Background

The introduction of the UK Register of Overseas Entities (“the Register”) by The Economic Crime (Transparency and Enforcement) Act 2022 (“the Act”) marked a significant milestone to combat illicit activities related to overseas ownership of UK property.

Under the Act, overseas entities that own or intend to acquire property in the UK are required to identify and register details of their beneficial owners or managing officers at the ROE and update these details at least once a year.

Offences

The Act introduced offences of failing to comply with the Act, including:

• Failure to register
• Failure to comply with updating requirements
• Failure to comply with notices received under the Act
• Failure to resolve inconsistencies in the ROE; and
• False filing.

Enforcement measures

Companies House recently released guidance on its enforcement powers in relation to the Register which include:

• Restrictions: an overseas entity cannot buy, sell, lease, or grant charges in relation to the UK land until it registers in the Register of Overseas Entities.
• Prosecution: non-compliance may be considered and referred to The Insolvency Service, and to other law enforcement agencies in more serious cases.
• Financial penalties: if an offence has been committed, fixed penalties and/or daily rate penalties, depending on the severity of the non-compliance, may be imposed.

Warning notice

If the Registrar suspects an offence has occurred, it will issue a warning notice which will give the entity a minimum of 28 days to provide a response and explanation for its non-compliance. Failure to respond or making a misleading, false or deceptive response may result in a penalty. If an offence is committed by a legal entity, the offence is also committed by every officer of that entity who is in default, and they may be imprisoned for up to two years.

Penalty amount

The Registrar has established a tiered penalty system, categorised into low, medium, and high rates based on the entity’s portfolio value. For example, failing to register during the transitional period (which expired on 31 January 2023) may lead to a penalty of between £10,000 and £50,000 for each property.

A daily fine amount for non-compliance can be up to £2,500.

Penalties must be paid within 28 days after receiving a penalty notice. Failure to pay may lead to debt enforcement through courts, with an 8% per annum statutory interest applied and a charge over the property.

Right to appeal

A penalty decision may be appealed in the High Court within 28 days of its receipt, e.g. if there are errors in calculation or if additional supporting evidence can be provided.

What this may mean for overseas entities

Failure to comply with the Act may lead to serious consequences for the entities and their officers. Therefore, it is imperative to ensure compliance and not to ignore any notices which may be received from the Registrar.

If you have any questions in relation to the UK Register of Overseas Entities, please get in touch with our Real Estate Finance team.