Register of Overseas Entities
The Act requires that an overseas entity that owns, or is proposing to own, land in the UK must register with the Registrar of Companies for England and Wales (“the Registrar”). As part of the registration process, overseas entities must disclose information about their beneficial owners or managing officers to Companies House. This information is then held on the Register and the overseas entity must update this information at least once a year.
Offences
Generally speaking, under the Act, it is an offence for an entity to:
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fail to register with Companies House, or update the information on Register.
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fail to comply with an information notice from the Registrar, or resolve an inconsistency on the Register pursuant to a request from the Registrar to do so.
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knowingly or recklessly provide the Registrar with misleading, false or deceptive information or documentation.
For most offences, the overseas entity, and every officer of the entity who is in default, will be liable.
Enforcement approach
Companies House has a range of sanctions at its disposal, which we discuss below. In its Guidance Companies House says that it "will use its significant enforcement powers predictably, consistently and judiciously" and will select the most suitable method of enforcement by assessing:
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the nature and seriousness of a failure.
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how individuals, businesses and the integrity of its registers have been affected.
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the novelty and duration of the issue.
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the public interest.
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whether other agencies are already taking, or contemplating taking, action in relation to the matter.
Resources will be prioritised with a focus on persistent, repeated and wilful non-compliance.
Types of sanctions
Restrictions on properties
Entities that have failed to register, or failed to comply with the updating duty, will face restrictions on selling, leasing or raising charges over their land. Overseas entities cannot purchase any new UK property without a valid registration.
Prosecution
Companies House may refer cases to The Insolvency Service and other law enforcement agencies to be considered for prosecution. Prosecution will usually be reserved for the most serious cases. Successful prosecution could result in a prison sentence, a fine, or both.
Civil financial penalties
The Registrar may issue a warning notice to an entity if they suspect an offence has been committed, setting out the grounds for their suspicion. The entity can make representations within the period set out in the notice (which will be at least 28 days), setting out any information it wishes to put forward for consideration. Failure to do so may result in a penalty being issued.
If, after considering the representations, the Registrar remains satisfied beyond reasonable doubt that an offence has been committed and a penalty is appropriate, they will issue a penalty notice setting out:
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the grounds for issuing the penalty.
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the type of penalty (fixed, daily rate, or a combination of both).
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the penalty amount.
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how the penalty should be paid.
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that the full penalty amount must be paid within 28 days of the notice.
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the right to appeal.
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what happens if the penalty is not paid, including the application of interest and enforcement of unpaid penalties.
The entity may appeal to the High Court (or the Court of Session in Scotland) if it believes that the decision to impose the penalty, or the level or type of penalty, is unlawful, irrational or unreasonable, or has been made on the basis of a procedural impropriety or otherwise contravenes the rules of natural justice.
How is the amount of the financial penalty determined?
To determine the financial penalty amount, the Registrar will assess the culpability and the harm involved in each case. When assessing culpability, the Registrar will consider factors including evidence of intent and previous penalties or conduct.
For offences relating to the Register, the value of an entity’s property portfolio will be used as an estimate of harm. The greater the value of the property portfolio, the greater the potential harm facilitated by the offence - for example, the risk of money laundering.
The value of each property will be estimated based on data including council tax bands, business rateable value, and the House Price Index. This will give a low, medium or high penalty rate for each property. The total penalty will reflect the value of the whole property portfolio.
The Registrar will also consider any aggravating or mitigating factors that may make the offence more or less serious – and will consider any representations from an entity or individual about their financial means and ability to pay. The Registrar also has the power to vary or revoke a financial penalty on a case-by-case basis. If an entity complies with the requirements before the end of the warning notice period, the matter will be reconsidered.
If Companies House is not contacted, it will assume that the property portfolio value reflects an entity’s ability to pay a penalty. It may also assume a level of an individual’s income it considers reasonable to determine an appropriate penalty.
Next steps
If you would like to discuss any aspect of this article, please get in touch with our team, who would be happy to help.
Authored by Daniela Vella and Claire Lipworth.
