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National Security Act and Overseas Entries

New legislation to be negotiated

Two Acts recently added to the statute books will need to be taken account when negotiating contracts to avoid delays in transactions.

Economic Crime (Transparency and Enforcement) Act 2022

Since April 2016 UK companies, limited by shares or guarantee, and limited liability partnerships have been required to provide to Companies House information about the people who have significant control (PSC) over the relevant entity. Companies House keeps the PSC Register enabling information about the ultimate ownership of business entities to be publicly available. In 2018 the Government published a Registration of Overseas Entities Bill to extend this requirement to overseas entities but the Bill did not become law.

The Economic Crime (Transparency and Enforcement) Act 2022 (the 2022 Act) received Royal Assent on 15 March in response to the Russian invasion of Ukraine but, as well as permitting the government to impose sanctions on individuals, the 2022 Act also contains provisions contained in the previous Bill requiring overseas entities which own a ‘qualifying estate’ in land in the UK to provide similar PSC information to Companies House to entered on an Overseas Entities Register.

The 2022 Act defines widely what entities are included: ‘overseas entity’ means a legal entity that is governed by the law of a country or territory outside the United Kingdom and ‘legal entity’ means a body corporate, partnership or other entity that (in each case) is a legal person under the law by which it is governed. The definition includes non-UK incorporated companies (even if the company is UK tax resident).

The 2022 Act will come into force when the Secretary of State directs which is likely to be at some point during the next six months. Further information is awaited from Companies House and HM Land Registry which will help to clarify the process in relation to property. In the meantime set out below is the outline of the process for property in England and Wales.

Requirement to register with Companies House

An overseas entity will have to apply to register with Companies House supplying the information set out in the 2022 Act as well as providing a statement that it has taken all reasonable steps to identify any registrable beneficial owners in relation to the entity. The overseas entity must update the registration every 12 months from the original registration date.

If an entity wishes to be removed from the register then, amongst other things, it must submit a statement confirming that the entity is not registered as the proprietor of a relevant interest in land.

Property already registered at HM Land Registry

The 2022 Act is retrospective and affects freehold property and leases registered since 1 January 1999 in the ownership of an overseas entity. During the transitional period of six months from when the relevant parts of the 2022 Act comes into force:

  • HM Land Registry will work through its registered titles and enter a restriction in the register of titles owned by overseas entities as soon as reasonably practicable and in any event before the end of the transitional period that they cannot transfer the freehold, grant a lease of more than 7 years or enter into a legal charge unless registered on the Overseas Entities Register. The restriction will not come into effect until the end of the transitional period.
  • An overseas entity which is the registered proprietor of such a title must register itself on the Overseas Entities Register. The overseas entity must either confirm that it has not made any relevant dispositions since 28 February 2022 ending with the date of the application or provide details of the dispositions entered into. A relevant disposition is a transfer, the grant of a lease for more than seven years and the grant of a legal charge.

Property transactions

An overseas entity will not be able to register at HM Land Registry the acquisition of a freehold or lease of 7 years or more unless it can provide an ID (or it is exempt). Upon registration HM Land Registry will again enter a restriction as noted above and a disposition of the property will be not permitted unless the overseas entity is registered on the Overseas Entities Register (with some exceptions including the exercise of a power of sale by a lender).

The need to be certain that a transaction entered into with an overseas entity will be registered is important not just for that entity. A restriction does not prevent a transaction proceeding, it prevents registration and the legal estate passing to the buyer. This means that the legal estate remains vested in the seller which has a number of negative repercussions for all parties involved.

Solicitors acting for all parties to a transaction will be seeking contract terms to ensure that an overseas entity is registered and has a current ID at the time of completion. This will be particularly tricky where completion is some time into the future (e.g. an option or conditional contract) and an update by the buyer of registration on the Overseas Entities Register is required after exchange but before completion. It might be that an overseas entity could take advantage of a shortened period for registration or re-registration as permitted under the 2022 Act if completion is nearing. More details of the process will no doubt inform practice in this area.


Those who break any of the rules relating to the registration of overseas entities could face a fine of up to £2,500 per day or up to 5 years in prison.

National Security and Investment Act 2021

The National Security and Investment Act 2021 (the 2021 Act) came into force on 4 January 2022 and involves the parties to a transaction determining whether the transaction poses a risk to national security. In some cases there is an obligation to report the transaction where it involves purchases in the seventeen ‘sensitive sectors’ listed in the 2021 Act. You can find a list of those sensitive sectors here. In addition a transaction may be called-in or the parties may decide to make a voluntary referral: in either case this is likely to cause some delay to the transaction. Potentially the 2021 Act also catches corporate reorganisations where corporate entities holding land become controlled by a different entity in the same.

The Department for Business, Energy and Industrial Strategy has produced guidance to help businesses understand their obligations under the 2021 Act. The 2021 Act imposes criminal sanctions for any breach.

The government is concerned that it has sufficient control over mergers and other deals which involve government property or other businesses or assets which might be a threat to national security. The focus of the 2021 Act lies with the entity that is buying the relevant asset but the acquisition of an asset itself can give rise to national security concerns.

The purchase of land close to government facilities or to installations relating to the sensitive sectors may amount to a trigger event. A trigger event is defined in the 2021 Act as occurring when a person gains control of a qualifying entity or a qualifying asset. A qualifying asset includes land although ‘land’ is not defined and therefore could include not only a freehold estate but a lease or the acquisition of other interests in land such as a right of way.

As we adapt to the 2021 Act, we might see greater due diligence into the use of the land being acquired: does it include activities that fall within sensitive sectors or otherwise pose a potential threat to national security? Checks may need to be made on any land in the vicinity of or adjacent to the land being sold, which would not previously have been considered.


Your key contacts

Laura Ford

Professional Support Lawyer (Senior Associate)

Taunton and Bristol
Laura is the PSL for the Commercial Property team and is responsible for the organisation of the team’s know how, precedents and other resources.
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