The Register of Overseas Entities

John Sinclair, Consultant at Burness Paull and Convener of the Law Society’s Property Law Committee and Ann Stewart, Property and Professional Development Adviser, Senior Professional Support Lawyer and member of the Property Law Committee consider the Register of Overseas Entities and how this will affect solicitors and their clients

Overview

The Economic Crime (Transparency and Enforcement) Act 2022 (ECA) provides for the creation of a Register of Overseas Entities (ROE). The ROE is being brought into force at a very rapid rate. There are many details about the ROE which are yet to be finalised but due to the effect on registration of certain deeds in the Land Register of Scotland and the likelihood of early commencement of the ROE, anyone who will be buying from or selling on behalf of an Overseas Entity should already be considering the requirements of the ROE.

We are keen to highlight this need and to provide an overview of the impact of the ROE on property transactions, focusing on the operation of the ROE in the first months - please note this is not a general note on the ROE.

An overseas entity is defined as being a legal entity that is governed by the law of a country or territory outside the United Kingdom. A legal entity is defined as being a body corporate, partnership or other entity that (in each case) is a legal person under the law by which it is governed.

The commencement date for the ROE has not yet been determined, but we understand that the intention is for ROE provisions to come into force as soon as possible.

The Secretary of State has the ability to provide for certain overseas entities to be exempt overseas entities.
Impact on Registration of deeds in the Land Register of Scotland

Deeds in favour of overseas entities: The ECA provides that the Keeper must reject an application for registration of a disposition, lease or assignation of a lease (a “qualifying deed”) in favour of an overseas entity unless that overseas entity is either exempt, or has been registered in the ROE.

Deeds by overseas entities: The ECA provides that the Keeper must reject an application for registration of a disposition, standard security, lease or assignation of a lease granted by an overseas entity unless that overseas entity is either exempt, or has been registered in the ROE. There are a number of other exceptions, and some protections for purchasers, in particular:

• There is currently a provision that the Keeper would not be required to reject the application if the overseas entity’s title had been registered in the Land Register prior to 8 December 2014, but this exemption and that date are under consideration;
• The application is made in pursuance of a contract entered into prior to the later of (i) the date on which the overseas entity’s title was registered and (ii) the commencement date of this part of ECA.
  In addition to the rejection of applications, the ECA also makes it an offence for an overseas entity to deliver deeds that would have to be rejected.

Transitional provisions

The transitional period is a period of 6 months from the commencement date of the ROE (which has yet to be determined).
In relation to a disposition, standard security, lease or an assignation of a lease being granted by an overseas entity which is neither exempt nor registered during the transitional period, the Keeper is not required to reject the application.
If a disposition, lease or an assignation of a lease is being granted in favour of an overseas entity, then there is no equivalent relaxation during the transitional period, and the overseas entity would not be able to register that deed, unless either it had been registered in the ROE or it is an exempt overseas entity.

Requirement to register or to provide information during the transitional period:

In terms of the new paragraph 10 of Schedule 1A to the Land Registration, etc (Scotland) Act 2012, even if there is no relevant transaction during the transitional period, an overseas entity (other than an exempt overseas entity) must register in the ROE prior to the end of the transitional period to avoid committing an offence if:

• between 8 December 2014 and the commencement date the overseas entity had been registered in the Land Register of Scotland as the proprietor or tenant of land; and
• the overseas entity was still the registered proprietor or tenant of such an interest at the end of the transitional period.
  Requirements to provide information for deeds since 28 February 2022:

In terms of Section 41 of the ECA, when an overseas entity registers in the ROE, it must provide

• a declaration that it has not made any “relevant dispositions” between 28 February 2022 and the date of its application to register; or
• details of any relevant dispositions that it had made between 28 February 2022 and the date of its application to register.

For these provisions, a relevant disposition is defined as being a disposition, standard security, lease or assignation of lease.

In terms of Section 42 of the ECA, if an overseas entity (other than an exempt overseas entity) has made such a relevant disposition, but does not require to register in the ROE by the end of the transitional period (for example, if it is no longer registered as the proprietor of a relevant interest in land), then the overseas entity must still provide details of the relevant dispositions.

Timing around commencement

It is not yet clear how long it will take to complete the registration of an overseas entity in the ROE, nor how much notice of the commencement date will be provided.

We do not anticipate that there will be a period during which it would be possible to register an overseas entity in the ROE in advance of the restrictions on registration coming into force.

However, this timing should be a short term, transitional issue, and once the ROE is up and running it will be possible to register an overseas entity in advance of it owning or leasing any land in Scotland.

Please note that the above comments are general, high level comments, and it is essential that the ECA and the subsequent regulations are referred to for their detail.