Economic Crime and the New Register of Overseas Entities
The full extent of economic crime in the UK is unknown but the government estimates it could be as much as hundreds of billions of pounds each year.
The UK’s new Economic Crime Act has been fast-tracked in response to the Russian invasion of Ukraine and is driven by the need for increasing corporate transparency and accountability.
The Act introduces three key measures, including the long-awaiting register of overseas entities which will be maintained by Companies House.
Beneficial ownership
Corporate beneficial ownership is a challenging issue for the government, even more so since the Russian invasion and the freezing of Russian assets – including multi-million pound mansions - by Western nations. Importantly, the Act has retrospective effect.
Beneficial ownership refers to those ultimately owning or controlling an asset, including companies, and those who benefit from those assets. The actual legal owner may not be the person ultimately controlling or benefitting from them.
The new public beneficial ownership register for UK property is now launched. The new law requires that any overseas entity that owns freehold or leasehold land in the UK and acquired it on or after 1 January 1999 must register details of beneficial ownership on the new Register of Overseas Entities.
Similarly, foreign entities that intend acquiring land in future will have to register their beneficial owner details on the register. For these purposes, a beneficial owner who is ‘registrable’ means a person with significant control. This includes someone who either directly or indirectly holds at least 25% of shares or voting rights of the entity; and someone who can appoint or remove a majority of the company’s board of directors.
Where they are a trustee, details of each beneficiary, settlor or grantor of the trust and former trustees must be provided. Very specific details of each registrable beneficial owner are required, so it’s important to ensure full compliance.
Application for registration must take place within 6 months of the commencement date of the Act (which was 15 March 2022); and details must be updated each year.
Failure to comply is a criminal offence and could lead to fines of up to £2,500 a day or up to five years in prison. There are also further practical implication of non-registration, including being unable to be registered at HM Land Registry following acquisition of land and property.
What does this mean?
There should be no more anonymity of foreign corporate owners and controllers of UK property, making the UK a fairer and more transparent economic environment in which businesses operate.
If you need specialist advice on registration under the rules, contact us now.
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