Ultimate Beneficial Ownership (UBO)

Cabinet Decision NO. 58 Of 2020: REGULATING THE BENEFICIAL OWNER PROCEDURES

The United Arab of Emirates replaced Cabinet Resolution No. 34 of 2020 to 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 its Real beneficiary or Ultimate Beneficial Owners which intends to enhance transparency of the UAE registered entities. It likewise intends to develop effective and sustainable executive and regulatory mechanisms and procedures in respect of beneficial owner data and improve implementation to ensure International Compliance and global confidence.

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, to establish an effective regulatory mechanism and procedure for the beneficial owner data. 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 which are exempted with this resolution. They are as follows: (a) the companies in financial free zones like Abu Dhabi Gold Markets and Dubai International Financial Centre, and (b) the companies which are directly or indirectly owned or affiliated by the Federal or Emirate Government.

Entities will need to 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 is a requirement outlined in the UAE Commercial Companies Law, as well as in respective Free Zone Companies Regulations. Although the Resolution requires additional information to be detailed (for example, 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 capital of the partnership, or who ultimately is entitled to control 25% or more of the voting rights of the partnership.

On the other hand, there are entities which are exempted with this resolution. They are as follows: (a) the companies in financial free zones like Abu Dhabi Gold Markets and Dubai International Financial Centre, and (b) the companies which are directly or indirectly owned by the Federal or Emirate Government.

Entities will need to 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 is a requirement outlined in the UAE Commercial Companies Law, as well as in respective Free Zone Companies Regulations. Although 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:

1. Maintain in their headquarters each the following registers:
   • Partners/Shareholders (state the information about the ownership interests and voting rights held by each individual);
   • Real Beneficiaries (provide the reason behind being Real Beneficiaries and the date they termed as one;
   • Directors and Nominee Directors;
   • And other important documents and UBO forms submitted to authorities.
2. Submitting undertaking to create the registry and ensure accuracy of data (which gives establishments with complex structures to start the procedures for determining their Ultimate Beneficial owner and keep their data in registers and also submit to their relevant Regulatory Authority.
3. Notify the relevant authority of any amendment regarding the initial information given, provided within fifteen (15) days of such change or amendment. Establishments are also required to appoint a person residing in UAE as a point of contact, so the licensing authority can contact that person regarding the UBO data and any other basic information requirement.
4. Entering Ultimate Beneficial owner data in the systems of licensing authorities and keep updated regarding any communication from authorities to avoid penalties.

If entities failed to comply with the Resolution, the UAE Ministry of Economy has announced major penalties for non-compliance to be imposed.

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.