Dhanguard’s Guide on Ultimate Beneficial Ownership Registration for Companies in UAE

By Sakshi Srivastav - 06 Jul 2021 Last Updated: 15 Sep 2021
Dhanguard’s Guide on Ultimate Beneficial Ownership Registration for Companies in UAE

On August 28, 2020, the UAE government released Cabinet Resolution 58, which replaced Cabinet Resolution 34. The goal of this resolution is to improve corporate transparency by regulating Ultimate Beneficial Owner Procedures. The resolution includes UBO guidelines for both new and existing businesses. All legal entities registered in the UAE mainland and free zones would be affected by the decision (with a few stated exceptions). The need of preparing and maintaining an Ultimate Beneficial Ownership (UBO) register and associated papers is the centrepiece of this resolution. Entities must have this register on hand at all times in their offices.They must also submit the registration with the appropriate authorities and notify them of any modifications to the record.

The declaration was made in order to reduce the risk of corporate financial fraud. Unregulated firms have the potential to engage in financial and economic crimes that impair a country's commercial climate. The hazard is mitigated by UBO regulations, which require organisations and institutions to identify the party that would eventually gain from a legal entity's conduct.

Since filing and maintaining a beneficial ownership record has become a legal requirement, all legal entities should rapidly learn all of the requirements of Resolution 58, as well as the filing processes. Let's first define the term "ultimate beneficial owner" before moving on to the details.

What is an Ultimate Beneficial Ownership?

An individual or group that owns or controls more than 25% of a corporation's stock and/or voting rights. It is also the person or party who gets the most from a company's dealings. The ownership or control of a corporation by a UBO can be direct or indirect. The Resolution (cabinet resolution 58) lays out certain application guidelines that must be followed by all parties involved.

Identification of the UBO

  • The UBO, according to the resolution, is the person who owns and controls a firm directly or indirectly. Individuals who possess at least 25% of a company's shares and voting rights, or who have the power to remove and appoint a majority of the company's directors, are designated UBOs.
  • If no natural person fits the aforementioned requirements, the UBO shall be someone who holds control over a corporation through other means.
  • If no natural person can be found who fits the qualifications indicated in the first two points, the UBO will be a person appointed to a senior management position in the organisation.
  • If more than one person meets the criteria for establishing a UBO (for example, if two people share 25% of the voting rights), they will all be classified as joint owners of the ratio.

The resolution further stipulates that any arrangement can be used to identify a company's UBO. This means that businesses can seek assistance from a variety of legal entities and/or third parties. After identifying a UBO, a corporation must keep an up-to-date record of the UBO's information at all times.

Ultimate Beneficial Owner VS Beneficial Owner

A UBO is not the same as a Beneficial Owner. Beneficial owners are those who own a company's stock. Individuals who control at least 25% of a company's stock are referred to as UBOs. They also have the capacity to exert direct or indirect control over a corporation. UBOs have the ability to control the fate of entire organisations. It goes without saying that these individuals have the potential to wield a great deal of influence.

Declaration of the UBO

Let's look at what UAE legal entities must do to comply with Resolution 58 now that we have a basic grasp of UBOs and the regulations that apply to them. The resolution includes a detailed set of guidelines that legal entities can use to establish their UBO.

All entities licenced in the UAE must declare their UBO, according to the resolution. The following are some of the exceptions:

  • Entities that have been granted a free-zone licence (Dubai International Financial Center and Abu Dhabi Global Markets).
  • The Emirate or the Federal government owns legal enterprises directly or indirectly.

The resolution exempts entities licenced by free-zones from declaring their UBO. Most financial free zones, on the other hand, already have mechanisms in place for recognising and declaring UBOs. The essential requirements for a person to qualify as a UBO, as well as the cause for their identification, are comparable to those outlined in Resolution 58. Every free-zone, on the other hand, approaches the situation differently. You can learn more about UBO declaration in free-zones by contacting Dhanguard.

Responsibilities of Legal Entities

  • Companies are obligated to supply all relevant facts precisely at the time of their registration and licencing.
  • On all of their paperwork, businesses should include their trade name and official address in the United Arab Emirates.
  • If the corporation has any doubts about who the true beneficiary is, it should inform all of its beneficial owners.
  • Companies must enter appropriate UBO details in the register once the UBO has been identified and reported. They must also ensure that the registry is kept up to date. Any modifications that a corporation learns about should be recorded in the register within 15 days of learning about them.
  • Companies must furnish all data related to their UBO (and other resolution obligations) within 60 days of cabinet resolution 58's passage. Alternatively, no later than 60 days after a company's registration and licence has been completed.
  • As needed, provide information to the registrar. Authorized personnel must have access to the same information.
  • Any modifications to the data supplied with the registrar must be communicated to the registrar within 15 days of the changes being made.

To learn more about the obligations and responsibilities of legal entities in terms of UBO compliance, see Cabinet Resolution No. (58) of 2020 Regulating Beneficial Owner Procedures.

Repercussions will be imposed on legal entities that do not comply with the legislation. The Ministry of Economy will impose fines against them. Following the imposition of these sanctions, the legal entity must file an appeal, which will be reviewed before the sanction(s) can be lifted.

