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Essential Corporate News – Week ending 1 November 2024
On 30 October 2024, the Chancellor of the Exchequer delivered the Autumn Budget 2024.
United Kingdom | Publication | March 2022
On 15 March 2022, the Economic Crime (Transparency and Enforcement) Bill (the Bill) received Royal Assent becoming the Economic Crime (Transparency and Enforcement) Act 2022 (the Act). The Act has been some time in the making and can be traced back to 2016 when the then Prime Minister, David Cameron, gave a warning to foreign companies in an anti-corruption summit that they would be required to disclose the beneficial ownership of UK property. Whilst the Bill was placed on a back-burner following Mr Cameron’s speech the events in Ukraine re-ignited a desire to push through the Bill and it was fast tracked through Parliament.
The Act has three key components which can be summarised as follows:
The Act applies across the UK.
Certain parts of the Act make different provision for different jurisdictions, for example, by catering to the differences in land law between England and Wales, Scotland and Northern Ireland. However, the overriding policy objectives are similar across the UK.
Comparatively little is known about overseas owners or leaseholders of land in the UK. The Act seeks to remedy this by establishing a Register of Overseas Entities (Register) that would, according to the explanatory notes to the Bill, “deliver transparency about who ultimately owns and controls overseas entities that own land in the UK.” In addition the Register is intended to act as a deterrent to those who would seek to hide and launder the proceeds of bribery, corruption and organised crime in land in the UK. The Register, to be operated by the Companies House registrar, becomes the third register of beneficial ownership in the UK. The other two are The People with Significant Control (PSC) Register for companies and Trusts.
In a nutshell, the Act provides that any overseas entity wishing to own UK land would need to identify their beneficial owners and register them. Importantly, not all beneficial owners need to be registered. Generally, a beneficial owner needs to be registered if they hold more than 25% of the shares or voting rights in an entity; can appoint or remove a majority of its directors; or have some other significant influence or control over it (including through a trust or partnership structure). These thresholds are in line with those for becoming a registerable beneficial owner under the existing PSC regime for companies. Schedule 2 of the Act expands on each of these thresholds in technical detail, and gives the Secretary of State the power to amend the thresholds under certain circumstances.
In relation to exemptions to registration, the Secretary of State can, by giving written notice to someone (without any parliamentary procedure) exempt them from the registration requirement. An exempt person is not considered a registrable beneficial owner so they will not be disclosed on the Register and will not have to respond to any information notice submitted to them. But the Secretary of State can only grant an exemption for certain reasons: in the interest of national security or for the purpose of preventing or detecting serious crime.
As for what information must be provided to Companies House, Schedule 1 to the Act sets out the information to be provided about the overseas entity and (if necessary) its beneficial owners and managing officers. Section 19 provides that the documents delivered to Companies House must be in English.
When an overseas entity registers, Companies House will allocate them an “overseas entity ID” and send it to them along with details about their date of registration, their duty to keep the register updated and their right to apply to be removed from the list.
In terms of UK land already belonging to overseas entities, the requirement to register would apply retrospectively to land bought on or after 1 January 1999 in England and Wales, and 8 December 2014 in Scotland. Overseas entities will have a 6-month transitional period from Parts 1 and 2 of the Act coming into force to dispose (sell off) their land or register. In Northern Ireland the requirement to register only applies prospectively (after the Act comes into force) so there is no need for a transitional period.
Failure to register or submitting false information will be a criminal offence and will also prevent the overseas entity from being able to buy or sell (or mortgage) UK property in the future. A transfer of land by an overseas entity in breach of the registration requirement will also be a criminal offence committed by the overseas entity and every responsible officer of it, punishable by a fine or imprisonment.
The Government has also published a fact sheet: The Register of Overseas Entities which accompanied the Bill.
You can access our more detailed briefing on the register of overseas entities here.
The origins of UWOs can be traced back to the Criminal Finances Act 2017 which inserted new sections in the Proceeds of Crime Act 2002 (POCA). For those unfamiliar with an UWO, these are a court order against someone relating to certain property. The order requires them to explain their interest in that property, how they obtained it, and other information relating to that property. The respondent to the order has a fixed period (as decided by the court) to respond. Two categories of people can be served with a UWO: politically exposed persons and someone suspected of being involved in serious crime (there need to be “reasonable grounds” for the suspicion). An UWO is intended to make it easier to obtain a Civil Recovery Order by reversing the burden of proof.
The amendments to UWOs as presented in the Act follow a targeted consultation that the Government undertook last November with a number of respondents feeling that the legislation was not meeting the policy intention behind them.
In terms of the changes that the Act makes to UWOs, these can be summarised as follows:
Whilst a review of the sanctions elements of the Act are outside the scope of this briefing it is worth noting that the legislation amends the Policing and Crime Act 2017 and the Sanctions and Anti-Money Laundering Act 2018 in four ways by:
Whilst some will claim this Act does not go far enough it is clearly an important development. The momentum set by this Act is clear – standards of diligence in overseas wealth entering the UK can no longer operate in silo to that of the ordinary UK citizen. Authorities now have significant powers and offenders face both fines and custodial sentences.
London has enjoyed an unprecedented position in the eyes of the ultra-wealthy – an infrastructure that goes far beyond the property purchases preoccupied by the Act. Luxury goods suppliers, money managers and services providers will undoubtedly be assessing their own governance and controls to ensure they are aligned to both the spirit of the Act, and a growing public sentiment against any perception of a ‘soft’ approach towards dubious funds entering the UK.
Publication
On 30 October 2024, the Chancellor of the Exchequer delivered the Autumn Budget 2024.
Publication
In a recent decision, the English High Court struck out what it described as a ‘hopeless and abusive’ claim that amounted to a de facto challenge to an award issued in a London-seated LMAA arbitration.
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