) 12 months from the date of the overseas entity’s registration; and
(ii) each subsequent 12 month period.
Figures from leading corporate services provider, Elemental CoSec, show that 90% of applications to register on the ROE were submitted after October 2022, and more than 50% were submitted in January and February 2023. This means that the deadline for most registered overseas entities to update is still a few months away.
However, planning ahead is important and there are practical issues that overseas entities must consider in relation to their update statements:
If any of the information relating to an entity’s beneficial owners or managing officers has changed since its original application, the updated information will need to be independently verified by a UK-regulated agent – this should be factored into update statement timelines.
Update statements can be filed online in most cases, however if there are any trusts involved the entity will need to file a paper form.This includes trusts that Companies House has already been told about, even if there have not been any changes to their details.
Overseas entities should also bear in mind that this is an evolving area of law. Proposed legislation already seeks to change the approach to the updating obligation to make it “event driven”. Changes have been proposed to the Economic Crime and Corporate Transparency Bill which would introduce a requirement that an overseas entity delivers to Companies House:
(i) details of any change to the information on the ROE as soon as reasonably possible, and in any event within 14 days of becoming aware of such a change; and
(ii) information relating to any change to the information on the ROE, or a statement that there has been no such change, no more than 14 days prior to the acquisition or disposal of a relevant property.
These onerous requirements were opposed by the Government in the House of Lords, but the final text of the Bill remains to be seen. We will continue to provide updates as the Bill progresses through the parliamentary process.
For now, however, overseas entities should focus on complying with their existing obligations and would be well-advised to begin considering any changes that have occurred since their original applications, so that update statements can be submitted on time.
Please come and speak to us if you would like any further advice on the Register of Overseas Entities, including with regards to update statements.