Register of Overseas Entities opens

Property Law Committee Convener John Sinclair provides some guidance on the new Register of Overseas Entities which opened on Monday, 1 August.

The ROE has been implemented through the provisions of the Economic Crime (Transparency and Enforcement) Act 2022.

Overseas entities which own (or in certain circumstances lease), or are about to buy property or land or enter into certain leases of property or land in the UK must register with Companies House as an overseas entity. The beneficial owners or managing officers must be declared on the Register. This is designed to enable greater transparency of property ownership in the UK. Leases that are not registrable in the Land Register of Scotland are not relevant for the ROE.

Transition period

The provisions apply to overseas entities which currently own property. There will be a six month transition period where all overseas entities which are in scope under the legislation and have bought land or property after 8th December 2014 in Scotland, 1st January 1999 in England and Wales and 1st August 2022 in Northern Ireland must register as an overseas entity on the ROE by 31st January 2023. An entity which has disposed of property or land since 28th February 2022 will also require to register and give details of that property transaction.

Failure to register could result in criminal sanctions being raised against the entity and beneficial owners. Once registered, the entity will be provided with a registration number it can use when applying for registration of a disposition, security, lease or to provide to the parties on the opposite side of the transaction to enable registration of the deed disposing of the entity’s interest in the property.

The overseas entity will, therefore, not be able to carry out certain transactions on a property without having first been registered on the ROE. The provisions in Schedule 4 of the Act, which come into force on 5th September 2022, will require the Keeper of the Register of Scotland to reject any application for registration of a relevant deed granted by an overseas entity (which do benefit from a 6 month transitional period) or granted in favour of an overseas entity, where that overseas entity would fall in scope of the ROE but has not been registered on the ROE and provided a ROE registration number. Please note the transitional arrangements which allow the Keeper of the Registers of Scotland to accept an application for registration for a relevant deed granted by an overseas entity submitted prior to the end of the six-month transitional period, ie 1 February 2023.

Government guidance

The UK Government has published general guidance on the requirements for registering on ROE as well as the process and information that is likely to be required.

The Property Standardisation Group has published its updated offer to sell and offer to lease to include drafting relating to the ROE. The updated offers make provision for either the seller or purchaser (or both) or landlord or tenant (or both) being an overseas entity and includes requirement for registration in the Register of Overseas Entities. You can find the updated offers on their website here and can find further information in their article published in July’s Journal – Living with the Register of Overseas Entities.

The UK Government has published technical guidance for beneficial owners of overseas entities and their professional advisors and the processes for registration. This can be accessed on the UK Government website and members are encouraged to consider the guidance, together with the legislation carefully.

Verification

One of the aspects of the registration process requires that beneficial owners and managing officers of an overseas entity are verified before registration on the ROE can be completed. Verification must be undertaken by a relevant person who is regulated under the Money Laundering Regulations and as set out in the ROE Regulations concerning verification. This includes independent legal professionals. Those undertaking verification are required to verify the identity of the relevant individuals within the entity and confirm they have seen requisite documentation (in line with the provisions in the legislation and regulations).

The agent undertaking the verification certification will require to provide an agent assurance code. If the agent is not also submitting the application to ROE on behalf of the entity, and only conducting the verification, an entity verification checks statement will also require to be submitted to Companies House.

It is important to note that while the verification requirements are modelled on the Money Laundering Regulations, the processes are different, particularly in respect of the definition of a beneficial owner.

Within the technical guidance published by UK Government there is a section which relates to the specific requirements for verification of the overseas entity at section 13. Those who are contemplating assisting their clients with verification in terms of the ROE registration process should ensure that they have read the legislation and guidance and are clear on their obligations and liability prior to proceeding.

Unlike the AML Guidance, the status of the guidance published by the UK Government is advisory and not statutory. If members are to accept instructions to assist their clients with the verification process they should ensure that they refer to the legislation and regulations.

Companies House

Overseas entities will require to update their registration with Companies House every year. A renewal must be filed no later than fourteen days after the due date. It would be advisable for members to include a clause in their Terms of Business Letters to ensure that the responsibilities for renewal are on the overseas entity and not the solicitor.

Keeping up to date

Law Society members should exercise caution if accepting instructions to assist with a ROE registration and should ensure that they understand the requirements under the legislation, regulations and the guidance prior to proceeding.

It is expected that there will be further updates and amendments to the process for ROE in the following months and we shall provide further updates when these are available.