Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA) – What is happening now?

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Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA) – What is happening now?

Published 29 septiembre 2022

Following our recent bulletin in relation to the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA), Companies House has, as promised earlier in the summer, moved swiftly and the Register of Overseas Entities (ROE) is now live.

This means that, from 1 August 2022, an Overseas Entity (OE) which owns or intends to acquire a “qualifying estate” in the UK must, unless exempt, comply with the requirements of ECTEA, which will include registering with Companies House to obtain a unique Overseas Entity ID (OE ID). A “qualifying estate” is a freehold or lease originally granted for a term of more than 7 years. There are no regulations as yet which provide for any exemptions.

An OE acquiring a qualifying estate in UK property will not now be able to make an application to register its interest at the Land Registry without an OE ID.

The legislation is intended to promote transparency around the ownership of land in the UK by OEs. A failure to comply with the requirements of ECTEA could ultimately result in criminal sanctions, so the consequences of non-compliance are severe.

Register of Overseas Entities (ROE)

The ROE is operated and managed by Companies House and is, for the most part, accessible to the public. 

As part of the registration process, the OE will need to provide detailed information about its beneficial ownership, including its managing officers and those with significant control.  The rules for establishing beneficial ownership are complex and it is likely there will be some situations where it will be challenging to determine who the beneficial owners are. The process may be time consuming and will likely involve advisors from a number of jurisdictions.  The information about the OE must be submitted in English and must be verified by a UK based agent that is supervised under the money laundering regulations (e.g. law firms, external accountants, etc.).

Key Dates

  • The Land Registry will add a restriction to all registered qualifying estates, where the OE became the registered proprietor on or after 1 January 1999, from 5 September 2022.  The form of restriction will prevent an OE from making the following dispositions of the qualifying estate without an OE ID:

-      Transfer;

-      Lease for a term of more than 7 years from the date of grant;

-      Charge;

  • There is a transitional period, ending on 31 January 2023 during which an OE can dispose of its qualifying estate without an OE ID.   This means that an OE which currently owns a qualifying estate, where it became the registered proprietor on or after 1 January 1999 will not need an OE ID to make disposals until 31 January 2023;
  • An OE will need to disclose details of any disposals of a qualifying estate since 28 February 2022 as part of its registration process, even if they no longer own any UK property at the end of the transitional period.

What to do next?

This new regime will likely cause a number of challenges  in the coming months and there will inevitably be delays to transactions as OEs and their advisers come to grips with the provisions and requirements of ECTEA.  

Next month we will be publishing some practical tips for property transactions where OEs are involved.

If you are an OE which owns a qualifying estate or you are entering into a real estate transaction with an OE which will be affected by the new legislation, we would advise you take advice as early as possible in order to avoid any delays to your transaction or any possible breach of the legislation.  

Authors

Stephanie Bagshaw

Stephanie Bagshaw

Leeds

+44 (0) 113 251 4879

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