The Economic Crime and Corporate Transparency Act 2023 - Real Estate

The Economic Crime and Corporate Transparency Act (the “Act”) received Royal Assent on 26 October.

What are the aims of the Act?

The Act introduces wide ranging measures designed to reduce economic crime and to create a more transparent and accountable business environment in the UK.  These include the introduction of a new corporate offence of failing to prevent fraud, which applies to large organisations, and the expansion in scope of corporate criminal liability, meaning that the actions of anyone falling into the category of “senior manager” can render the organisation criminally liable for a range of economic crimes specified in the Act.

In the real estate sector, the Act introduces measures to consolidate and strengthen the Register of Overseas Entities (“ROE”) regime introduced under the Economic Crime (Transparency and Enforcement) Act 2022 (“ECTEA”).

What is changing for Real Estate transactions?

• New identity verification requirements

The Act introduces new identity verification requirements for anyone submitting documents to Companies House, including documents relating to the registration and release of mortgages and charges over land.  Only individuals whose identity has been verified, authorised corporate service providers (ACSPs) or employees and officers of ACSPs will be able to register or release security at Companies House.

It is our intention to become an ACSP and we will be ready to continue to assist clients in registering or releasing security at Companies House when these new requirements come into force.

• Changes to the Register of Overseas Entities

Some technical changes are being made to the Register of Overseas Entities (ROE) and to the information that must be submitted to this register.  These changes will impact real estate transactions involving land to be purchased, sold, leased or charged by an overseas entity (where the ownership of the land and entity are in scope of the ROE throughout the UK.

The Act extends the ambit of the ROE disclosure requirements and brings more overseas entities within the scope of the regime in an attempt to close loopholes in the existing system. For example, where an overseas entity holds land as a nominee, the previous regime required disclosure in relation to the beneficial owners of the nominee; now the duty extends to the beneficiary on whose behalf the property is held by the nominee.  The Act also introduces new duties of disclosure where land is held by an overseas entity as a trustee.

The Act gives Companies House new powers to request information, to resolve inconsistencies between information on the companies register and the ROE and to remove information from either of those registers. Failure to timeously provide Companies House with requested information will result in a loss of “registered overseas entity” status, until the failure is remedied.  This will have a direct impact on property transactions until the information is supplied and the entity’s status restored.  It will impact on the practical steps and timings relating to transactions involving overseas entities.

Since it was established under the ECTEA on 1 August 2022, Companies House advises there have been over 28,000 entities registered in the ROE.  More than a year on we are starting to see the requirement to file an update statement (this filing requirement exists even if nothing has changed). Entities may have already received an email reminder from Companies House to do this.  Failing to do this means the ID number will become invalid and the entity will not be able to buy, sell, transfer, lease or create a charge over property and could also incur criminal penalties.

Further legislation

In due course, further legislation will be introduced to detail how these changes will take effect. We will keep this page updated with new information. You can also sign up for updates to stay informed and ahead of the curve on the Act’s impact on Real Estate.

Please get in touch with our specialists to find out how we can help you navigate the Economic Crime and Corporate Transparency Act.

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