Have you received a fine from Companies House for not registering your company as an overseas entity by the deadline of 31 January 2023?

In this blog, we discuss how you can respond to enforcement action taken against your company under the Economic Crime (Transparency and Enforcement) Act 2022. There is a more recent Economic Crime (Transparency and Enforcement) Act 2023 which builds on the 2022 Act and adds greater enforcement powers.

When the 2022 Act was first introduced, Companies House took a relaxed approach in which they encouraged overseas companies with land in the UK to register before the relevant deadline of 31 January 2023. Companies House are now taking a far more stringent line and are now using their various enforcement powers against companies which they deem to be in breach of the legislation. We are now seeing an increasing number of fines against companies who have failed to register as an overseas entity or have committed any of the other possible offences under the Act. We have a number of clients who have received financial penalties of £50,000 or £60000.

Possible sanctions

Under the Act, Companies House may take any of the following enforcement actions:

·        Restrictions on the disposal of the overseas entity’s properties in the UK

·        Issue (severe) financial penalties

·        Refer the matter for prosecution

In determining which of the sanctions to impose, Companies House takes a risk-based approach and has regard to the following factors:

·        The risks posed to individuals and the economy

·        The seriousness of the breach of the law

·        The impact on the economy, individuals or integrity of the register

·        Cost and benefit of taking enforcement action

·        Whether it is in the public interest to do so

We have outlined the possible sanctions above. The majority of clients contacting us have received a financial penalty. Companies House can impose a fixed penalty, a daily rate penalty of £2500 per day or a combination of both. The financial penalty can be low (up to £10,000), medium (up to £20,000) or high (up to £50,000). A daily penalty can result in a higher fine. Companies House will also have regard to any aggravating or mitigating factors.

What can you do?

If you are in receipt of a financial penalty, you have the right of appeal to the High Court which must be made within 28 days of the date of the financial penalty. The appeal lies on the grounds that the financial penalty was unlawful, it was irrational or unreasonable or the financial penalty has been made on the basis of a procedural impropriety or otherwise contravenes the laws of national justice.

In assisting clients, we will review the background to the company, including the correspondence address that is held on record for the company to seek to explain why the company may have failed to register within the deadlines set under the legislation and/or failed to comply with any other requirements under the legislation. It is important that any appeal is lodged in time and further that there is full and frank disclosure. The Registrar at the Companies House does have discretion not to proceed with a financial penalty and we will make robust representations to Companies House with the view to getting any financial penalty waived. It is also important that we simultaneously complete the application to register the company as an overseas entity to demonstrate compliance.

If you are in receipt of a sanction from Companies House for failing to comply with your legal obligations as an overseas entity, please call us today on 020 8858 5996 or email Winston Brown at: Winston.brown@brownandcosolicitors.co.uk and we would be happy to assist.