Ready, Steady, Register: New UK beneficial ownership register

Companies House will verify the information and then issue a unique identification number (an overseas entity ID). Without the ID, the overseas entity will not be able to apply to be registered at the Land Registry as the owner of property. The overseas entity will need to comply with an “updating duty” (at least every 12 months from the date of registration) in order to retain its status as a “registered overseas entity”.  The Land Registry will place a restriction on the title register to prevent sales, charges and leases of more than seven years from being registered unless the overseas entity has registered at Companies House.

Overseas entities who already own UK property will be given six months from when the Act comes into force to register and obtain an ID. During that period, a restriction will be put on the property register which will become effective after the six month transition period. After this transition period only registered overseas entities will be able to subsequently sell, charge or let. 

The duty to register will only commence once secondary legislation has been published which will set a date for the register to open.

Q:  Which entities have to be registered on the new register at Companies House?

Overseas entities will have to be registered on the register at Companies House.  An overseas entity will include a company, partnership, trust or other legal entity.

Q:  What information does the register contain? 

Companies House must keep the register which will consist of a list of registered overseas entities, the documents they have to deliver and any other information required. The list must contain the name of each overseas entity that has applied to register and has not been removed.

Q:  What information must the overseas entity provide in its application for registration?

The overseas entity will have to provide information about itself and its beneficial owners.  If there are no beneficial owners, the overseas entity has to state that this is the case.

Q:  Who is a beneficial owner?

A person is a beneficial owner if, in relation to the overseas entity, it:

• owns directly or indirectly more than 25% of the shares or voting rights;

• can appoint or remove a majority of the board of directors; or

• has the right to exercise or actually exercises significant influence or control over the overseas entity. 

Q:  What is the result of registration of the overseas entity?

Companies House will allocate an overseas entity ID and record that in the register. The overseas entity will receive notification of the date of registration and its ID.  These dates are important for the continuing updating duty. The overseas entity number will be required for Land Registry applications.

Q:  How often does this information have to be updated?

The information must be updated within 14 days after the end of 12 months beginning with the date of registration, although the entity can shorten the update period by notification and by delivering the required information within 14 days of the updated date. This should help companies align their updating periods with their accounting periods and with other companies in the same group

Q:  What is the required information for the overseas entity?

Name; country of incorporation; registered or principal office; service address; email address; legal form of the entity and the law by which it is governed; any public register in which it is entered and its registration number on that register. 

Q:  What is the required information for beneficial owners?

For companies it is the same as for the overseas entity plus the date on which the entity became a registrable beneficial owner; which of the conditions relating to beneficial ownership is met and a statement as to why each condition is met; whether the entity meets that condition by virtue of being a trustee; and whether the entity is sanctioned.   

Q:  What are the penalties for failing to comply?

A fine and for continued contravention a daily default fine not exceeding £2,500 and one half of level 4 on the standard scale which is currently £1250.  It is also an offence for a person, without reasonable excuse, to deliver any document that is misleading, false or deceptive in a material way.

Q:  Can an entity apply to be removed from the register?

Yes if it can provide a statement that it is not registered as the proprietor of a relevant interest (freehold or leasehold) in land since 1 January 1999.  However it must still provide a statement and information about the beneficial owners.

The registrar will check if the overseas entity is a registered proprietor and became so pursuant to an application made on or after 1 January 1999 and if not remove the overseas entity from the register.  

Q:  How much of the information lodged at Companies House will be public?

Certain information will be protected under data protection law such as details of individual trustees. 

Q:  When should overseas entities register at Companies House?

Overseas entities should register at Companies House as soon as possible after the register opens. Overseas Entities should also factor into their timelines that they have to give an information notice on their beneficial owners, requiring them to respond within a month. This is important for an overseas entity who is buying a UK property as they need to get themselves registered on the new Companies House register as soon as it is available and should prepare their beneficial ownership information well in advance.

An overseas entity will need to have registered at Companies House before any application can be made to the Land Registry.  The application risks being rejected outright if this has not been done. 

For existing overseas entities who own UK property, it would be prudent to keep a record of any disposals made since 28 February 2022 as this information will be required for registration at Companies House.  The relevant disposals will involve a freehold or leasehold granted for a term of more than seven years. 

