The Register of Overseas Entities | Annual update statements
The UK’s property market has long attracted international investment, with many overseas entities holding, buying, selling, or transferring property or land. To bring greater transparency to ownership and combat financial crime, the UK government introduced a mandatory Register of Overseas Entities (ROE) in 2022. In this article, Tracey Neuman – Executive Director, Guernsey, provides guidance on the updates required to the register and the steps overseas entities must take to comply, as well as the definitions and rules surrounding beneficial ownership.
What is the Register of Overseas Entities?
The ROE is a legal requirement for overseas entities seeking to engage in property transactions within the UK. Before buying, an overseas entity must register with Companies House and declare its registrable beneficial owners or managing officers. For those entities that already own UK real estate they should already be registered on the ROE and be providing an annual update statement. This process is designed to ensure that information about who owns and controls UK property is made public and subject to scrutiny.
Steps to register or update the register
Overseas entities must follow a series of steps to register and keep their information up to date:
Identify Registrable Beneficial Owners (RBOs): Entities must determine who their RBOs are. If there are none, they must identify their managing officers.
Confirm details: Contact the identified RBOs or managing officers to confirm the accuracy of the information held and their status.
Allow 30 days for responses: After contacting RBOs/managing officers, entities must wait 30 days for replies. If no response is received, liability for failing to register and provide up-to-date, complete information shifts to the RBOs.
Provide details for verification: The entity, its RBOs, and information about any associated trusts must be submitted to a verification agent, along with supporting documentation. Third-party scrutiny is mandatory to ensure the veracity of the information, except for annual update statements when no changes have occurred in the year.
File with Companies House: Either the verification agent or the entity itself can file the registration or update the annual statement, and fees are payable.
The importance of annual update statements
Entities must submit annual update statements to confirm their details remain accurate, or to report any changes. From 4 June 2024, beneficiaries of nominee arrangements are treated as RBOs and must be included in annual update statements.
Who is a Beneficial Owner?
A beneficial owner is an individual or legal entity with significant influence or control over the overseas entity. An owner may qualify as a beneficial owner if they:
Hold, directly or indirectly, more than 25% of shares or voting rights in the entity
Have the right to appoint or remove directors
Exercise or have the right to exercise “significant influence or control” over the overseas entity
Exercise or have the right to exercise “significant influence or control” over a trust involved with the entity
Are the beneficiary of a nominee arrangement (as of June 2024)
Indirect holdings explained
An individual is considered to hold shares or rights “indirectly” if they have a majority stake in a legal entity, and that entity holds shares or rights in the overseas entity. This also applies if the individual is part of a chain of entities, each with majority stakes down the chain, culminating in ownership of the overseas entity’s shares or rights.
Significant influence or control over trusts
Technical guidance defines significant influence or control over a trust as the right to direct or influence its operations. Examples include:
Appointing or removing trustees
Directing distribution of funds or assets
Making investment decisions
Amending or revoking the terms of the trust
Issuing instructions to trustees that are generally followed
NB not all beneficial owners are RBOs.
Who is a Registrable Beneficial Owner?
The rules for registrable beneficial owners are nuanced:
Individuals: All individual beneficial owners are RBOs unless they hold their interests via another RBO.
Legal entities: Any legal entity “subject to its own disclosure requirements” is registrable. This includes entities with a Persons with Significant Control (PSC) register, those treated as subject to the PSC regime, those registered on the ROE, non-UK corporate trustees, or those designated by the Secretary of State.
Corporate Trustees: All corporate trustees are now RBOs, regardless of their own disclosure requirements and whether there is another RBO closer to the overseas entity in the chain of ownership. This captures private trust company (PTC) structures and means more trust details must be reported.
What happens if you do not comply?
An entity will not be able to be registered as the owner of UK real estate if it is not registered on the ROE, regardless of whether the purchase has been completed or not.
If the real estate is already owned by an entity that is either not registered or has not filed its annual update statement then a restriction is placed on the title, which prevents any dealings with it. This includes not only sales but also refinancing.
Fines can be applied. These can be a fixed amount, a daily fine or a combination of the two, which can amount to several thousand pounds.
In addition, it is a criminal offence, such that the managing officers of the entity (or the RBOs who fail to respond to the notice) can be subjected to custodial sentences.
The harshness of the penalties demonstrates the need to stay on top of these rules, which have changed regularly since they were first introduced.
How can Ocorian help with the Register of Overseas Entities?
The ROE has ushered in a new era of transparency for UK property transactions involving foreign entities. Understanding these requirements is essential for overseas companies and individuals looking to invest in UK property.
By following the proper steps, identifying beneficial owners, and maintaining accurate records on an annual basis, overseas entities can ensure compliance and contribute to a more transparent property market.
Ocorian are regulated and has been accepted and approved by Companies House as an Assured Agent. Ocorian are therefore well positioned to assist non-UK holders of UK land and property in their registration and update process.
Should you have any questions regarding the ROE or the Act and its consequences, please do reach out to the team and we will be happy to assist.