Subscribe
Measures Against Russia (Only)? UK Economic Crime (Transparency and Enforcement) Act 2022

Rushed through the Parliament in response to Russia’s invasion of Ukraine, the new Economic Crime (Transparency and Enforcement) Act (the “Act”) received Royal Assent on 15 March 2022.

The Act introduced three key measures:

  1. the creation of a register of non-UK legal entities and beneficial owners owning UK land (the “Register”);
  2. the strengthening of the Unexplained Wealth Order (“UWO”) regime, which aims to provide UK law enforcement more flexibility to investigate the origin of property and facilitate the recovery of proceeds of crime; and
  3. the broadening of the sanction provisions, such as introducing a “strict liability” test when determining if a person could receive a fine for sanctions breaches.

Although the above measures were introduced in response to Russia’s invasion of Ukraine, it is worth noting that they do not only target Russian entities or persons, but have a much wider impact.

This article will focus on the Register, as we think this is of most interest to the readers of BrassTax as it places registration obligations (which are retrospective) on non-UK entities holding UK land, including some non-UK asset holding companies, and their officers.

The Register

All non-UK legal entities holding UK land (i.e., freehold estate or a leasehold estate granted for more than 7 years) (“UK Land”) will be required to join the Register which contains information on the entity’s beneficial owners. The Register (only with certain personal information withdrawn) will be available to the public.

A person will be a “beneficial owner” means a person who (i) directly or indirectly holds 25% of the shares or the voting right in the non-UK entity; (ii) has the right, directly or indirectly, to appoint or remove a majority of the board of directors of the non-UK entity; or (iii) has the right to exercise, or actually exercises, significant influence over the non-UK entity. If a trustee or a member of a trust, partnership or any other entity that is not a legal person can meet any of the conditions listed above, a person can be a “beneficial owner” of the non-UK entity if that person has the right to exercise, or actually exercises, significant influence over that trust or that entity.

Broadly speaking, failure to comply with the registration obligations will have the following consequences:

  1. such failure will constitute a criminal offence for the entity and every officer of that entity, which is punishable by a fine, imprisonment of up to five years, or both;
  2. if the non-UK entity is not registered in the Register (unless otherwise exempted), no application may be made to HM Land Registry to register the non-UK entity as the proprietor of the UK Land; and/or
  3. if the non-UK entity is already the proprietor of the UK Land and if it is not registered in the Register, subject to certain narrow exemptions, such non-UK entity will not be able to sell, mortgage or grant a lease of more than 7 years (as HM Land Registry will be prohibited from registering these dispositions).

It is worth noting that the registration requirements will apply retrospectively to all UK Land bought by non-UK legal entities and registered at HM Land Registry on or after 1 January 1999 for England and Wales, and, for Scotland, all UK Land bought by non-UK legal entities and registered on the Land Register of Scotland on or after 8 December 2014.

These non-UK entities will only have a grace period of 6 months from the day as appointed by the Secretary of State on which the provisions governing the Register come into force for them to either apply for registration or dispose of their UK Land.

What can be done to prepare for the registration obligations?

Given that the registration obligations are retrospective and that the grace period is very short, non-UK legal entities, such as overseas asset holding companies, should review their portfolio to determine whether there is any registration obligation and should seek UK lawyers’ assistance, where necessary, as the consequences of non-compliance can be serious for the officers of the non-UK entities.

 

Key Contacts

 
 
 
© 2022 | Notices