Register of Overseas Entities (ROE)  Explained

The closing date for all foreign investors owning properties in the UK to register with Companies House is January 31, 2023. After establishing the Register of Overseas Entities, Companies House recommends all agents and foreign entities within the scope to complete the registration process by the deadline. Overseas entities should declare beneficial owners along with other details. They must update their data each year.

Avoiding Errors

Registering before the cut-off date is crucial to avoid penalties and prosecution. Companies House advises agents to work with their clients and verify the information before filing for registration. Agents should submit the information on clients' behalf to expedite the process. Most rejections of filings are because of errors in the section on the agent's information. Some common flaws are:

• Incorrect registry name
• Abbreviation of registry names
• Wrong email addresses
• Inconsistency in the agent's name
• A discrepancy in the responsible person's name

Variations in addresses

Avoiding such errors will minimize rejections and unnecessary hassles.

Verification of Information

Overseas entities must identify and provide all details of managing officers and/or beneficial owners. They cannot move ahead with the process independently, as the registration process requires proper authentication. Verifying the information by relevant professionals such as auditors, tax advisers, financial institutions, and insolvency practitioners is mandatory, as there was a lot of criticism about the practice of self-attestation.

The professional verifying the information must alert the National Crime Agency through a report if there is a reason for suspicion. The Suspicious Activity Report should provide information about acts of money laundering or terror funding.

Implications

There is a provision for multiple sanctions impacting entities and individuals in the event of a failure to:

• Declare information about beneficial owners.
• Update the information in the register annually.
• Provide accurate information that is not deceptive, incorrect, or misleading

Respond to any request for information from the registrar

A non-UK entity that disposes of the property without registering with Companies House risks a daily fine of up to £2,500, as well as the imprisonment of its officers.

Way Forward

All non-UK entities holding interests in land or foreign entities undertaking M&A activity resulting in interests in UK land are required to register and comply with the Economic Crime (Transparency and Enforcement) Act 2022.

All concerned overseas entities, beneficial owners, and managing officers should study the registration requirements besides understanding how the Act impacts property investments in the UK. They must take immediate action to complete filing before the deadline. Agencies or individuals planning to provide loans to such entities must ensure that the foreign entity is taking steps to comply with the registration process.

Advisors should consider the implications of non-compliance, as entities not complying with the process cannot register qualifying estates. Risk management is essential for both parties before finalizing the transaction documents. The government's intent to keep watch over the inflow of wealth into the UK may impact other sectors like luxury goods supply and money management.

The 1 August 2022 and 15 March 2002 are important dates for Overseas UK property investors. The Economic Crime (Transparency and Enforcement) Act 2022 (The ECTEA) came into force 15 March 2022 after receiving royal assent. The ECTEA aims to support the government's policy of acting against overseas economic offenders laundering funds through their interests in UK real estate. The UK government expedited the legislation considering international conflicts and other political events, though the measures to curb criminal activities by scrutinizing suspicious wealth are under consideration since 2016.

Overview of the ECTEA

The Economic Crime (Transparency and Enforcement) Act 2022 mainly impacts overseas entities owning properties or intending to lease or purchase UK properties. According to HM Land Registry the approximate number of such properties with interests of overseas entities in England and Wales is 100,000 titles. The ECTEA will impact over 35,000 overseas entities.

ECTA introduced the new Register of Overseas Entities (ROE), which came into force on 1 August 2022. The ECTEA mandates these overseas entities to get a unique Identification Number (OE-ID) by registering on the Register of Overseas Entities (ROE). The overseas entity will provide relevant details of beneficial owners or managing authorities during the registration process. The Companies House will operate the ROE.

The OE-ID is vital for any property dealing as the HM Land Registry will need the same for registering the Beneficial Owner of the property. In the event an Overseas Entity doesn't register the property on the ROE within the stipulated period, the property cannot be registered on the HM Land Register, thereby preventing its sale.

Overseas Entities as per The Act

According to the act, a corporate body or a partnership firm under the legal control of a country or territory outside the UK is an Overseas Entity. Entities in the Republic of Ireland, the Channel Islands, and the Isle of Man are Overseas Entities according to the definition of the ECTA.

No exemption to any Overseas Entity exists at present, though the Act makes provision for such an entity, being outside its scope. Each Overseas Entity should consider steps to comply with the ECTA if it has interests in the UK property through ownership or intentions to lease, sell, transfer, buy, and charge.

Disclosing the Beneficial Owners

Submitting detailed information about the Beneficial Owners is mandatory for registering on the Register of Overseas Entity. As per the guidelines by the Company House, a Beneficial Owner is an individual with:

• - Over 25 percent of voting rights, or shares in the Overseas Entity,
• - Authority to remove or appoint most of the directors,
• - A considerable hold on the affairs of the Overseas Entity.

The ECTEA exempts beneficial owners or trusts of the title. It covers the beneficial owners of OEs that have land ownership. The Register of Overseas Entities owning land or property will make the information available to the public. The Act exempts specific personal details from being publicly available subject to an application by the individual to Companies House.

Non-compliance

The obligations to register properties of Overseas Entities will also impact overseas investors legitimately purchasing properties in the UK. Non-compliance with the ECTEA regulations attracts severe repercussions. Indeed, it amounts to a criminal offence for the Overseas Entity. Property dealings for an entity that has not registered on the ROE is also a criminal impacting the Overseas Entity and its responsible management officers. The Act makes provisions for imprisonment of up to five years or a fine.

The hope for the UK homeowner and property investor is that eventually tightening up improper UK property investment will filter through the property market and curtail the runaway price rises seen in recent decades.