March 14, 2024 New ROE Changes introduced 4th March
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) became law on 26 October 2023. At the time we wrote about changes it included on the Register of Overseas regime. On 29 February of this year the second commencement regulations under ECCTA were made, with the changes being quietly introduced on the 4th March, alongside a raft of other Companies House reforms.
It would have been easy to miss and at the time of writing, there is still no information on the Companies House website regarding these important changes, some of which affect all overseas entities. We’ve put together a practical summary of the key changes and what they mean including a discussion of helpful transitional provisions where applicable.
Changes to acceptable Addresses
Previously, an overseas entity was allowed to provide either a registered office address or a principal office address. This is no longer the case, an overseas entity must now provide a principal office address. This change applies to all registrations from 4 March 2024. Rather unhelpfully no definition of principal office is contained within the law and though guidance is expected, it has not yet been published. What is clear is that if an overseas entity maintains a separate office from its registered office where its business is conducted from, it is this office (and not the registered office) that should appear on the register.
Trustees will almost always be RBOs (with one exception)
Currently, the ROE is only concerned with going ‘up the chain’ and registering the first entity that can be registered (except where a government or public body is involved above that). Following the amendments, any trustees up the chain will also need to be registered as RBOs along with the usual entities and the details of the trust must be provided.
The net effect of this is that if there is a trust arrangement anywhere in the structure the trustee will be an RBO and details of the trust must be disclosed, bringing on to the register a large number of trusts ‘up the chain’ that were previously excluded and closing what was perceived as an oversight in the original regime.
The one major exception is where the overseas entity is itself a trustee there is no requirement to provide information about the trust (unless the entity is holding land on bare trust as a nominee, see below).
This amendment is subject to a transitional provision so applies to all new registrations as of 4 March 2024 but will only apply to annual updates from 4 June 2024.
RBOs of corporate trustees will be disclosable
Currently, when registering an OE, one stops if a non-UK corporate trustee appears as this entity will be an RBO, and details of the trust must be disclosed. However, following the amendments, the non-UK corporate trustee and details of the trust would still need to be registered as an RBO but we must now continue up the chain to identify any other RBOs and register those individuals as well.
This amendment is subject to the transitional provision so applies to all new registrations as of 4 March 2024 but will only apply to updates from 4 June 2024.
In our view, it is questionable how such disclosures will add to transparency about the ownership of the underlying land.
Transparency on nominee arrangements
Originally, where an overseas entity held land as a nominee there was no need to disclose details of the beneficial owner. Following the amendments, there is a new condition that now captures overseas entities that hold land as a nominee for another person(s).
There is no minimum level of interest so someone with a 1% beneficial holding through a nominee OE in a bare trust structure would need to be registered.
This amendment is subject to a transitional provision so applies to all new registrations as of 4 March 2024 but will only apply to updates from 4 June 2024.
Other upcoming changes
The above changes do not represent all the changes to the ROE under ECCTA, which are expected later this year:
- The requirement to declare all title numbers – At the moment, no information about the specific interest in land is required to be submitted by an overseas entity. The new provisions will require an overseas entity to submit each title number for which it is listed as the registered proprietor. This information must be verified by a regulated agent such as Elemental.
- Managing Officers under 16 – A requirement to include the name and contact details of an individual who is at least 16 years old and is willing to be contacted, where the managing officer is aged 15 or under.
- Expansion of information – Currently, where the Settlor of a trust (sometimes also called the Grantor) is a legal entity there is no obligation to look to the ownership of that legal entity. Following the amendments, if there is any owner of such a legal entity that would qualify as an RBO were the legal entity an overseas entity on the date the trust was settled then details of that owner will need to be provided and verified as of that date. Importantly, it is the ownership structure as it was on the date the trust was settled and not today that is pertinent. This could present challenges for very old trusts.
- Changes in beneficiaries under trusts – Currently, a “snapshot” of trust information must be provided by an OE when completing the update process. Following the amendments, additional reporting obligations will apply where a trustee has become or ceased to be an RBO during the update period. Information will also need to be provided about persons who have become or ceased to be a beneficiary of the trust during the update period.
- Transitional period changes – When overseas entities originally registered, they were not required to disclose changes in beneficial ownership that had occurred before the application was made except where land had been sold. Controversially the ECCTA will retrospectively require all overseas entities to provide details of any changes in beneficial ownership, including information relating to trusts, which occurred between 28 February 2022 and 31 January 2023.
