Imminent Deadline for the“ROE” (Economic Crime Act 2022)

Introduction:

To recap, in the wake of Russia’s invasion of Ukraine, the Economic Crime (Transparency and Enforcement) Act 2022 (the “Act”) was speedily passed. Effective from 1^st August 2022, the Act established a Companies House register for overseas entities (“ROE”), requiring overseas entities that own land in the UK to provide details of their beneficial ownership. This article will focus on the imminent deadline for registration and the consequences of non-compliance, with a particular focus on Northern Ireland and England and Wales.

Rationale:

The ROE forms part of the UK government’s strategy to combat economic crime. In the UK, it is estimated that £88bn is laundered per year. The ROE was created to tackle this by facilitating greater transparency around overseas entities holding or purchasing UK real estate.

The ROE Requirement and “Overseas ID”:

The requirement is that an overseas entity with a “relevant interest” in property or land in the UK must register with Companies House. We have defined “relevant interest” in our previous article on this topic, The Economic Crime (Transparency and Enforcement)… | Carson McDowell (carson-mcdowell.com). To recap, the ROE applies to all UK land and property, with the following variations;

• all property owned by overseas entities in England and Wales from 1 January 1999; and
• in Northern Ireland to properties bought after 1 August 2022.

When registering, the overseas entity will be required to provide prescribed information about its beneficial ownership. An authorised, independent third party will verify the information provided, and the entity will be issued with an “overseas ID.” This ID will be provided to the Land Registry when the entity subsequently deals with UK land or property.

Imminent Deadline of 31^st January 2023:

The deadline for registration with Companies House is fast approaching. If overseas entities do not register on or before 31^st January 2023, they will not be issued with an “Overseas ID” and will be unable to register any change of interest at the relevant Land Registry. Accordingly, buying, selling, transferring, or charging land or property in the UK becomes a real problem. It should be stressed that even if an overseas entity has no immediate intention of engaging with UK real estate, the Act still requires all entities to register by 31^st January 2023. Furthermore, even if an overseas entity has disposed of its affected UK real estate between the 28^th February 2022 and the 31^st of January 2023, it is not exempt. The entity must still register and disclose beneficial ownership information to Companies House.

Non-Compliance:

Statistics have indicated that approx. 31,000 entities have still not applied for registration. This is concerning for three reasons;

• Entities who fail to register or submit false information risk fines of up to £2,500 per day or even imprisonment for a term of up to five years.
• There will be a likely influx of rushed applications to the UK Land Registries during January 2023, resulting in serious delays in application processing.
• Many overseas entities will effectively find themselves unable to deal with UK land or property from the 1^st February 2023.

Missed the Deadline? What Can You Do:

A recent Companies House blog stated that demonstrating the commencement of the registration process and an intention to complete as soon as possible can prove beneficial for an overseas entity that has missed the deadline of 31^st January 2023. Companies House cannot grant an application extension. However, they may take these factors into account when considering further enforcement action. Nevertheless, this should not be interpretated as a nod to not taking the deadline seriously. Overseas entities need and should be taking immediate action to complete registration if they have not already done so.

Conclusion:

To reiterate, the deadline for registration is fast approaching. It is imperative that any overseas entity owning affected UK real estate mobilises itself immediately and registers beneficial ownership at Companies House. Failure to do so will result in the entity facing severe financial/criminal sanctions for non-compliance and an inability to deal with UK land or property.

If you would like any further information or advice, please contact Clara Eccles from the Corporate team.

*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.