11 September 2023
The Economic Crime (Transparency and Enforcement) Act 2022 (the “Act”) became law in the United Kingdom on 15 March 2022. The Act creates a registration requirement at Companies House for any overseas entity which owns a qualifying estate to register on the Register of Beneficial Ownership of Overseas Entities (the “Overseas Register”) maintained by the Registrar of Companies for England and Wales (the “Registrar”) and to disclose details of their beneficial owners therein.
Overseas entities holding a qualifying estate had until 31 January 2023 to register with Companies House and to provide details of their beneficial owners. Following registration there is an ongoing obligation for overseas entities to file an annual update statement on the Overseas Register.
The Registrar has recently published its approach to enforcement and has indicated that, for overseas entities that were required to register by 31 January 2023 and have not registered, they will start taking enforcement action.
Failure to comply with the Act constitutes a criminal offence on the part of the overseas entity and its officers.
Additionally, enforcement options include restrictions on properties, a civil financial penalty, or criminal proceedings.
For failure to register or file an update statement, an overseas entity will immediately face restrictions on selling, leasing or raising charges over its land, and on purchasing any new UK property.
Civil penalties may be charged on a fixed basis, on a daily rate, or both. If satisfied that an offence has been committed, the Registrar may issue a penalty notice outlining the terms of the sanction. Companies House have indicated that the value of the overseas entity property portfolio will be used to assess the penalty. For example, for failing to register during the transitional period offences, penalties for a high value property can be STG£50,000.
Finally, the Registrar may in the most serious of cases refer the matter to The Insolvency Service and other law enforcement agencies to be considered for prosecution.
If any non-UK incorporated company in your group owns land or property or disposed of land or property in the UK after 28 February 2022 and you have not completed a filing on the Overseas Register, please be aware that the Registrar has commenced enforcement action, including financial sanctions, against overseas entities in breach of their obligation to register.
Notwithstanding the fact that the 31 January 2023 registration deadline has now passed, we would strongly encourage any overseas entities within scope of the Act who have not yet registered to do so as soon as possible.
Additionally, once registered, an update statement must be filed every year by all overseas entities on the Overseas Register.
If there have been any changes (e.g. company details or changes/new registrable beneficial owners or managing officers), these changes will need to be verified by a UK regulated agent no more than 3 months before the date of the update statement.
It is a criminal offence for an overseas entity not to file an update statement at Companies House. Where an overseas entity has failed to provide an update statement, that overseas entity will immediately face restrictions on selling, leasing or raising charges over its land, and on purchasing any new UK property. The Registrar will also add a note to the overseas entity’s public record stating that the requirement to file an update statement has not been complied with. Enforcement will also include prosecution and fines.
We have already assisted several KPMG clients which have Irish companies in their group owning land or property in the UK with meeting their obligations under the Act. We can assist with the necessary documentation and liaise with a UK Regulated Agent on your behalf to complete the necessary verification checks and filings with Companies House.
If you believe that the foregoing may be relevant to your business and you require assistance with registration on the Overseas Register or with filing your overseas entity’s annual update statement, please do not hesitate to get in contact.