Real Beneficiary List

Companies in the UAE are required to keep the data of the Beneficial Owner in a register of the genuine beneficial owner, according to article 8 of Cabinet Decision No 58 of 2020. A person who owns or controls 25 percent of the capital directly or indirectly is the true or ultimate beneficiary. Alternatively, a person who has voting rights over at least 25% of the shares or who has ultimate control over a ‘legal person.'

According to the law, the register must be created within 60 days after the law's publication or the day on which the Legal Person is established.Any modifications to the data in the Register of Beneficial Owner shall be updated and recorded by the entity within 15 days of becoming aware of the change.

The following information should be included in the Real Beneficiary Register (RBR):

Requirements for Real Beneficiary

  • The Real Beneficial Owner's full name, nationality, date, and place of birth.
  • Residential address or the address to which the authorities may deliver notices in accordance with the law's provisions.
  • The nation of issuance, the date of issuance, and the expiration date are all listed on the passport or identity card.
  • The basis for the person's becoming a Beneficial Owner of the UAE entity, as well as the date on which they did so.
  • The date when the person's status as a Beneficial Owner of the UAE firm ceased to exist.

Partners' or Shareholders' Register

In addition to the RBR, UAE entities must update and maintain a Partners or Shareholders Register (PSR). The data of the entity's partners or shareholders is contained in the PSR. Any change to the Register must be updated and recorded within 15 days of the entity becoming aware of the change. The following information must be included in the Register of Partners and Shareholders:

  1. The number of shares held by each shareholder, as well as the categories and voting rights connected with them.
  2. The date on which the partners or shareholders in the UAE entity reached such capacity.
  3. In the event of natural partners or shareholders, the full name as it appears on the identity card or passport, nationality, address, birthplace, employer's name and address, and a true copy of a valid passport or ID are required.
  4. In the case of corporate partners or shareholders, the following information is needed by Clause (1) of Article (4) of the Cabinet Decision:
  • The company's name, legal form, and articles of incorporation.
  • The business's head office address or principal address, as well as the name and address of its legal representative in the state, with acceptable documentation in the case of a foreign legal person.
  • Articles of Association or any other equivalent documents that have been approved by the State's Relevant Entity.

Names of relevant personnel in higher management positions within the Legal Person, as well as information from their passports or identity cards, such as document numbers, issue and expiration dates, and issuing entity.

Nominee Board Members

A management or board member who acts as a Nominee Board Member shall inform the Legal Person that he is a nominee board member and provide the needed data within 15 days of being a nominee board member, according to Article 9 of Cabinet Decision No 58 of 2020. A nominee board member who attained such status prior to the Cabinet Decision's publication shall notify the Legal Person within 30 days of the Cabinet Decision's dissemination date.

Within 15 days of making a change to the data referred to in PSR, a Nominee Board Member must notify the Legal Person. Within 15 days after ceasing to be a nominee Board Member, the Nominee Board Member must notify the Legal Person. With the help of the best UBO consultants in the UAE, the entities will be in full compliance with the UBO law.

How can I know who the ultimate beneficial owner is?

The following approach should be used to identify and validate a company's UBO:

  • Obtain the credentials of a legal body to determine whether it is registered and valid.
  • Obtain information on a legal entity's ownership chain in order to identify all individuals who own the entity directly or indirectly through shares or interests.
  • All beneficiary owners' ownership shares, share percentages, and management control should be compared. This will assist you in identifying the persons in the firm who have the most power.
  • Compare each BO's ownership and control levels to the UBO identification criteria laid out in Resolution 58. The UBO will be the person who meets all of the requirements.

Third-party professional assistance can make UBO verification go more smoothly. Once a UBO has been identified, a corporation must prepare the appropriate information and submit the Register of Beneficial Owner to the authorities.

Should Liquidation Companies Keep Their UBO Registers?

The Ultimate Beneficial Owner of a firm in liquidation should be reported to the Regulatory Authority (UBO). The Real Beneficiary Register and Partners or Shareholders Registers must be kept for at least five years from the date of liquidation by the legal person, administrator, and liquidator. Consult with top UBO consultants in the UAE for advice on how to keep the UBO registers up to date while closing down a business.

How can Dhanguard help you?

To improve openness, the UAE government mandated the creation of UBO Registers. UBO Registers serve as a catalyst in the fight against money laundering and terrorism financing. It will have a good economic impact by reducing corruption and fraud, as well as empowering a wide spectrum of enterprises in their efforts to conduct efficient due diligence. Maintaining UBO records may appear to be a difficult task for businesses, but with the help of UBO experts in Dubai like Dhanguard, it will be much easier.

Conclusion

The United Arab Emirates is continually looking for new methods to welcome the best investors, entrepreneurs, and businesspeople from all over the world. It encourages a low-tax environment, little bureaucracy, a transparent visa process, and simple company formation to this purpose.

It has gone further in recent years to distinguish the UAE apart from others in the region and abroad. Long-term visa schemes, revisions to foreign ownership requirements, and the relaxing of various corporate and criminal prohibitions are examples of such policies.The establishment of Ultimate Beneficial Ownership (UBO) legislation for UAE firms is its most recent action. The new laws, which are aimed at boosting transparency in the government, oblige certain corporations to publish information about their owners.The new guidelines are straightforward to follow if you have the correct help from our experts at Dhanguard.

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