Ultimate Beneficial Ownership (UBO)

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Licensing authorities begins issuing written warnings to entities that violate Ultimate Beneficial Owner Procedures.

Ultimate Beneficial Ownership (UBO)

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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.

Cabinet Resolution No. (53) of 2021 Concerning the Administrative Penalties against Violators of The Provisions of the Cabinet Resolution No. (58) of 2020 Concerning the Regulation of Beneficial Owner Procedure

# Violation Legal Ref., Cabinet Resolution No. (58) of 2020 Administrative Penalties
First Time Second Time Third Time
1 Failure of the legal person to create Register of Beneficial Owner and maintain its data. Article (8) Written Warning AED 50,000 and warning the legal person to rectify its situation within Thirty (30) Days as of the violation issue. AED 100,000 and suspension of the trade license for at least Twelve (12) Months.
2 Failure to include the data mentioned in Clause (2) of Article (8) of the mentioned Cabinet Resolution No. (58) of 2020. Article (8) Written Warning AED 20,000 and warning the legal person to rectify its situation within Fifteen (15) Days as of the violation issue. AED 40,000 and suspension of the trade license for at least Six (6) Months.
3 Failure of the legal person to maintain adequate, accurate, specific and updated data of Beneficial Owner or Failure of the legal person to correctly record down the Beneficial Ownership. Article (6) and Article (7) Written Warning AED 10,000 and warning the legal person to rectify its situation within Fifteen (15) Days as of the violation issue. AED 20,000 and suspension of the trade license for at least One (1) Month
4 Failure of the legal person to provide the Registrar with the data referred to in Article (10) of the mentioned Cabinet Resolution No. (58) of 2020 regarding the details of the director or nominal board member. Article (9) Written Warning AED 20,000 and warning the legal person to rectify its situation within Fifteen (15) Days as of the violation issue AED 40,000 and restriction of the powers of the board members or directors, who are proved liable for the violation.
5 Failure of the legal person to create the Register of Partners or Shareholders. Article (10) - AED 50,000 and warning the legal person to rectify its situation within Sixty (60) Days as of the violation issue. AED 100,000 and suspension of the trade license for at least Twelve (12) Months.
6 Failure of the legal person to maintain the information of all partners or shareholders in the Register of Partners or Shareholders. Article (10) Written Warning AED 30,000 and warning the legal person to rectify its situation within Fifteen (15) Days as of the violation issue. AED 60,000 and suspension of the trade license for at least Six (6) Months.
7 Failure of the legal person to provide the Registrar with the information of beneficial owner and the Register of Partners or Shareholders and maintain such registers from damage, loss or destruction Article (11.1) Written Warning AED 15,000 and warning the legal person to rectify its situation within Fifteen (15) Days as of the violation issue AED 30,000 and suspension of the trade license for Three (3) months.
8 Failure of the legal person to provide any additional information required by the Registrar Article (11.2) Written Warning AED 5,000 and warning the legal person to rectify its situation within Fifteen (15) Days as of the violation issue. AED 10,000 and suspension of the trade license for at least One (1) Month
9 Failure of the legal person to provide the Registrar with the name of a natural person residing in the UAE and authorized to disclose to the Registrar all data and information required by the mentioned Federal Decree-Law or Executive Regulations thereof. Article (11.4) Written Warning AED 1,000 and warning the legal person to rectify its situation within Fifteen (15) Days as of the violation issue. AED 2,000 and suspension of the trade license for at least One (1) Month
10 legal person to issue shareholder's share guarantees. Article (11.5) Written Warning AED 5,000 AED 10,000
11 Failure of the legal person, on the issuance of shares or stocks in the name of persons or board members, to disclose to the Registrar the information in respect of such shares or stocks and the identity of such persons or board members within Fifteen (15) Days as of such issuance. Article (11.6) Written Warning AED 5,000 and warning the legal person to rectify its situation within Fifteen (15) Days as of the violation issue. AED 10,000 and restriction of the powers of the board members, directors or owners, who are proved liable for the violation.
12 Failure of the legal person to hand over to the liquidator the Register of Beneficial Owner and Register of Partners or Shareholders within Thirty (30) Days as of appointing the said liquidator Article (11.7) Written Warning AED 5,000 and warning the legal person to rectify its situation within Fifteen (15) Days as of the violation issue. AED 10,000 and suspension of the trade license for at least One (1) Month.
13 Failure of the legal person or the liquidator to maintain the records and all information referred to herein for at least Five (5) Years as of the date of dissolution, liquidation or de-registration. Article (11.8) Written Warning AED 20,000 AED 40,000

Deadline for the UBO Declaration

For Other Authorities:

As per the advice from the other authorities, they are still waiting for the ministry approval regarding the extension request.

Authority Name Notification required Notification deadline
Dubai Media City (DMC) Yes 30th of June 2021
International Freezone Authority (IFZA) Yes Registrations are still being accepted
Dubai Studio City (DSC) Yes 30th of June 2021
Ras Al Khaimah Economic Zone (RAKEZ) Yes Before 8th of July 2021
Fujairah Creative City (FCC) Yes Before 8th of July 2021
Sharjah Media City Free Zone (SHAMS) Yes 30th of June 2021
Ajman Free Zone Authority (AFZA) Yes 7th of July 2021
Dubai Multi Commodities Centre (DMCC) Yes 30th of June 2021
Dubai Outsource Zone (DOZ) Yes 30th of June 2021
Dubai Airport Free Zone (DAFZA) Yes 30th of June 2021
Dubai South (DWC) Yes Before 8th of July 2021
Dubai Internet City (DIC) Yes 30th of June 2021
Jebel Ali Free Zone (JAFZA) Yes 30th of June 2021
Dubai Silicon Oasis (DSO) Yes 30th of June 2021
Dubai Department of Economic Development (Dubai DED) Yes 15th of July 2021
Sharjah Airport International Free Zone (SAIF) Yes 30th of June 2021
Dubai Science Park Yes 30th of June 2021
Dubai Development Authority (DDA) Yes 30th of June 2021
Hamriya Free Zone Yes 30th of June 2021
Abu Dhabi Department of Economic Development Yes 30th of June 2021
Sharjah Department of Economic Development Yes 30th of June 2021
Umm Al Quwain Free Trade Zone Authority (UAQ) Yes 30th of June 2021

Synopsis

  • All entities in the United Arab Emirates (unless excluded by the Resolution) must comply with the preparation of the UBO Declaration until the earlier of, deadline specified by their licensing authority. According to the Ministry of Economy, the last date to provide data on Ultimate Beneficial Owners, 30th of June 2021. However, most authorities have now extended their deadline until July 8, 2021, and registrations are still being accepted by the licensing authorities.
  • The filing of the UBO Declaration to the relevant authority is as per deadline set by each licensing authority.
  • The entities shall notify the relevant authority of any amendment regarding the initial information given, provided within fifteen (15) days of such change or amendment.
  • Non Compliance will lead to Administrative Fines ranging from AED 50,000 to AED 1,000,000.

How can we help?

On your behalf, AMCA will be the one to prepare the registers of the UBO’s Partners/Shareholders and Nominee Directors/Managers (if applicable) as per the Resolution. You will not be worried regarding the filing of your declaration of UBO, because we will do it for you. In addition to that, we’ll take care of informing the relevant authority regarding the changes and amendment on the information provided. Rest assured that you are in good hands during the filing and submission of your UBO if you work with us.

24 Oct 2020

Mohammad Sharique Nadeem

Business Analyst

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