The Economic Crime (Transparency and Enforcement) Act 2022
- The Register of Overseas Entities
Introduction
On 1 August 2022 the Register of Overseas Entities came into force through the Economic Crime (Transparency and Enforcement) Act 2022 (‘Act’). Overseas entities that wish to buy, sell or transfer property or land in the UK are now required to register with Companies House and disclose information relating to their registrable beneficial owners or managing officers.
Furthermore, overseas entities that already own or lease land or property in the UK were also required to register with Companies House and disclose information relating to their registrable beneficial owners or managing officers by 31 January 2023.
For further information, please see R3’s previous technical alert here.
Land ownership and transactions: England and Wales
Earlier this year, the R3 Technical Team wrote to the Department for Business and Trade (‘DBT’) with the support of Stewart Perry, the Chair of R3’s General Technical Committee to express the concern of R3 members in relation to ‘Schedule 3, Land ownership and transactions: England and Wales of the Act; specifically, ‘Schedule 4A, Overseas Entities’ –
In summary, that schedule states that a restriction will be placed on the title to a property where an overseas entity is registered as proprietor to prevent a dealing unless it properly registers as an overseas entity or:
“…(b) the disposition is made in pursuance of a statutory obligation or court order, or occurs by operation of law,
…(d) the disposition is made in the exercise of a power of sale or leasing conferred on the proprietor of a registered charge or a receiver appointed by such a proprietor,
…(f) the disposition is made by a specified insolvency practitioner in specified circumstances.“
The “specified circumstances” and “specified insolvency practitioner” in(f) above means those “specified in regulations made by the Secretary of State for the purposes of that paragraph”.
Concern
R3 members had expressed concern about when a disposition is made by an ‘insolvency practitioner in specified circumstances’, as there are no supporting Regulations, and any sale may not be caught within paragraph (b) as an administrator or liquidator does not have a statutory obligation upon them to sell property.
Meeting with members from the DBT
To understand the DBT’s position in respect of our concern, a virtual meeting was held in April 2024 with members from DBT’s legal and policy teams. The DBT explained that the policy behind the exceptions contained within Schedule 3 was for them to be used infrequently as possible and to force overseas entities to comply and register accordingly. Furthermore, it was stated that there was no current intention to produce regulations to detail the ‘specified circumstances’ an insolvency practitioner may make a disposition.
Conclusion
As there is no intention to produce regulations, the consensus was that an insolvency practitioner, in capacity as an administrator or liquidator, has two options available to them when selling land or property owned by an overseas entity. The options are as follows:
(1) If the overseas entity is not a registered and the officeholder has sufficient comfort, the insolvency practitioner can make an application to the registrar for registration in accordance with section 4 ‘Application for registration‘ of the Act.
Or
(2) If the overseas entity is not a registered overseas entity and the insolvency practitioner is unable to make an application for registration, then an application seeking a court order permitting the sale should be made.
Note – Whilst every care has been taken in its preparation, this note is intended for general guidance only, and does not constitute legal advice.