In 2022, the property industry adapted to the practical implementation of the Register of Overseas Entities at Companies House, which was brought in by the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA 2022). The short transitional period of six months that applied to most existing overseas registered proprietors has expired, so the obligations to register and maintain a valid registration are in full force. For a full overview of the requirements you are welcome to get in touch to request a copy of our client guide.
This article examines some of the detail set out in recent secondary legislation (as it applies in England) and touches on the draft Economic Crime and Corporate Transparency Bill (ECCT Bill). Having said that, a proper look at the ECCT Bill would need a separate article of its own. Here we focus on some of the wrinkles in the original legislation and how the new secondary legislation is aimed at helping with that in practice.
Register of Overseas Entities (Disclosure and Dispositions) Regulations SI 2023/344
The current regime may feel well-established, but it is worth keeping an eye on new developments. For example, the Register of Overseas Entities (Disclosure and Dispositions) Regulations SI 2023/344 were made on 20 March 2023. These include details of who may apply to the Secretary of State for consent to register a disposition, what information must be included and other procedural points. This is relevant where the consent of the Secretary of State is needed to register a disposition of land that would otherwise be prevented by the restriction on the title (see para 5, Schedule 4A of the Land Registration Act 2002 as added by ECTEA 2022).
Put simply, if a party is left in a position where a valid overseas entity identification number is needed to satisfy the restriction on the title, but it is not possible to provide such number, then they can apply to the Secretary of State for consent. The regulations set out how to do so. Such circumstances may not arise often but they will come up.
Imagine a scenario where a transfer took place before ECTEA 2022 was enacted. The registration application may have been pending at the Land Registry for some time. If the application is cancelled after the circumstances of the parties have changed, it may not be possible for an overseas party to register. If none of the exceptions set out in certificate OE1 apply (for example there was no preceding contract) then consent of the Secretary of State would appear to be needed for the fresh application (see scenario 11.5 of HMLR Practice Guide 78).
Register of Overseas Entities (Definition of Foreign Limited Partner, Protection and Rectification) Regulations SI 2023/534
Further, the Register of Overseas Entities (Definition of Foreign Limited Partner, Protection and Rectification) Regulations SI 2023/534 were made on 11 May 2023. These regulations are intended to further supplement ECTEA 2022 and enable applications to rectify the register. These regulations also adjust protections available so, for example, an individual can protect their usual residential address from being shown on the register. Understandably, this may be of particular interest to clients who may otherwise have had their usual residential address published.
Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023/696
These latest regulations came into force on 23 June 2023 and make provisions relating to financial penalties, appeals and enforcement of ECTEA requirements. There is Companies House guidance in connection with these regulations, which is worth a read: Register of Overseas Entities: approach to enforcement.
Secondary Legislation Awaited
Still more regulations are expected in order to give effect to certain provisions of ECTEA 2022. For example, para 3, Schedule 4A of the Land Registration Act 2002 (as added by ECTEA 2022) is drafted to allow a disposition by a "specified insolvency practitioner" in "specified circumstances" to be completed by registration notwithstanding the restriction that has been entered on the title. This could in the future prove to be an important exception. However, at the time of writing, we are still awaiting draft secondary legislation to define both "specified insolvency practitioner" and "specified circumstances".
Economic Crime and Corporate Transparency Bill
Looking further ahead, it was acknowledged from the outset that legislating against economic crime would be an "iterative process" (Lord Callanan, House of Lords, March 2022). We will soon have a whole new Act, given that at the time of writing the Economic Crime and Corporate Transparency Bill (ECCT Bill) is well on its way through the legislative process. There are measures in the ECCT Bill that are intended to make the register of overseas entities more effective. For example, scope for the registrar to serve notice on an overseas entity if information provided appears inconsistent with Companies House records. Failure to comply with the notice would mean the overseas entity not being treated as a "registered overseas entity" until the failure is remedied. The intention being that an overseas entity in default of this obligation would not have a valid overseas entity identification number at that point sufficient to satisfy the Land Registry restriction on the title.
Further, the form of the ECCT Bill produced in the Lords' Report Stage would extend the required information needed from an overseas entity to include title numbers of other qualifying estates owned by that entity in England and Wales (and the equivalent in Scotland and Northern Ireland). There are also hotly debated proposals to include further updating requirements within fourteen days of becoming aware of a change and within fourteen days before a relevant property transaction. It is clearly well worth keeping an eye on developments to be able to adapt day-to-day real estate practice as needed.
*A version of this article was first produced for the Law Society's Property in Practice June publication, aimed at real estate practitioners.
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