Updating the Register of Overseas Entities – what are the practical implications, including for those who have disposed of all UK land?

The Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA), which established the ROE, requires OEs to comply with an annual updating duty (s7). The updating duty requires the OE to either confirm that there are no changes in its beneficial ownership or to supply the required information in respect of any changes. The duty arises within 14 days of the expiry of 12 months from the OE’s registration on the ROE (and within 14 days of the expiry of 12 months after an annual update, thereafter). Therefore, OEs who registered promptly last August will start to become subject to the updating duty from mid-August 2023 and all OEs will be subject to the initial duty to update their information at some point prior to mid-February 2024. Failure to comply with the updating duty is an offence and will also prevent an OE from either acquiring or dealing with UK land. Companies House has recently published guidance on its approach to enforcement, which might herald that it intends to start using these enforcement powers.

HM Land Registry (HMLR) also has an enforcement role in preventing acquisitions and disposals by OEs who have not complied with the requirements of ECTEA. For these purposes, an OE that fails to comply with the updating duty will not be treated as being registered on the ROE until it remedies the failure and will be prevented from acquiring or disposing of legal title to land. OEs who are registered on the ROE obtain an OE ID which must be supplied to HMLR in connection with any dealings. However, merely having an OE ID will not be sufficient to satisfy HMLR, if the updating duty has not been complied with.

Some practical implications:

• In order for an acquisition or relevant disposition by an OE to be registered at HMLR, it will be necessary to check at Companies House that the updating duty has been complied with. In terms of an acquisition by an OE, the updating duty must have been complied with at the time of the application to HMLR. For relevant dispositions by OEs, the updating duty must have been complied with at the time of the disposition. Compliance with this will be of concern to both parties to a transaction, to ensure that the registration at HMLR can be completed and that the legal estate passes.
• OEs who have disposed of their only or last remaining UK property cannot apply to be removed from the ROE until the registration of their disposal at HMLR is complete. This is because OEs will need to confirm that they are “not registered as the proprietor of a relevant interest in land” in order to make an application for removal from the ROE (s9) and Companies House will also check the position at HMLR. Only once the registration of the disposal at HMLR is complete does an OE cease to be the registered proprietor and is consequently entitled to be removed from the ROE.  Processing times at HMLR remain slow, post-Covid, and it is not unusual for applications to HMLR to take up to 2 years to be completed. During this time, the disposing OE will remain on the ROE and will be subject to the annual updating duty. Strictly, an OE will commit an offence in these circumstances if it does not update the ROE. This may come as a surprise to OEs who have disposed of all UK land. Whether or not Companies House will take a pragmatic approach to enforcement in these circumstances remains to be seen. Their recent guidance does state that they will consider whether taking enforcement action is in the public interest and that they will take account of the risk posed and the seriousness of any breach. This may offer some comfort.