November 8, 2023 Register of Overseas Entities: Economic Crime and Corporate Transparency Act 2023
The Economic Crime and Corporate Transparency Act 2023 (“ECCTA”) received Royal Assent on 26 October 2023 and has made various amendments to the Economic Crime (Transparency and Enforcement) Act 2022 (“ECTEA”).
As of the date of writing none of the provisions relating to the Register of Overseas Entities (“ROE”) are in force and there is no published timeline for them coming into force. We are also still waiting on official guidance from the Government on the new provisions. The following is a summary of our understanding of the changes based on the wording of ECCTA.
The most complex changes undoubtedly relate to overseas entities involved in trusts and there is a large risk that many overseas entities do not fully understand their updated obligations without careful consideration and advice.
However, there are more minor changes (particularly to address and land information) that will impact almost all overseas entities in some way.
Currently, the overseas entity or a corporate beneficial owner or managing officer must provide its ‘registered or principal office’. This has been amended so that the corporate entity must provide its ‘principal office’ and not its registered office. This is to bring the ROE rules in line with the updated rules under the Companies Act 2006.
In some cases, this will be the same, but many entities have a registered agent or similar as the registered office which would seem to be different from the principal office. There is currently no definition of principal office under the legislation but we would expect this to be expanded on in the guidance.
Action: Overseas entities and corporate beneficial owners/managing officers will need to amend their registered office if disclosed on the ROE where it is not the same as their principal office.
Overseas entities are now obliged to disclose the title number (or equivalent in Northern Ireland or Scotland) of all qualifying estates that the overseas entity is the registered proprietor of.
Further, this information will need to be verified by a UK regulated agent.
Action: All overseas entities will need to disclose details of the UK land owned by them.
Expansion of information to be provided on Trusts
ECCTA has expanded the amount of information required in relation to trusts. The following is the extra information that is required.
Registerable beneficial owner of a settlor or grantor: Previously, overseas entities needed to disclose details of the settlor or grantor of a trust but not the owner of the settlor or grantor. However, under the new legislation, where the settlor or grantor under a trust was a legal entity, then any registerable beneficial owner of that entity will need to be disclosed as part of the trust information.
The disclosure must be as of the date the trust was settled. For some trusts, this could be a long time ago and will require investigation of the registerable beneficial owner of a settlor/grantor at such time.
Trustees and Trusts now always disclosable
Previously, a trustee could be exempt from registration (in the same manner as other beneficial owners) if there was another registerable beneficial owner in the ownership chain between the trustee and the overseas entity. This has now been changed.
If a trustee indirectly owns the overseas entity, it will always be disclosed as a registerable beneficial owner and therefore the information on the trust will also be disclosed.
There is also a new power given to the Secretary of State to make further regulations to expand the definition of registerable beneficial owners where there are trusts involved.
Action: Overseas entities will have to consider their entire corporate structure to see if there is any trustee in the ownership chain, even if this is above the current RBO.
Private Corporate Trustees now disclosable
There were some limited cases where a private corporate trustee was not considered to be ‘subject to its own disclosure requirements’ and therefore were not disclosed as a registerable beneficial owner of the overseas entity.
This is no longer the case and any legal entity that is a beneficial owner by virtue of being a trustee will now need to be disclosed.
In our experience, there were very few cases where a corporate trustee was not previously disclosed, but this change has removed a small loophole.
Action: If the overseas entity is owned by a corporate trustee (on behalf of a trust) that is not disclosed as the RBO, this will now likely need to be disclosed.
Registerable Beneficial Owners of Corporate Trustees now disclosable
If a non-UK Corporate Trustee owns an overseas entity directly and, itself, is owned by another registerable beneficial owner, then that person may also need to be disclosed.
This is likely to catch some corporate service providers where an individual (or an entity that is subject to its own disclosure requirements) has a majority stake in the corporate trustee. Such a person may then need to be disclosed as a registerable beneficial owner of the overseas entity, even though they would likely have no economic interest in the overseas entity itself. Please note that this will not be the case if the corporate trustee is itself registered as an overseas entity (as it will then be subject to its own disclosure requirements) or if it is otherwise ‘subject to its own disclosure requirements’.
This may have been an inadvertent consequence of the legislative changes relating to private corporate trustees. However, it will need to be considered by any overseas entity owned by a corporate trustee.
Action: All overseas entities owned directly or indirectly by a non-UK corporate trustee will now need to investigate the ownership structure of the corporate trustee and whether it is subject to its own disclosure requirements, to see if there are any further RBOs to disclose.
Land held on bare trust
Where land is held by the overseas entity for the benefit of another person (even in part), that other person may now be considered a beneficial owner of the overseas entity.
It is worth noting that there is no de minimis in these provisions, so it would appear that a beneficiary who owns 1% of the land would still be disclosed.
There is no definition of ‘nominee’ but it is assumed this means a bare trust arrangement. Therefore, if the OE holds the land under a discretionary trust it would suggest there is no new disclosure requirement under the ROE.
Please note that there may be disclosure requirements under the Trust Registration Service where the OE holds land on trust.
Action: Overseas entities who hold land on trust for another to consider the new beneficial owner condition.
Disclosure of changes in beneficiaries
ECCTA has widened the obligation to disclose changes in beneficiaries under trusts during the update period. This includes where a trustee has ceased to be an RBO during the update period.
Action: Overseas entities that are owned by a trustee to make sure they are aware of any changes to beneficiaries under the trust during the update period.
Managing Officers under the age of 16
Where a managing officer is younger than 16, they now need to provide the name and contact details of an individual who is at least 16 years old and is willing to be contacted about the managing officer.
Elemental will be monitoring the implementation of ECCTA as well as any guidance issued by the Government and we will be guiding our clients through the updating requirements at the applicable time. However, if you have any questions, please do not hesitate to get in touch.
Elemental is an integrated corporate services provider that specialises in supporting law firms and corporate service providers. They are an independent UK specialist, and the CGI awarded them Service Provider of the Year 2021 and again in 2022. Elemental is the market leader for Register of Overseas Entities services and is advising a number of law firms, corporate service providers, and other UK-regulated agents on the new regime.