Register of Overseas Entities – Enforcement and the looming deadlines for register updates

The Economic (Transparency & Enforcement) Act 2022 introduced the Register of Overseas Entities (ROE) which opened on 1 August 2022 to capture information about the beneficial ownership of overseas entities (OEs) which own real estate in the UK. Most OEs were obliged to register on the ROE (which is maintained by Companies House) by 31 January 2023. For further background information, see our earlier article here.

We know that there are several thousand OEs who are yet to register on the ROE, and those companies should be particularly concerned about recent announcements made about enforcement.

OEs who have already registered on the ROE cannot rest easy. Once registered, a registered OE must remember their ongoing duty to keep the ROE up to date. In particular, OEs have annual updating requirements. For OEs who registered last summer (when the ROE first opened), their first annual confirmation statement date may now be due.

Updating the ROE register

Annual update statements: An update statement (or “annual statement”) needs to be filed every year to confirm that the information held by Companies House on the ROE is correct and up to date. An OE must file an annual statement even if nothing has changed. The annual statement must be filed within 14 days of the annual statement date. The annual statement date will be shown on the normal Companies House website and is normally the day before the anniversary of registration on the ROE.

OEs were told about their legal requirement to provide annual updates in their registration confirmation email, and Companies House will be sending an email reminder to the email address held on record for each OE.

It’s a criminal offence not to file the annual statement, and entities may face prosecution or a financial penalty if they do not comply. Remember, the offence is committed not just by the OE but by every officer of the OE who is in default. The company’s registration on the ROE and their associated ROE ID numbers will become invalid if the OE does not file the annual statement in time – the ROE registration will only become valid again once their record is brought up to date by filing the annual statement.

This means OEs will not be able to buy, sell, transfer, lease or raise charges against property or land in the UK if they miss their filing deadline, as their OE ID number will be invalid, and HMLR will check this at the point of registration.

Filing the annual statement: OEs or their agents will be able to file their annual statement online, unless there are any trusts involved in the OE (either trusts that the OE disclosed at the time of registration or trusts that need to be disclosed as part of the annual statement). These entities will need to file a paper form which can be obtained from Companies House.
OEs will need to request an authentication code before they file to make sure everyone who files on behalf of the OE is authorised to do so. If any information has changed since the OE registered, a UK-regulated agent must complete verification checks to confirm that the information is still accurate. If nothing has changed, no additional verification will be needed.

OEs will be able to file their update statement online from the beginning of August.

Enforcement

Aside from the fact that OEs who do not have an up-to-date OE ID face restrictions on transferring, leasing or charging land and cannot register the purchase of any new UK property), Companies House have significant enforcement powers which they say they will use “predictably, consistently and judiciously”. They say where email reminders and “help and guidance” do not secure compliance, Companies House may resort to financial penalties or prosecution.

Civil financial penalties: The registrar has the power to impose a civil financial penalty when satisfied beyond reasonable doubt that an offence has been committed. Penalties may range from fixed, daily fines or a combination depending on the offence committed.

If satisfied that an offence has been committed the registrar may issue a penalty notice setting out the grounds, type of penalty and the amount, as well as information on how to appeal and the consequences of non-payment.

The value of the OEs property portfolio will be used as an estimate of the size of the harm and penalties fixed accordingly. By way of example the penalties issue for offences committed during the transitional period up to 31 January 2023 ranged from £10,000 per property to £50,000 per property.

Prosecutions of criminal activity: Companies House may refer cases to The Insolvency Service or other law enforcement agencies to be considered for prosecution. This will be considered in the most serious cases. Once a case has been referred all decisions in respect of investigation, charging and prosecution rest with the prosecuting authority.

What action should you take next?

If an OE has not registered on the ROE already, then the company and all of its officers will have already committed an offence, which may have practical consequences (for example, this may need to be disclosed on a new loan application, or to an insurer). The OE will need to register as soon as possible to avoid or minimise any enforcement action. Companies House provide comprehensive guidance on how to register and a list of agents who can assist you.

If an OE is already registered on the ROE, diarise a reminder so the update requirements are dealt with in good time. Bear in mind that the procedure to obtain the information required by the annual statement may take more than 4 weeks to obtain. Again, detailed guidance has been provided to assist with updating obligations. To discuss the above requirements in further detail, please contact us.