Foreign Landowners Step into the Light… UK Government Introduces New ‘Foreign Entity Register’ | Dechert LLP

On March 1, the Home Office introduced the Economic Crimes (Transparency and Enforcement) Bill (the “Invoice“). The most significant change, introduced in Part 1 of the Bill, is the creation of a new public “foreign entity register” to be maintained by Companies House (the “DEERThis OnPoint summarizes the new ROE process and explains how it will affect foreign entities that have land interests in the UK.

Sophisticated investors will already be familiar with the concept of beneficial ownership reporting. People with significant control (“CFP“) The register has been publicly available since 20161 and the UK committed around the same time to establishing a public register of beneficial owners of non-UK entities that own or buy land in the UK.2 The ROE is therefore not a surprise.

The Explanatory Notes to the Bill specify that the BR has two main purposes:

  1. Prevent and combat foreign entities using UK land to launder money; and
  2. To increase transparency and public confidence in foreign entities owning or buying land in the UK.3

While these goals are laudable, there are many legitimate reasons to purchase land through a foreign entity, and the impact of the bill on law-abiding foreign entities will be significant. The bill proposes additional administrative obligations for foreign entities to provide and update information about their beneficial owners, and it comes with financial and criminal penalties. It also makes changes to the UK land registration system so that foreign entities which have purchased qualifying UK land since 1 January 1999 are not permitted to make disposals unless they duly registered with the ROE. It is therefore important that companies obtain this right.

ROE should be implemented quickly. Part 1 comes into force on a date fixed by regulation. The government has asked parliament to expedite the bill’s passage as part of its urgent response to the Russian invasion of Ukraine, and the bill has already reached committee stage in the House of Commons. lords.4 It is therefore likely that the Treasury will urgently issue the necessary regulations once the bill comes into force, so foreign entities and those who represent them should start preparing now to avoid falling under the blow of the new regime.

Registerable Beneficial Owners (“RBO”)

The bill defines “foreign entity” simply as “a legal entity governed by the law of a country or territory outside the United Kingdom”.5 This includes corporations, partnerships and other entities that constitute a body corporate under the law that governs them.6

The law defines RBOs as any natural person, legal entity or government or public authority who, with respect to a foreign entity:

a) holds directly or indirectly more than 25% of the shares or voting rights;7
b) has the right to appoint or dismiss the majority of the members of the Board of Directors;
c) has the right or exercises significant control over the company;
d) Any trustee of a trust or member of a partnership or unincorporated association who meets one of the conditions described above and has the right to exercise significant influence over the activities of the trust or entity.8

“Indirect ownership” refers to beneficial owners who own land through a chain of companies or through a complex corporate structure, which means entities will need to provide recordable beneficial ownership information throughout. along the property ladder.

The bill will require all foreign entities to apply for registration on the BR and:

a) Make a statement that the entity has no reasonable grounds to believe that it has RBOs; WHERE
b) Declare that:

I. The entity has identified one or more RBOs; Where
ii. the entity believes that there are recordable beneficial owners that it has not identified; Where
iii. the entity is unable to provide information about one or more recordable beneficial owners.9

“Relevant information”

Foreign entities that identify RBOs will be required to provide “relevant information” about any identifiable RBO. Schedule 1 of the bill sets out the disclosures, which are summarized in the table below.

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