It is now over a year since the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA) established the register of overseas entities (OE register) and ushered in the new requirement to register. Broadly, this applies to overseas entities which hold, or are entitled to hold, certain interests in UK land.
As overseas entities approach and reach the one-year anniversary of registration, they need to be aware of their annual updating duty, and take steps to ensure they comply with it.
What is the updating duty?
An overseas entity which is registered in the OE register has a duty to update its registered information annually. In essence, this means filing the same information that was required in its original application for registration, updated as appropriate, together with an additional statement regarding any changes relating to registrable beneficial owners. That additional statement must in one of two formats, which are set out in ECTEA:
- that the entity has no reasonable cause to believe that anyone has become or ceased to be a registrable beneficial owner during the update period; or
- that the entity has reasonable cause to believe that at least one person has become or ceased to be a registrable beneficial owner during the update period.
If there have been changes, the statement must be accompanied by the required information about each person who became or ceased to be a registrable beneficial owner during the "update period". The first update period is the period of 12 months beginning with the date of the overseas entity's registration. The updated information must be delivered to the Registrar of Companies within 14 days after the end of the update period.
Where the person who became or ceased to be a registrable beneficial owner was a trustee, there are additional information requirements. The overseas entity must also provide the required information about the trust (or so much of it as the overseas entity is able to obtain); and a statement as to whether the overseas entity has any reasonable cause to believe that there is required information about the trust that it has not been able to obtain.
Any updated information must be verified by a UK-regulated agent no more than three months before the date of the update statement.
Companies House has published guidance on filing an overseas entity update statement. File an overseas entity update statement sets out how overseas entities can file online. However, the online updating service cannot be used for making changes to any trust information. This will need to be made via an overseas entity update statement in hard copy.
Breach of the updating duty
Failure to file an update statement on time is a criminal offence committed by the overseas entity itself and every officer in default. The Registrar of Companies has power to impose financial penalties on persons guilty of an offence. In addition, the overseas entity will in effect lose its overseas entity ID, which means it will not be able to deal with or acquire UK land.
Guidance on the approach that Companies House will take to enforcement can be read here.
Possible changes?
Amendments may be made to the OE regime by the Economic Crime and Corporate Transparency Bill, which is still making its way through the legislative process. The amendments could affect the updating duty. In particular, amendments proposed by the House of Lords would (a) introduce event-driven updates on beneficial ownership information and (b) require overseas entities to update their record no more than 14 days before completion of a land transaction, rather than just annually. However, the government does not support these amendments.
Action to take now
Overseas entities should review their current registration details and gather any new information required for the update statement, bearing in mind the requirement to get new information verified by a UK-registered agent.
A potential lender will want confirmation that the updating requirement has been complied with by an existing overseas entity seller/buyer if appropriate (and that the borrower has given satisfactory warranties regarding future updating). As mentioned above, the Land Registry does not consider an overseas entity to be a "registered" unless the updating requirement has been complied with. It will not therefore register an acquisition involving an overseas entity, nor the entry into of a charge over land held by an overseas entity, unless and until the updating requirement has been satisfied.
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