Economic Crime (Transparency And Enforcement) Act Provides Transitional Period

• Law Firm: Pillsbury Winthrop Shaw Pittman
• Subject Matter: Corporate/Commercial Law, Compliance, Corporate and Company Law, Directors and Officers
• Author: Mr James Campbell
• Published date: 17 January 2023

TAKEAWAYS

• Failure to comply with the Act will expose the overseas entity and its officers to criminal sanctions and could potentially impact banks who have lent monies secured on the UK property.
• The Act applies to various transactions that took place on or after January 1,1999.
• A person or corporate entity will be registrable if, in relation to the overseas entity, they (or a trust or firm which they control) own more than 25% of the shares or voting rights have the right to appoint or remove a majority of the board of directors or they have significant influence or control over the overseas entity.

The Economic Crime (Transparency and Enforcement) Act which came into force last year provides a transitional period ending on January 31, 2023, during which overseas entities that own (or want to sell or transfer) or lease UK real estate must register the beneficial owners or managing officers of that overseas entity at Companies House. A failure to comply with the Act will expose the overseas entity and its officers to criminal sanctions and could potentially impact banks who have lent monies secured on the property.

The Act applies, in the case of England and Wales, to all transactions since January 1, 1999, involving:

• Transfers of a qualifying estate to an overseas entity;
• Transfers of a qualifying estate by an overseas entity (if the transfer took place on or after February 28, 2022);
• Registrable leases for a term of more than seven years from the date of grant to an overseas entity, which are granted out of a qualifying estate;
• Registrable charges by an overseas entity;
• Applications for first registration of a qualifying estate where the applicant is an overseas entity; and
• Adverse possession applications to register an overseas entity as proprietor of a qualifying estate.

For the purposes of the Act, "qualifying estate" means a freehold estate in land or a leasehold estate in land granted for a term of more than seven years from the date of the grant.

The rules for determining whether someone is a registrable beneficial owner are complex, particularly where the ownership structure has more than one layer or involves trusts or foundations, but in summary a person or corporate entity will be registrable if, in relation to the overseas entity, they (or a trust or firm which they control) own more...