Cabinet Decision NO. 58 Of 2020: REGULATING THE BENEFICIAL OWNER PROCEDURES
The United Arab of Emirates replaced Cabinet Resolution No. 34 of 2020 with Cabinet Resolution No. (58) of 2020 regulating Beneficial Owner Procedures (the “Resolution”).
The Resolution covers the most updated requirements for the entities in UAE to disclose their Real beneficiaries or Ultimate Beneficial Owners, which intends to enhance the transparency of the UAE-registered entities. Similarly, it intends to improve compliance and global confidence in international data by developing effective and sustainable executive and regulatory mechanisms.
The Ultimate Beneficial Owner’s (UBO’s) objectives cover the maintenance of the economic position of UAE with international requirements. It also aims to regulate minimum obligations in disclosure of Beneficial Owners, Shareholders, Partners, and Nominee Board Members, and lastly, establish an effective regulatory mechanism and procedure for the beneficial owner data. In addition, it aims to control Money Laundering and Terrorist Financing.
As per Ministry, 513000, regulated by 38 licensing authorities, are required to provide data on ultimate beneficial owners. Including all Licensed by the local licensing authorities and the non-financial free zones.
How to Identify Ultimate Beneficial Owner?
Ultimate Beneficial Owner Rule
As per Cabinet Resolution No. (58) of 2020, Beneficial Owner or Real Beneficiaries can be the following:
For UBO:
- Natural Person who owns/controls the establishment definitively, through direct/indirect ownership shares of 25 % or more.
- Or: someone who holds the right to vote by 25% or more or the right to appoint/dismiss the majority of the establishment’s managers or any other means by which he exercises ultimate control over the establishment.
- In cases where UBO cannot be identified through the two conditions above, then a natural person who holds the position of Senior Management Official in the company may be deemed as the UBO.
On the other hand, there are entities exempted from this resolution. They are as follows: (a) the companies in economic free zones like Abu Dhabi Gold Markets and Dubai International Financial Centre, and (b) the companies directly or indirectly owned or affiliated by the Federal or Emirate Government.
Entities must assess who constitutes a UBO and consider whether anyone is a nominee Director / Manager. The Register of Shareholders / Partners is not a new concept. The Thirequirement isn't outlined in the UAE Commercial Companies Law and Free Zone Companies Regulations. The Resolution requires additional information about voting rights.
For Nominee Director/Manager:
The details of the Director / Manager, acting in agreement with the instructions of another person.
For the Partner/Shareholder:
A UBO is any individual who controls 25% or more of the partnership's capital or who ultimately is entitled to control 25% or more of the voting rights of the partnership.
On the other hand, some entities are exempted from this resolution. They are as follows: (a) the companies in economic free zones like Abu Dhabi Gold Markets and Dubai International Financial Centre, and (b) the companies directly or indirectly owned by the Federal or Emirate Government.
Entities must assess who constitutes a UBO and consider whether anyone is a nominee Director / Manager. The Register of Shareholders / Partners is not a new concept, as this requirement is outlined in the UAE Commercial Companies Law and respective Free Zone Companies Regulations. However, the Resolution requires additional information to be detailed (for example, voting rights).
Ultimate Beneficial Owner Companies Act
As per Cabinet Resolution No. (58) of 2020, all Relevant Entities must perform the following:
-
Maintain in their headquarters each the following registers:
- Partners/Shareholders (state the information about the ownership interests and voting rights).
- Actual Beneficiaries (provide the reason behind being Real Beneficiaries and the date they termed as one;
- Directors and Nominee Directors;
- And other essential documents and UBO forms were submitted to authorities.
- Submitting undertaking to create the registry and ensure data accuracy (which gives establishments with complex structures to start the procedures for determining their Ultimate Beneficial owner, keep their data in registers, and submit to their relevant Regulatory Authority.
- Notify the relevant authority of any amendment regarding the initial information provided within fifteen (15) days of such change or modification. Establishments are also required to appoint a person residing in the UAE as a point of contact so that the licensing authority can contact that person regarding the UBO data and other essential information requirements.
- Entering Ultimate Beneficial owner data in the systems of licensing authorities and keep updated regarding any communication from authorities to avoid penalties.
If entities fail to comply with the Resolution, the UAE Ministry of Economy has announced significant penalties for non-compliance.
However, it has been assured by the ministry that any data submitted will be kept with utmost confidentiality with no access to anyone for any commercial purposes, including the employees of the entity itself, except in case of an investigation and the required disclosure to specific official entities, according to the strict internal policies and Regulations, as stated by Al Hosani in a recent media briefing.
