What requirements are there to identify beneficial owners currently?
Currently there is no public register of beneficial owners of land in the UK. However, under the 5th Anti-money laundering directive, solicitors and conveyancers transacting in land are required to identify the beneficial owners of their clients and to understand the source of their wealth and the funds used for a transaction. While this information will be recorded and retained and can be requested by the relevant authorities, it does not need to be registered.
There is also no requirement to identify the other party to the transaction, so the seller need not identify the buyer and vica versa (relying on the other party’s professional advisor to have done so). Some jurisdictions do have these requirements. For example, an entity managed by a service provider regulated in Jersey selling land (in the UK or elsewhere) is required to identify the beneficial owner and source of funds of the purchaser.
What does the Registration of Overseas Entities Bill propose?
The Bill establishes a framework for the registrar of companies for England and Wales to establish a register of overseas entities.
All overseas entities that own, or wish to purchase, land in the UK will be required to have registered before they are able to register their title or dispose of the land. This will place a practical bar to dealing with UK land on any company not having complied (at least nominally) with the registration requirements.
For existing owners, there will be a transitional period of 18 months from the date the law comes into force for the overseas entity to register as such (or dispose of the land). Failure to register within the 18-month window will be an offence committed by the overseas entity and every officer of that entity who is in default. The maximum penalty for the offence is imprisonment of up to two years plus a fine.
There will be a new requirement for the Land Registry to enter a restriction on the title of land owned by an overseas entity, so that dispositions of the land at a time when the overseas entity is not registered cannot be completed by registration at the Land Registry.
Once registered, an entity will be allocated an overseas entity ID by the registrar.
Within 14 days of each anniversary of the overseas entity’s registration, the entity must deliver to the registrar a statement updating or confirming the details required to be registered (for which, see below). If the overseas entity delivers this statement on an earlier date than required, then its next statement will be required within 14 days of the anniversary of that earlier date. Once again, failure to comply with this duty is an offence committed by the entity and every officer of the entity who is in default, although the penalties for this offence will not extend to imprisonment.
Who must be registered?
Five categories of person must be registered as beneficial owners, which closely mirror the PSC requirements for UK companies. These are: