Corporate transparency in 2022: a guide for Insolvency Practitioners

Insolvency Practitioners should be alert to the potential impact of new and proposed corporate transparency measures. 

Companies House reform and the new Register of Overseas Owners of UK Property will be largely welcomed, providing more in depth access to more reliable information which will support IPs when carrying out their duties.  However, some of the insolvency specific details are yet to be confirmed and IPs will want to watch this space.  We have set out a high level summary of the forthcoming changes below.

In Scotland, the new Register of Persons Holding a Controlled Interest in Land is already in place.  While this won’t have an impact on property disposals, IPs are under a duty to inform the Keeper of their appointment in certain circumstances.  We have set out the action you need to take now in this insight.

Action needed now: The Register of Persons Holding a Controlled Interest in Land in Scotland

In Scotland, the Register of Persons holding a Controlled Interest in Land (RCI) came into force on 1 April 2022.  The RCI is maintained by the Registers of Scotland.

When someone who is not the owner or the tenant of land, but has the power to direct what happens to that land, they are referred to in the underlying legislation as an associate.  The associate’s details, together with (in some circumstances) the owner or tenant’s details, need to be entered on the RCI.  It is the land owner or tenant’s duty to register the associate’s details.  There will be a transitional period of 1 year, thereafter from 1 April 2023, it will be a criminal offence, by both the owners or tenants and their associates, not to comply.  Failure to register will not prevent the disposal of the land.

The aim of the RCI is to ensure that there can no longer be categories of land owner or tenant where control of decision-making is not clear.  IPs are under a duty, where they are appointed as liquidator or are dealing with the dissolution of a company that is registered on the RCI, to notify the Keeper of the winding-up or dissolution as soon as reasonably practicable.

Practical tips for IPs:

• Carry out a free search of the RCI on appointment as a liquidator. You can find the RCI here: Search the register - Register of persons holding a controlled interest in land - Registers of Scotland (ros.gov.uk)
• Consider carrying out a further search 31 days after appointment, as there is a 30 day period during which associates may challenge the information to be included on the register.
• Notify the Keeper as soon as reasonably practicable if appointed as a liquidator over an entity registered on the RCI, providing the following information:
  • The entity’s name and address;
  • The title number if the affected land is registered within the land register or a sufficient property description if the land is recorded within the Registers of Sasines;
  • The date of the recorded person’s winding up or dissolution; and
  • Information confirming that the recorded person has been wound up or is dissolved, such as copies of the liquidator's appointment documents or information from Companies House confirming that the entity has been dissolved.

Changes on the horizon: The Register of Overseas Owners of UK Property

The Register of Overseas Owners of UK Property, to be managed by Companies House, will soon be up and running.   Once established, any overseas entity which owns or wishes to purchase UK property will be required to register its details, and the details of its beneficial owners, at Companies House.  An overseas entity is any entity which is a legal person under the law by which it is governed.  An individual may also be required to register if they are a beneficial owner of an overseas entity. 

The registration needs to be updated annually and the Land Registry (England & Wales, Northern Ireland) or Land Register (Scotland) will not register the sale or purchase of qualifying UK property owned by an overseas entity unless the registration requirements have been complied with, or an exemption applies.  The managing officers of the overseas entity could also face criminal and civil sanctions if they do not comply. 

There are a number of exemptions enabling the registration of dispositions of property owned by an overseas entity which has not complied with the registration requirements.  These include a sale by a registered chargeholder or their receiver, or a (yet to be) specified insolvency practitioner in (yet to be) specified circumstances.  Whilst these exemptions provide some hope that the new restrictions will not impede IPs or receivers in carrying out their duties, we will need to see further details before confirming the extent to which they will have an impact on sales of properties by receivers or IPs.

Changes on the horizon: Companies House reform

Substantial changes to registration and filing processes at Companies House are proposed, and draft legislation is expected imminently.

The intention is that Companies House will move from operating a passive register to becoming a proactive "gatekeeper" with a role of maintaining the integrity of the register.  We have summarised some of the main proposed changes below:

The timeline for implementation is still unclear and, given there will be a transition period for information to be updated, it might be several years before professionals see the benefits.  It also remains to be seen whether or not IPs will be given access to all of the additional information being filed at Companies House.  R3 continues to campaign for automatic access to this information for all IPs to be included in the draft Bill.  This would assist with investigations into director misconduct and the identification of assets for the benefit of the company’s creditors.

Next steps

We will provide further updates on the Register of Overseas Owners of UK Property and Companies House reform as the situation develops.  In the meantime, if you would like further advice on any of the points raised in this insight please contact a member of TLT’s restructuring & insolvency team.

Contributors: Emma Gascoyne-Day, Tessa Durham

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2022. Specific advice should be sought for specific cases. For more information see our terms & conditions.