The Economic Crime (Transparency and Enforcement) Act 2022 was pushed through parliament at breakneck speed, and with it sees the introduction of a public register for all non-UK entities owning UK land that meet certain criteria.
The requirement to register applies to all new UK land acquisitions, as well as to any overseas entities holding UK land before the Act was passed, going back to 1 January 1999. The Act applies to all non-UK companies, corporate bodies and partnerships that own a freehold interest in UK land or a leasehold interest granted for a term of more than seven years.
The register, to be maintained by Companies House, will be publicly accessible. Very broadly, overseas entities owning UK land will be required to register details of those who:
- hold, directly or indirectly, more than 25% of the shares or voting rights;
- can appoint or remove a majority of the board; and/or
- have the ability to exercise significant influence or control over the entity.
Any such entity must take reasonable steps to identify its beneficial owners and submit the relevant information to the overseas entity register. Each entity that completes the necessary registration will be allocated an "overseas entity ID" number.
There will be a six-month transition period for overseas entities that already own land. Any overseas entity that disposed of a property on or after 28 February 2022 (when the legislation was first introduced to Parliament) will need to give details of that disposal and its beneficial ownership.
Significantly, an overseas entity will be prohibited from buying UK land, or taking a leasehold interest of more than seven years, unless and until the identity of its beneficial owner or controller has been registered at Companies House and the overseas entity ID provided. This is likely to stall some purchases in the future as companies gather relevant information to be placed on the record.
Every overseas entity must update its record of beneficial ownership and control on the register at least once every 12 months. If it does not, it will be banned from buying, selling, mortgaging or leasing UK land until this is remedied.
Non-compliance can lead to various criminal offences and penalties, including fines of up to £2,500 per day or up to five years in prison. Therefore, this is an Act that overseas companies need to understand prior to entry into the UK property market.