Foreign investors in the UK, including a myriad of Israelis, will be required to disclose the identities of beneficial owners on a new register at Companies House (UK's registrar of companies). The rules cover any land bought since 1999.
This is not purely another level of bureaucracy, failure to comply is a criminal offence, which could result in a prison sentence of up to five years and or an unlimited financial fee.
The new Act aims to introduce transparency whilst streamlining rules on imposing sanctions, and updating Unexplained Wealth Orders, allowing law enforcement agencies to delve more deeply into complex ownership structures. The law does protect people who have previously exchanged contracts before the Act comes into force.
The war in Ukraine may have prompted the hasty - and some may say long overdue - legislation. But it makes no distinction between economic crime from Russia and any other country.
The bill was introduced March 1st and became law on March 15th. This is remarkably fast for a bill in the UK Parliament, which would usually take several months and tells us of the urgency the British feel towards increasing transparency and getting a handle on sketchy foreign investments.
There will be a grace period of six months from the date the Act comes into force and any breach of the rules will be treated as a criminal offence by the company and its officers and can incur up to five years’ imprisonment and or financial fine.
For the skeptics, who are not worried about a fine or imprisonment, there are other shackling implications; One will not be able to sell, buy or loan against their property without triggering a notice in the digital registry resulting in freezing all action on your investment.
When looking at the bigger picture, historically this bill is significant, to say the least – as this speedy update in legislation will have numerous implications on tax, residency, investment, and corporate structures world-wide.
There is a wide and rare consensus for the Economic Crime bill in the British Parliament even in these times of fragile political common ground. The bill went through Parliament in two weeks flat, so the new changes could come into effect very soon.
A date for the law to become actionable has not been set, however, it is imminent and once the law comes into force, any legal entity based outside the UK will have to place themselves on a Register of Overseas Entities before they can buy land.
David Prais is partner and head of Real Estate at Asserson Law Offices, Israel’s largest British law firm