What is the register of overseas entities?

On 1 August 2022, the UK’s new Register of Overseas Entities (the "ROE") came into effect under the Economic Crime (Transparency and Enforcement) Act 2022. The purpose of the ROE, a public register maintained by Companies House, is to record the beneficial ownership of "overseas entities" holding UK land. To whom does the ROE apply? The register applies retrospectively to overseas entities which hold UK land in England and Wales purchased on or after 1 January 1999 (other rules and dates apply for Scotland and Northern Ireland). An overseas entity here means "a body corporate, partnership or other entity that (in each case) is a legal person under the law by which it is governed." Those entities which are now obliged to register must do so by 31 January 2023. Additional information must also be provided for any entity which disposed of land after 28 February 2022. In future, HM Land Registry will be prevented from registering an overseas entity as a proprietor of registered land unless that entity has first obtained an "Overseas Entity ID". From 5 September 2022, an overseas entity will also need an Overseas Entity ID before it is able to dispose of registered property. Failure to comply with this new registration requirement carries a penalty of up to £2,500 per day or a custodial sentence of up to five years, in addition to the practical restrictions on buying and selling land that arise from not possessing an Overseas Entity ID. If UK land is held via a trust, this does not itself give rise to a disclosure obligation; trusts do not have separate legal personality and so trusts cannot be overseas entities. However, if the trustee of such a trust is a non-UK corporate trustee (as is often, perhaps usually, the case), then the trustee may itself be obliged to disclose its own beneficial ownership structure in accordance with the principles summarised above. These rules apply similarly to properties whose legal title is held by a nominee company. What will the impact of the ROE be? Although such measures can at times seem burdensome for both clients and their professionals, the UK’s move towards greater transparency over the last decade is well-intentioned. The ROE helps to close a loophole that existed for decades. Although the extent of the disclosure may seem excessive to certain clients, the new regime simply brings the foreign ownership of UK property in line with the transparent regime that has existed for the wider British public for years through HM Land Registry. Until the ROE, the right not to have your name connected with a particular property was a benefit only available to the wealthy. The information to be disclosed relating to beneficial owners includes their: name; date of birth; nationality, correspondence and home address; the date they became a beneficial owner of that overseas entity; and the nature of their control over the entity. However, not all this information is disclosable to the public. However, where the impact of the ROE may be felt more unexpectedly is on the shoulders of UK professional advisors. The ROE envisages a mechanism by which relevant persons verify that the information being submitted to the ROE is accurate. The definition of "relevant persons" includes independent legal professionals, and external accountants and tax advisers. Verification means filings being based on documents or information in either case obtained from a reliable source independent of the person whose identity is being verified. In reality this may often involve obtaining documents directly from a foreign registry where possible. Herein lies the potential problem, as it is left to the professionals to determine that they are satisfied that the information with which they are provided is accurate. The result of this is that broadly based, and strikingly stringent, criminal charges could fall on honest professionals acting in their clients’ best interests. This is perhaps not commensurate with the risks posed under the previous paradigm, and Government action could have perhaps been better directed. No reputable advisor should take umbrage with the Government seeking to tackle 'dirty money' in the UK. However, the ROE appears to risk criminalising professionals rather than, or as well as, non-compliant offshore structures and their owners.