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New disclosure rules for non-UK owners of UK land

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New disclosure rules for non-UK owners of UK land

On 15 March 2022, Royal Assent was given to create the Economic Crime (Transparency and Enforcement) Act 2022 (the Act).

The Act can be traced back to 2016 when Prime Minister David Cameron, at an anti-corruption summit, warned foreign companies that they would be required to disclose the beneficial ownership of UK property. Whilst Cameron’s initial bill had been placed on a back-burner, the unfortunate events in Ukraine in early 2022 have re-ignited a desire for international transparency and the bill was fast tracked through Parliament.

The new Act requires Companies House to set up and maintain a new public register of the beneficial owners of non-UK entities which own UK land which will be known as The Register of Overseas Entities (the Register). The UK Government has stated that Companies House will work to implement the Register as quickly as possible.

Background to the Economic Crime (Transparency and Enforcement) Act 2022
The background to the Act is that it has been estimated there are some 95,000 UK properties held by overseas companies. There have long been concerns in some quarters around the lack of transparency as to who actually owns the land when an overseas entity is listed as the registered owner with HM Land Registry.

The aim of the Act is to provide this transparency and therefore help to prevent and combat the use of UK property either to launder money, finance terrorism or invest the proceeds of other unlawful activities.

Transparency of beneficial owners
Where an overseas entity wishes to own UK land, it will need to identify and list its beneficial owners. Generally, not all beneficial owners will need to be registered, but if a beneficial owner holds (whether directly or indirectly) 25% or more of the shares or voting rights, or if they can appoint or remove a majority if its directors, or have the ability to exercise some other significant influence or control over the entity, then they will need to be included on the Register.

It should be noted that these thresholds are in line with those for becoming listed under the existingPeople with Significant Control’ (PSC) registers for UK Companies and Trusts – both of which are also administered by Companies House.

Due to the practical difficulties of enforcement against overseas entities, the Act will change land registration procedures to impose restrictions that prevent dealings in the UK land. These will significantly strengthen the incentive on overseas entities and those dealing with them to ensure compliance with the Act but raise additional transactional steps that will need to be overcome.

Implementation of the Register
Work on the implementation of the Register is underway, and Ocorian are recorded as a stakeholder for the project. The exact launch date for the Register will be published alongside secondary legislation, which will also fill in the details of the Register and provide the practical measures which are required for the Act to come into effect.

Once the Register’s launch date is known, overseas entities who already own land in the UK will be given 6 months to register their beneficial owners or managing officers. This 6 month period will begin from the launch date. Any new purchasers will need to register with Companies House from the day the register comes into effect.

How Ocorian can help
Ocorian’s Real Estate Team are well positioned to provide the necessary support to our clients in terms of assisting with identifying which individuals (if any) will need to be included within the Register. Ocorian will also be supporting our clients in working through the registration process.

Contact us
Any interested persons who would like to discuss the potential impact of the Act are welcome to reach out to Nick Terry or to their usual Ocorian contact.

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