On 15 March, the new Economic Crime Bill received Royal Assent and came into effect in the UK. As my previous post highlighted, this new legislation (formally known as the Economic Crime (Transparency and Enforcement) Act 2022) is aimed at clarifying exactly who the beneficial owner is for property held in the UK.
In particular, the new law requires overseas corporate entities that hold property in the UK (or acquire it in the future) to declare certain key information about their beneficial owners and to renew such declarations on an annual basis. "Overseas entities" are defined as a legal entity governed by laws outside of the UK, essentially all non-UK companies and other non-UK corporate entities that hold UK property.
As this Evening Standard article highlights, failure to abide by the new laws can have implications for both the property and the party making the declaration. In relation to the former, such properties could be blocked from any sale or letting. Whereas in relation to the latter, it now an offence for a person, without a reasonable excuse, to provide a false or misleading declaration to the UK registrar of companies, Companies House. A successful conviction can result in a fine of up to £2,500 per day or up to five years in prison.
The requirement to provide such information is also retrospective to 28 February. As a result, any attempted sales since that date now need to be reported and proper declarations need to be made. Further guidance on exactly how such reporting will be made is expected shortly, and impacted parties will have six months to register.
It has been noted that this particular legislation only requires disclosure of the beneficial owner of the property (which in itself could be another company or other entity). As such, the ultimate beneficial owner will not necessarily be disclosed. However, in a nod to this deficiency, the government has also announced that a second Economic Crime Bill will be published later this year (likely in May). It states this will outline comprehensive reforms to Companies House powers and procedures and will be "a very substantial piece of legislation". Initial indications predict that it will also include new powers to seize crypto assets from criminals, and it seems highly likely it will also continue the drive to identify the ultimate beneficial owners of property in the UK.
The register would need to be updated each year and punishments for failing to declare details, or submitting false information, would result in the asset being frozen and it cannot be sold or rented out.