Ultimate Beneficial Ownership (UBO)

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

The United Arab of Emirates just recently 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 beneficial owners which are intended 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.

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.

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:

• UBOs are individuals who ultimately own or control or have the right to vote with a minimum of 25% shareholding of the company, either directly or indirectly, or who have the right to either appoint or dismiss the majority of the Directors/Managers.
• If no one meets the condition above, then any natural person who has the power to control the company using any other means may be termed as the UBO.
• In cases where UBO cannot be identified through the two conditions above, then a natural person who holds Higher Management in the company may be deemed as the UBO.

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;
2. Submit the information mentioned above (information must be accurate) with the relevant authority by no later than 27 October 2020. (Note: All the information will be handled confidentially by the authority);
3. Notify the relevant authority of any amendment regarding the initial information given, provided within fifteen (15) days of such change or amendment.
4. Provide a contact details of an in individual (resident in the UAE) with whom the authority can contact regarding any information provided.

If entities failed to comply with the Resolution, the UAE Ministry of Economy possibly enforce sanctions on those entities. The list of administrative sanctions is yet to be issued.