BANKING AND FINANCE

The Economic Crime (Transparency and Enforcement) Act 2022: lenders - top tips to consider

As you may be aware, The Economic Crime (Transparency and Enforcement) Act 2022 (the “Act”) introduced various provisions relating to land ownership and the registration of an “overseas entity”*.

In relation to the new provisions, one key implication of the Act for lenders is in respect of the prevention of dispositions in England and Wales. In particular, if you intend to obtain a legal charge over a “qualifying estate”** in connection with a proposed financing to an overseas entity, the Act’s requirements could have a consequence on the registration of the legal charge at the Land Registry.

Some key points to note:

  • On or after 5 September 2022, if an overseas entity intends to acquire a qualifying estate and grants a legal charge over it, at the time of granting the legal charge, an overseas entity must be registered on the new Register of Overseas Entities (held by Companies House). The overseas entity shall need to identify the beneficial owner(s) of that entity and keep the register updated.
  • If an overseas entity owned a qualifying estate on 1 August 2022, after 31 January 2023, a lender must ensure that the overseas entity is registered on the Register of Overseas Entities. Until 31 January 2023, the overseas entity could grant a legal charge over the qualifying estate, however, during the period between 1 August 2022 to 31 January 2023, it is considered best practice for a lender to require an overseas entity to be registered on the Register at the time of granting the legal charge.
  • The Act shall also apply retrospectively in England and Wales and, therefore, as a lender, you may wish to consider the implications of the Act not only in respect of a new secured loan.

On transactions where security over a qualifying estate may be granted, the above points should be borne in mind and you could request, as a condition to lending, evidence of compliance with the requirements (for example, requesting that the overseas entity provides confirmation of their ID number) or, a specific undertaking within a finance document in respect of compliance with the registration and obligations under the Act.

It is important for lenders to be aware of the Act and its implications, to identify any transactions that involve an overseas entity owning a UK property and consider any additional requirements to be implemented in respect of this.

If you have any questions or queries as to how the Act may affect you or your customers, please do not hesitate to get in touch with a member of our Banking and Finance team.

*An overseas entity may be a body corporate, partnership or other legal person or entity governed by the law of a country or territory outside of the UK
**A qualifying estate relates to a freehold land or lease of 7 years or more from the date of grant where the application to register the overseas entity at the Land Registry as proprietor of that interest was made on or after 1 January 1999.

About the authors


about the author img

Tyne Harman

Associate

Advises on a variety of debt finance and refinance matters, including acquisition, real estate finance and general corporate and commercial banking.

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