Objective & Scope of Ultimate Beneficial Owner
- Maintain UAE’s economic position with international requirements
- To regulate minimum obligations in disclosure of Beneficial Owners, Shareholders, Partners & Nominee Board Members
- To have effective & enduring regulatory mechanism & procedures for the beneficial owner data
Who is a beneficial owner?
The Cabinet Decision No. 58 of 2020 defines an ultimate beneficiary owner as any one of the following:
- Any natural person who owns or controls directly or indirectly at least 25% of the share capital
- Any natural person with voting rights for at least 25% of the shares
- Any natural person with ultimate control over the legal person
Who does it apply to?
The UBO Law applies to all companies licensed and registered in the UAE, except for those that are wholly owned by a local or federal government body, or are set up in the DIFC or ADGM financial free zones, which are already subject to their own UBO disclosure requirements.
What must be disclosed by Companies?
The UBO Law requires companies to maintain registers with information about ultimate beneficial owners (UBOs), shareholders and nominee board members (together, the Registers).
Any company in UAE freezone or mainland must maintain at their office.
- Partners or Shareholders Register (PSR)
- Real Beneficiary Register (RBR)
- Register of Nominee director
What Needs to be Maintain in UBO Register?
The UBO Register should set out details of the company’s “Real Beneficiaries”, which the UBO Law defines as:
- Natural persons who own or control, either directly or indirectly, at least 25% of the company’s share capital, or who hold at least 25% of the voting rights, or who control the company through other means, including by holding a right to appoint or dismiss the majority of the directors or managers.
- If no natural person satisfies the above criteria, the Real Beneficiary is the natural person who exercises control over the company by other means.
- If no natural person satisfies both the conditions above, then a natural person who is responsible for the senior management of the company will be deemed the Real Beneficiary.
- The Register must include, for each Real Beneficiary, the following:
- Full name, nationality, and date and place of birth. Place of residence or notice address.
- Passport or identification number, country, and date of issue and expiry.
- The basis on which the natural person is identified as a beneficiary.
- The date on which the person became a Real Beneficiary, and if applicable, the date on which they ceased to be one.
The Shareholder/Partner Registers must include the following for each partner or shareholder:
- The number and class of shares/equity held, and the voting rights attached to such shares.
- The date on which the shareholder/partner acquired the shares/equity. Shareholders/partners that are natural persons: same information that is required for a Real Beneficiary.
- Shareholders/partners that are legal entities:
- Name, legal form, and memorandum/articles association.
- Address of main office or headquarters, and if the legal entity is foreign, the name and address of its legal representative in the UAE should be included.
- Names of the persons holding senior management positions (including their passport or identification number, country of issue, date of issue, expiry date).
Trustees and Nominee Managers
For a company with a shareholder or partner that acts as trustee, or that has a nominee manager, meaning a person that is acting on the instructions of another person, the Shareholder/Partner Register must include information about such trustee or nominee manager. The information to be included for a trustee or nominee managers is the same as for a Real Beneficiary.
Companies must also provide its licensing authority with the name, address, contact information and ID copy of an individual, who must be a UAE resident, and who is authorized to disclose to the licensing authority the information required by the UBO Law.
Companies Exempted from Ultimate Beneficial Ownership
The requirement to disclose the details of the Real Beneficiary applies to all the companies incorporated on the mainland as well as the companies licensed by the free zones. However, the following entities are exempted from the purview of Cabinet Decision No. 58 of 2020:
- Companies Registered in Financial Free Zones (DIFC, ADGM)
- Companies owned by the Federal government & its Subsidiaries
Requirements for Companies under Liquidation
Apart from the operating entities, companies undergoing liquidation in the UAE also need to meet UBO requirements. Companies under liquidation should submit the RBR & PSR or its true copy to the Registrar within 30 days from the date of the liquidator’s appointment. Apart from that the liquidators or administrators must maintain the Registers for at least five years from the date of liquidation.
The disclosure timelines are as follows:
- Newly incorporated legal persons will have 60 days from the date of incorporation to create and share these registers.