Land registry applications under the new regime

Q:  How does registration as an overseas entity affect Land Registry applications?

Under the new regime, no application may be made to register an overseas entity as the new owner unless at the time of the application it is registered at Companies House or is exempt. The transaction itself will not be void if an overseas entity hasn't registered at the time of the transaction but no application to the Land Registry can be made until it has its overseas entity ID number. 

A similar restriction will be place on the title of existing overseas entities who hold land in England and Wales acquired on or after 1 January 1999 (or 8 December 2014 for land in Scotland).  In this case, the restriction will not take effect until after the end of the transition period which is six months from the date on which the register of overseas entities is created.  Owners will be notified after restrictions have been placed on the title.

Q:  What effect will the restriction have?

Once a restriction is on the title, dispositions by the overseas entity will NOT be registered by the Land Registry unless:

• the entity is a registered overseas entity or is exempt at the time of the disposition (i.e. at completion);
• the disposition is made in pursuance of a statutory obligation or court order or occurs by operation of law;
• the disposition is made in pursuance of a pre-existing contract made before the restriction is entered in the register;
• the disposition is made in exercise of a power of sale under a registered charge or a receiver appointed by the proprietor;
• the Secretary of State gives consent to the disposition or it is made by a specified insolvency practitioner in certain circumstances.

Q:  What about the exemption for contracts entered into before the restriction comes into effect?

This is an important exemption for existing overseas entities (who are selling) but beware of any variations to the contract which take place after the end of the transition period.  Where a variation fundamentally alters the contract, there might be an argument that the altered contract does not fall within the exception.

Q: Which dispositions are caught by the restriction?

Any sale, lease or charge of a freehold or lease of over 7 years will be caught. 

Q:  What happens during the transition period?

Overseas entities must apply to be registered at Companies House on the overseas entity register and obtain the overseas entity ID number.  Where an overseas entity applies for registration on the overseas entity register before the end of the transition period, information has to be provided by the overseas entity to the Companies House register stating if the overseas entity has or hasn't made a disposition since 28 February 2022. This will include the date of the disposition and relevant title number(s).  This has to be provided even if the overseas entity is a single asset owning entity which has disposed of its only UK property.

Q:  What about disposals made during the transition period?

If an overseas entity disposes of land during the transition period and is not registered at Companies House, this should be acceptable for a purchaser as it is made during the transition period.   This is the case even if the Land Registry has placed a restriction on the title as the wording of the restriction should make it clear that it doesn't have effect until the end of the transition period.  

Q:  What about acquisitions made by the overseas entity between 28 February and the beginning of the transition period?

If the overseas entity buys property during the period from 28 February 2022 until the beginning of the transition period this will not be caught by the Act as there is no statutory duty to register at Companies House until the regulations set the start date (although any acquisitions will need to be reported to Companies House on application for an overseas entity ID number).

Q.  What about acquisitions by overseas companies during the transition period?

An overseas entity buyer will not be able to apply to the Land Registry to be registered as the new owner unless they have been registered at Companies House and have an overseas entity registration ID number.  In this case, the Land Registry will register the overseas entity as the new proprietor and place a restriction on the title which will have immediate effect.

Q.  Does an overseas entity buyer benefit from the transition period?

No.  Once in force overseas entity buyers must register at Companies House and have an overseas entity registration ID number before applying to the Land Registry.

Q.  What about acquisitions by overseas entitles after the transition period?

This is the same as during the transition period.

Q.  What happens if an overseas entity is the buyer and the Act comes into force between exchange and completion and there is a fixed completion date with no option to delay completion?

The overseas entity buyer will have to complete the purchase but cannot apply to register the acquisition at the Land Registry until they have registered at Companies House.

Next Steps

Overseas entities should line up their beneficial ownership information, ready to register as soon as the Companies House register opens.

We have been given no indication of when the Companies House register will open but it is hoped that a short pre-opening window will be given so that companies can prepare the relevant forms and give the relevant information notices to beneficial owners.

A second Economic Crime Bill is expected later in 2022 so watch this space.

Authored by Jane Dockeray and Ingrid Stables.