Practice areas

Impact of the Overseas Companies (Execution of Documents and Registration of Charges) (Amendment) Regulations 2011 (SI 2011/2194) (“the 2011 Regulations”)

SEPTEMBER 2011

The above new regulations are set to come into effect on 1 October 2011. They have been drafted following a consultation period in 2010 and are relevant in the context of registered overseas companies (companies that have registered a UK establishment with the UK registrar of companies).

If an overseas company wishes to trade in the UK it has various options. It can appoint an agent to operate in the UK, incorporate a subsidiary in the UK or set up a UK establishment. However, once an overseas company has a physical presence in the UK through which it is carrying on business it should register with the registrar of companies. There are approximately 10,000 such registered companies. 

What do the existing regulations provide?

The regulations currently in force are the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 (SI 2009/1917).

The current requirements for registration of a charge on property in the UK created by an overseas company closely follow the rules for charges created by companies registered in England and Wales. They therefore provide that a registered overseas company must register with the registrar of companies any charge created over any property in the UK within 21 days.

Currently all registered overseas companies have to keep available for public inspection a register of their registrable charges together with copies of the instruments at a UK location that has been previously notified to the registrar.

What changes will the new regulations make?

The 2011 Regulations make two key changes to the required procedure for registered overseas companies:

  1. Charges required to be registered

A registered overseas company will only be required to register with the registrar of companies details of the following charges:

  • any charge it creates over land in the UK;
  • any floating charge it creates over any of its property in the UK, except any charge whose terms expressly exclude all property in the UK; and
  • any charge it creates over ships, aircraft and intellectual property registered in the UK.

A charge must still be registered within 21 days of its creation.

 

       2.    Inspection requirements

The 2011 Regulations narrow the requirement for a registered overseas company to keep available for inspection in the UK a register of the charges it creates and copies of the instruments creating them – this requirement will only apply to the limited registrable charges. The 2011 Regulations also provide for electronic inspection of security documents and the overseas company's register.

 

Why are these changes being made?

There have been some problems with the current regulations. The registration requirement only applies if the property is in the UK at the time the charge is created and so the public record does not provide the same degree of certainty for registered overseas companies as it does for UK companies. This has been a particular problem in the context of property that is intangible as its location is often uncertain. This has led to lenders wanting to impose registration requirements which has been time-consuming and often costly.

It seems that lenders have also found it difficult to discover whether an overseas company has registered a UK establishment - this is because the name under which it registers a UK establishment may be different to the name under which it is incorporated.

The changes also allow for electronic inspection which is much more practical in today’s business environment.

Effect of the 2011 Regulations in practical terms?

Requirements for registration will be far less onerous, but this does mean that when dealing with a registered overseas company, documents filed at Companies House may not reflect the full financial position.

As far as the transition period is concerned, charges with a creation date of on or before 30 September 2011 will still have to be registered with Companies House. Companies House has also clarified that it will continue to accept statements of satisfaction against any charges created prior to 1 October 2011.

Philip Langford

Head of Department and Partner

 

 

If you would like any further information about the issues raised in this article please contact Philip Langford (plangford@gdlaw.co.uk), or any other member of Goodman Derrick LLP’s Corporate Team on 0207 404 0606.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.

 

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