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The Register of Overseas Entities – new powers for Companies House to impose financial penalties.

ROE Building and signing

The Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023 (the Regulations) which came into force on 23rd June 2023 give the Registrar of Companies new powers to deal with overseas entities which have not yet complied with their obligation to register on the Register of Overseas Entities (ROE) or have not filed an update when due.

The Regulations include powers for the Registrar of Companies to impose significant financial penalties for offences under the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA).

Background

ECTEA, which came into force on 1st August 2022, requires overseas entities owning UK land to have their beneficial ownership verified (by a UK regulated verification agent) and to be registered on the new ROE at Companies House before the expiration on 31st January 2023 of a six-month transitional period (as detailed in our previous article).

What are the consequences of failure to register before the deadline?

If an overseas entity that owned land in the UK on 31st January 2023 or made a disposition of land in England and Wales or Scotland after 28 February 2022 has failed to register and cannot demonstrate either that it had an application for registration pending on 31st January 2023, or that the entity was exempt from registering, the entity and every officer of the entity have committed an offence, unless the entity was exempt from registration. An entity that commits an offence may be liable to a fine. An individual who commits an offence may be imprisoned and/or liable to a fine. In addition to these sanctions that may be imposed against the entity and its officers, a restriction is placed on the transfer of the land in question so that it will not be possible to sell, lease or otherwise dispose of the land until the overseas entity has been registered.

What are the consequences of failure to comply with the updating duty?

The first entity to be registered on the Register of Overseas Entities was KEYA II LIMITED, a Jersey company. The registration took place on 3rd August 2022. The first update for this company will be due on 3rd August 2023 and must be filed within 14 days of that date.

It is not yet possible to file an update of the Register of Overseas Entities, but the UK government announced on 28th June 2023 that it will be possible to file updates online in August 2023.

Failure to update the register is an offence on the part of the entity and each of its officers. The officers of the entity whose details have not been updated may be liable to a fine, as may the entity itself.

What is the immediate significance of the Regulations?

To date, no fines have been imposed on unregistered overseas entities that own land in the UK or their offices. Empowering the Registrar of Companies to impose financial penalties on entities and officers of entities that have not been entered on the Register of Overseas Entities or that have not filed updates on time is a clear indication from the UK government that action is imminent in terms of imposing fines. The level of those fines is currently unclear and there is a mechanism for appealing against any fine that is imposed, but in the absence of a successful appeal against a fine imposed by the Registrar, that fine may be enforced as if it were a contained in a judgment entered in the High Court.

What should overseas entities do if not yet registered or if an update is due soon?

Overseas entities currently in breach of the requirement to register with the ROE should take action to register without further delay. As a first step the overseas entity should engage the services of a UK-regulated verification agent who can perform the necessary beneficial ownership verification and file the application for registration with Companies House. If an annual update is due in the next few months, it is a good idea to contact a UK-regulated verification agent now so that prompt action may be taken when the update is due (and it may be noted that it is possible under ECTEA to file the update early and thereby move the annual update deadline forward, although as noted above, the mechanism for this is not yet in place).

De Pinna is the largest firm of Scrivener Notaries in London and we have a dedicated group of notaries who are registered as verification agents at Companies House. We deal with registration and verification for entities with the simplest and the most complex of structures. We monitor the legislation and guidance in respect of the Register of Overseas Entities closely and will be ready to file updates as soon as this becomes possible.

De Pinna offer a personal service. A team headed by one of our notaries who is an accredited verification agent will work with you to ensure that you understand what information you need to provide to us and the most efficient way of doing so.

If you would like any further information in relation to the Regulations or ROE, please contact:

Phillip Journeaux at phillipj@depinna.co.uk
Peter Adams at petera@depinna.co.uk
Iain Ostrowski-Rogers at iainor@depinna.co.uk