- Where the legal person issues shares in the name of a person or board director, the legal person shall have 15 days to disclose to the registrar the details of these shares, as well as the identities of the recipient; and
- If the registrar requests any additional information related to the registers, the legal person is obliged to provide this information within the time period the registrar states.
Penalties Related to Real Beneficiary Disclosure
The UAE government stringently enforces the UBO regulations with a set of hefty penalties imposed on the violators. The government issued Cabinet Decision No. 53 of 2021 to ensure the strict enforcement of UBO regulations in the UAE. The following are some of the key violations and the corresponding UBO penalties specified in the Cabinet Decision:
- AED 50,000 for the first time & AED 100,000 with the suspension of trade license for 12 months in case of repetition for companies failing to create the UBO registers
- AED 20,000 (for the first time) & AED 40,000 with the suspension of trade license for at least six months (for subsequent repetition) for companies failing to include the mandatory details in the registers
- AED 10,000 (for the first time) and AED 20,000 with a suspension of trade license for at least one month (for subsequent repetition) for companies that fail to maintain adequate, accurate, specific and updated data of Beneficial Owner or fail to accurately record the Beneficial Ownership
- AED 20,000 (for the first time) and AED 40,000 along with restriction of the powers of the board members or directors (for subsequent recurrence) for companies that fail to disclose the mandatory data regarding the details of the director or nominal board member
- AED 50,000 (for the first time), followed by a fine of AED 100,000 and suspension of the trade license for at least Twelve (12) Months (in case of the violation repeats) for companies that fail to create the PSR
- Fine of AED 30,000 (first instance) followed by a penalty of AED 60,000 and suspension of the trade license for at least six months (in case of repeating the violation) for companies failing to maintain the information in all partners or shareholders in the PSR
- A penalty of AED 15,000 will be imposed on companies that fail to provide information on RBR, and PSR and fail to maintain the registers safe from damage, loss or destruction. Subsequent occurrences of the violation will lead to a fine of AED 30,000 and suspension of the trade license for at least three months
- AED 5,000 (for the first instance) and AED 10,000 and suspension of the trade license for at least one month (subsequent occurrence of the violation) for companies that fail to provide any additional information requested by the Registrar
- Companies must disclose to the Registrar the name of the UAE-resident individual who holds the responsibility to disclose all the mandatory days and information. Failure of this obligation will incur a first-time penalty of AED 1,000 and a penalty of AED 2,000 and suspension of the trade license for at least one month for repeating the violation
- A company that fails to issue shareholder’s share guarantees will incur a penalty of AED 5,000 in the first instance and a penalty of AED 10,000 for further recurrence of the violation
- Companies should provide the Registrar with information on shares and stocks issued to persons or board members. They should also disclose the identity of such persons or board members to whom the shares or stocks were issued. Failing to do so within fifteen days of issuance will attract a penalty of AED 5,000 in the first instance and AED 10,000 and a restriction of the powers of the board members, directors or owners if the crime is repeated.
- AED 5,000 fine will be imposed on companies under liquidation that fail to hand over to the liquidator the Register of Beneficial Owner and Register of Partners or Shareholders within Thirty days of appointing the said liquidator. The fine will escalate to AED 10,000 and suspension of the trade license for at least one month if non-compliance is repeated.
- Companies under liquidation will incur a penalty of AED 20,000 if the administrator or the liquidator fails to maintain the mandatory records and registers for at least five years from the date of dissolution, liquidation or de-registration. If the violation is repeated a penalty of AED 40,000 will be incurred.
UBO COMPLIANCE SERVICES
Compliance with UBO regulations is essential. Failure to comply with it invites fines in both the free zones. So, maintain the registers, provide accurate information, and submit them to the Registrar whenever requested.
Ahmad Alagbari Chartered Accountants Experts can help you to be UBO compliant.
- Assess whether you qualify for UBO or are exempt
- Make changes whenever necessary and notify the Registrar of the same
- Maintain a Register or Record of beneficial owners at your office
- Liaise with the relevant authorities for UBO compliance
Alia Noor (FCMA, CIMA, MBA, GCC VAT Comp Dip, Oxford fintech programme, COSO Framework)Associate Partner
Ahmad Alagbari Chartered Accountants