Cabinet Resolution No. (58) of 2020 regulating Beneficial Owner Procedures (the “Resolution”) came into effect on 28 August 2020 and replaced Cabinet Resolution No. 34 of 2020 issued earlier this year. The Resolution introduces new requirements for entities to disclose its beneficial owners. The main purpose is to enhance transparency of entities registered in the UAE, as well as to develop effective and sustainable executive and regulatory mechanisms and procedures in respect of beneficial owner data. The objective of the Regulation is also intended at combating anti-money laundering crimes, the financing of terrorism and financing of unlawful organization and likelihood of battling tax avoidance and providing greater transparency to the UAE’s business environment in line with the international guidelines and requirements.
Scope
The provisions of the Regulation shall apply to legal person licensed or registered in the State including commercial free zones in the UAE (Covered Companies/Covered Licensee).
Exclusion
Companies wholly owned by the Federal or local government or any other companies wholly owned by these companies, as well as the financial free zones (Dubai International Free Zone and Abu Dhabi Global Market), shall be excluded from the provisions of this Regulation.
Detail
The Resolution requires entities licensed in the UAE (unless exemptions apply) to prepare and file a Ultimate Beneficial Owner (“UBO”) register, Nominee Director register (if applicable) and a Partners or Shareholders register, with the relevant authority within sixty (60) days from the date the Resolution came into effect, being 27 October 2020, or by the date the entity is established.
It is worth noting that there has been no reference to the information in the registers being made publicly available, it is anticipated that all information will be held and maintained for authorities use only.
A further look into the requirements imposed by the Resolution
Register of UBOs
- UBOs are natural persons who ultimately own or control or have the right to vote with minimum 25% shareholding of the company, whether through direct or indirect ownership or who have the right to appoint or dismiss the majority of the Directors / Managers.
- If no natural person satisfies the condition above, then any natural person who exercises control over the company through other means shall be deemed as the UBO.
If no natural person satisfies both conditions above, then a natural person who is responsible for the senior management of the company will be deemed as the UBO.
The takeaway
- A Real Beneficial Owner is defined as the physical person that ultimately controls the covered licensee, whether directly or indirectly, through at least 25% of the capital or voting rights or through effective control. If no Real Beneficiary is determined, the physical person who is in charge of the Senior management shall be deemed as the Real Beneficiary.
- All entities in the UAE (unless excluded by the Resolution) must prepare registers of UBOs, Shareholders (Partners) and Nominee Directors by 27 October 2020.
- Covered Companies are required to designate an individual who the Registrar may contact in relation to any disclosure, however, companies listed on regulated markets shall be exempt from such requirements.
- The registers of UBOs and Partners / Shareholder and Nominee Directors are to be filed with the relevant authority by 27 October 2020. Although the filing mechanisms for onshore entities and certain Free Zones have yet to be confirmed.
- Entities must notify the relevant Registrar of any change or amendment to the information provided within 15 days of such change or amendment
Register of Nominee Director / Manager
Details of Directors / Managers acting in accordance with the instructions of another person.
Register of Partner / Shareholder
The number of ownership interests held by each Partner or Shareholder and the voting rights attached to such ownership interests and the date of acquisition of ownership interests.
Assessment
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). Entities must notify the relevant authority of any change or amendment to the information provided within fifteen (15) days of such change or amendment.
Penalty
If entities do not comply with the Resolution, the UAE Ministry of Economy may impose sanctions on those entities. The list of administrative sanctions is yet to be issued.
How can BSAA help?
- Review the existing structure of the organization.
- Assist identifying the Real Beneficiaries.
- Prepare registers of the UBOs, Partners / Shareholders and Nominee Directors / Managers (if applicable), in accordance with the Resolution.
- Arrange filing with the authorities.
- Maintain the relevant registers on a dedicated company secretarial database on an ongoing basis.
- Inform the relevant authority of any changes or amendments to the information provided.
Let’s talk
For a deeper discussion of how this issue might affect your business, please contact: info@bsauditing.com
