Beneficial ownership registers: recent developments

Expansion of the Register of Overseas Entities regime

The Register of Overseas Entities (ROE) regime, which requires overseas entities that hold, or wish to acquire, land in the UK to register with Companies House and provide details of their beneficial owners, has now been a fixture of the UK-transparency landscape since August 2022. In October 2023, changes to the regime (largely "tightening up" the existing rules) were introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023), although these amendments required further regulations to bring them into force.

On 1 March 2024, Regulations were introduced which, along with various company law reforms, introduce two key changes to the ROE regime. (Note that further regulations are awaited to enact other changes made by ECCTA 2023 to the ROE regime).

• The requirement that details of all corporate trustees in the chain of an overseas entity’s ownership structure be registered

Previously, a corporate trustee was only required to register as a "beneficial owner" of an overseas entity if it was “subject to its own disclosure requirements” (SODR) (meaning, broadly, that its provision of trust services was regulated in its own jurisdiction). Following the Regulations, this requirement no longer applies, so any corporate trustee in an overseas entity’s ownership structure will be required to register, regardless of whether it is SODR.

Further, an exemption previously applied, effectively meaning that only the first corporate trustee which was SODR in an overseas entity’s ownership chain needed to register. This acted as a "blocker", shielding other beneficial owners further up the chain from registration. This exemption has now been abolished for persons who are beneficial owners in their capacity as trustee; in practice, meaning that all trustees in an overseas entity’s ownership chain will need to register (provided certain other conditions are met).

This may be of particular significance where, for example, a Private Trust Company (PTC) structure is used, as these structures commonly involve a chain of corporate trustees. As before, however, whilst details of the trustees will be publicly available, other details of the trusts will not.  

• New conditions for registration where an overseas entity holds real estate as nominee

Whilst the ultimate rationale for introducing the ROE was to increase transparency relating to the ownership of UK land, the regime, in its original form, only captured the beneficial ownership of overseas entities owning UK land, rather than the ultimate beneficial owners of the land itself. This has now been countered with new conditions for registration where an overseas entity holds land as a nominee: previously, the capacity in which the overseas entity owned the relevant land did not affect the application of the rules to such an entity.

Now, where an overseas entity owns land as a nominee, the person for whom the overseas entity holds the land as nominee will be deemed a registrable beneficial owner of the nominee overseas entity. Further, if an overseas entity holds land as a nominee for a legal entity, then that legal entity and all its beneficial owners will be registrable without exception.

Currently, however, there is no definition of "nominee" in ECCTA 2023 (and this was not added by the Regulations). As such, it is not presently clear what exactly this term means. Logically, this would include bare trusts of land where the trustees exercise no control or discretion over the land’s management. However, it is less clear whether other kinds of trust will fall within this concept. For example, Jersey Property Unit Trusts are unlikely to be captured, as, arguably, these arrangements are not bare trusts for the individual unit holders.

The changes set out above will affect overseas entities registering for the first time from 4 March 2024. For overseas entities that were already registered pre-4 March 2024, the relevant information needs to be provided with the first update statement delivered after 4 June 2024.

Trust Registration Service: new consultation

On 11 March 2024, HM Treasury launched a new consultation on the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the MLRs), being the legislation by which the UK’s Trust Registration Service (TRS) was first introduced.

The consultation covers a number of themes, including possible reforms to the TRS, the aim being to ensure that the register focuses on the "highest risk trusts". Suggestions being considered in this respect are as follows.

Aligning the rules for certain trusts that must register following the death of the settlor: namely, excluding co-ownership property trusts and trusts created by a deed of variation from registration for two years following death, thereby aligning the registration timing with will trusts.

Introducing a de minimis level for trust registration: so that a trust that is (i) not liable to relevant UK taxes; (ii) does not own or have an interest in UK land; (iii) does not hold more than £5,000 in assets; and (iv) does not distribute more than £2,000 in assets and expenses (combined) in any 12-month period, does not need to register. Once a trust exceeds any of the relevant thresholds, however, it would become registrable and remain registrable. The Government also proposes to introduce new restrictions to prevent settlors from avoiding registration by settling multiple smaller trusts.

The mandatory registration of all non-UK express trusts that have no UK trustees but that own UK land, acquired before 6 October 2020: currently, such trusts, which acquired UK land post 6 October 2020, must register, but the TRS does not capture these types of trust where the land was already held before this date. These changes are being considered to address a perceived reporting gap regarding the direct ownership of UK land by non-UK trusts.

Extending the trust data request rules to non-UK express trusts, with no UK trustees, that own UK land: this is to address the current position where only law enforcement agencies can access data on these types of trust. The Government is proposing to widen information access so that the public can request information on such trusts, where (i) the requester has a "legitimate interest" (i.e. broadly, they are involved in a money laundering investigation); or (ii) the trust subject to the request has a controlling interest in an offshore company, in line with the wider TRS trust data request rules.

The introduction of the de minimis registration threshold and the alignment of registration dates for post-death trusts will, if enacted, no doubt be welcomed by trustees and practitioners alike. The stricter requirements for non-UK trusts holding UK land and a widening of access to their data, however, adds another layer of administration and disclosure and is part of the Government’s continued focus in this area (following another recent consultation, launched in December 2023, aimed at increasing the transparency of trusts holding UK land: Government consults on expanding access to information on trusts).

The MLRs consultation remains open until 9 June 2024.

Final thoughts

One question which some may now be considering, given the number of different UK transparency regimes aimed at capturing information relating to the ownership of UK land (the Levelling-Up and Regeneration Act 2023 introducing a potential third regime), and the Government’s continued focus in this area, is whether there might be scope for reform to consolidate these regimes, to make compliance and data-capture more streamlined. At this stage, however, there is no indication that the regimes may be synchronised, although one thing is clear: the existing regimes all appear to be heading in the direction of ever-increasing transparency.