What is the Economic Crime (Transparency and Enforcement) Act 2022 (ECTEA)?
The ECTEA was passed to combat economic crime through introducing transparency around the ownership of overseas legal entities that hold registered title to land or property in the UK. Transparency is achieved through the establishment of a new public Register of Overseas Entities (and their beneficial owners) to be kept at Companies House. The register will publicise who actually owns property and land in the UK.
We are still waiting for the passing of the secondary legislation required to implement the new procedures.
How does the ECTEA work?
The ECTEA applies to any overseas entity:
- With title to registered freehold or leasehold property in the UK acquired since 1 January 1999 in England or Wales, or since 8 December 2014 in Scotland.
- Wishing to purchase such UK land in any part of the UK.
- Intending to dispose of such UK land, or which has disposed of such land since 28 February 2022.
Overseas entities who come under this new legislation will have six months, from the implementation of the new register, to complete their registration. The start of this six-month transitional period will be determined under the anticipated secondary legislation.
Once registered, overseas entities will not be required to renew statements in the register on an annual basis.
Overseas entities will need to do the following information to register:
- Details of the property involved.
- Any registrable beneficial owner(s) of the entity or confirmation that there are no registrable beneficial owner(s). A registrable beneficial owner is defined as a person:
- Directly or indirectly holding 25% or more of the shares or voting rights of the overseas entity, or
- Who can affect or change the composition of the board of directors of the overseas entity, or
- Who otherwise has the right to exercise significant influence and control over the overseas entity.
- In cases where a registrable beneficial owner is a trustee, overseas entities will need to include the identity and location of each beneficiary, settlor or grantor of the trust. Former trustees of a trust are also included.
Failure to comply with the ECTEA can result in criminal transactions of:
- Fines up to £2,500 a day.
- Prison sentences of up to five years for officers of overseas entities.
Additionally, failure to register before the end of the transitional period can result in the HM Land Registry placing a restriction on titles to land and properties registered to overseas entities. This may include restriction to an overseas entities’ ability to transfer, let or charge their interest.
The ECTEA legislation can be found here: https://www.legislation.gov.uk/ukpga/2022/10/contents/enacted
© 2022 Whitestone Chambers