Overseas entities holding real estate in England and Wales must update their beneficial ownership registrations
Published on 31st Jul 2023
One year on from the introduction of the Register of Overseas Entities, affected businesses are reminded they have an annual duty to update, or face potentially serious consequences
Fines, criminal sanctions and an inability to deal with its registered real estate in England and Wales are the potential repercussions for an overseas entity that fails to comply with its annual duty to notify Companies House of its beneficial owners.
Register of Overseas Entities – one year old this month
It is a year since Companies House opened the Register of Overseas Entities on 1 August 2022, giving existing overseas owners of real estate in England and Wales just six months to ascertain, obtain independent verification of and register their beneficial owners before they became subject to criminal sanctions and daily fines.
Another key driver for compliance with the regime was the fetter placed on overseas entities transacting with their registered real estate. From 1 February 2023 (or, where earlier, the date of any post-regime acquisition), overseas entities have been essentially prohibited from transferring, charging or creating a lease for seven years or longer out of English or Welsh real estate unless they are a Registered Overseas Entity.
Most overseas entities have now complied with their statutory duty to register their beneficial owners at Companies House. However, the duties do not end with registration.
To achieve the government's stated aim of improving transparency over who owns the overseas entities that hold UK property, equal weight is given to the need to keep the Register of Overseas Entities up to date. Accordingly, the legislation places great significance on an annual duty on the part of overseas entities to update the register each year to confirm whether or not there have been any changes to the details of their beneficial owners. A filing is required even where there have been no changes.
Failure to comply
Failure to comply with this duty is not simply treated as a "late filing" – it will mean the overseas entity immediately ceases to be a "Registered" Overseas Entity and finds itself in breach of the legislation, open to the full force of penalties on offer (hefty fines and criminal sanctions).
The other critical consequence of an overseas entity losing its Registered Overseas Entity status is that any transfer, charge or lease over seven years granted by that overseas entity cannot be registered by the counterparty. This means that it can never be a legal interest. There is no "saving" mechanism, even where the entity's loss of status was only for a matter of days due to an administrative oversight.
If such a scenario were to arise, the party expecting to complete a relevant transaction with the overseas entity in breach is likely to refuse to complete (and to be justified in doing so). The overseas entity itself would also need to avoid unintentionally completing in such a situation, as to do so would be a criminal offence.
Keeping transactions running smoothly
Registered Overseas Entities must be aware of the date on which their registration update is due. This is stated on the Register of Overseas Entities at Companies House and falls one year and 14 days after last year's filing (unless the entity has asked for its filing date to be brought forward).
In straightforward cases, where there are no trusts and no personal information needs to be shielded from the public register, the updating can be carried out via the Companies House online service.
However, entities should be aware that the updating process should be started well in advance of the due date:
- Anyone who may be a beneficial owner of the entity should be notified to obtain/confirm the relevant information for the register with one month allowed for their reply.
- A verifying agent will need to be instructed where there are changes to information previously submitted. This verification must be carried out no more than three months in advance of the update statement to Companies House.
Osborne Clarke comment
The potential consequences for a failure to make this mandatory annual update are unusually rigid when it comes to the Register of Overseas Entities.
It is important that overseas entities holding registered interests in real estate in England and Wales are aware of the rules and their potential impact. Starting the process well in advance of the due date is strongly recommended.