The Economic Crime (Transparency And Enforcement) Act 2022 And The Register Of Overseas Entities ' Implications And Considerations For Lenders

• Published date: 14 December 2022
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Compliance, Financial Services, Corporate and Company Law
• Law Firm: Birketts
• Author: Mr William Sell and Alex Schaafsma

Introduction

After the Economic Crime (Transparency and Enforcement) Act 2022 ('the Act') came into force on 15 March 2022, Companies House opened the Register of Overseas Entities ('the ROE') on 1 August 2022.

Under the Act, which was fast-tracked through Parliament in response to events in Ukraine, overseas entities ('OEs') which own property in the UK are subject to several requirements that must be met in order for these entities to be registered. This article addresses the key concerns for lenders following the introduction of the ROE and the steps that lenders should now consider taking going forward.

Who must apply?

OEs which currently own or are acquiring qualifying estates in the UK must register on the ROE. Note the reference to qualifying estates (explained below), a lender which is itself an OE does not have to register on the ROE as it holds a charge, not a property title as such.

OEs that already owned qualifying estates prior to 1 August 2022 need to register on the ROE by 31 January 2023. This applies to OEs that acquired property or land on or after 1 January 1999 (in England and Wales) or 8 December 2014 (in Scotland).

Definitions

'Overseas entity' means a legal entity governed by the laws of a country or territory other than the United Kingdom. This means that companies incorporated in the Channel Islands, the Isle of Man and the Republic of Ireland will be classed as OEs.

'Legal entity' means a body corporate or a firm that is a legal person under the law by which it is governed (i.e. companies, LLPs and partnerships but not individuals).

'Qualifying estate' means a freehold estate in land or a leasehold estate in land granted for a term of more than 21 years from the date of grant.

It is important to note that the position for UK trusts is different because trusts do not have legal personality, so they do not fall into the above definition for a legal entity. Therefore, provided that the trust is not a separate legal entity under its domestic law, it does not need to register on the ROE. Instead, it must register with HMRC under the Trusts Registration Service which has very similar requirements in terms of the information to be provided, but does not operate as a publicly available register (unlike the ROE).

However, trustees who are beneficial owners of an OE will still need to disclose the details of their underlying beneficial ownership arrangements as required under the Act.

Considerations for Lenders

If an OE was already a...