The necessity of identification of Ultimate Beneficial Owner has gained momentum across the globe with an increased International focus on tax transparency and the fight against tax evasion and other financial crimes.
Further, the recommendation of the Financial Action Task Force (‘FATF’) to OECD Global Forum on Transparency on measures geared to Anti-money laundering (AML) and Countering the Financing of Terrorism (CFT) has initiated new regulations in many countries.
In this context, the United Arab Emirates (UAE) issued Cabinet Decision No. 58 of 2020 on Regulating the Beneficial Owner Procedures (the Regulations) on 24 August 2020.
As per the Regulation, the details of the Ultimate Beneficial Owner (UBO) are supposed to be filed by the existing Legal Person within 60 days of the promulgation of the decision i.e. by October 27, 2020.
However, each Licensing Authority has issued its own deadline to comply with Beneficial Owner Procedure Regulations. Therefore, to ensure compliance, one needs to consider the deadline issued by the licensing authority with whom it is registered.
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Though each licensing Authority has its own list of details, broadly, the Register of Beneficial Owner shall include the following data in respect of each Beneficial Owner:
The Regulation lists the details required to be maintained in respect of Shareholders of the reporting entity which are as under. However, each licensing has issued its own list of details and format to submit shareholders’ details.
|In respect of Individual Shareholders||In respect of Corporate Shareholders|
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People usually ask
A Beneficial Owner is a person who has ultimately owns and controls the legal person. The Beneficial owner is defined in Cabinet Decision No. 58 of 2020. The word Ultimate Beneficial Owner is generally used interchangeably with the term Beneficial Owner in the business parlance, as the intent is to determine the ultimate owner and/or controller of the legal person.
The provisions of this Regulation do not apply to entities that are wholly owned by the Local / Federal Government and their subsidiaries and the Financial Free Zone (DIFC and ADGM) Companies.
Only if the Company is wholly owned by local or Federal Government, it shall be exempt from filing details of Beneficial Owner. In case the Company is partly owned by local or Federal Government, it will have to comply with all the provisions of this Regulation.
Regulation will apply to all Legal persons in UAE. Therefore Co. X will be required to maintain and submit the Register of Beneficial Owners and Register of Shareholders.
Co X will be required to obtain the details of Beneficial Owners of Company outside UAE and report their names in the Beneficial Owner Register.
For companies found to be non-compliant with the Regulation, the UAE Ministry of Economy may Impose sanctions. The list of administrative sanctions has not yet been issued.
Beneficial owner as defined in Cabinet Decision No. 58 of 2020, is a natural person who directly (Holding 25% of more of the Shares or Voting Rights directly or through the chain of ownership) or indirectly (Right to appoint/dismiss majority of directors or by any other means viz. through POA ) Controls the legal person. In case no single individual can be identified for direct/indirect ownership or control, the individuals holding higher management positions are deemed to be the beneficial owners of the legal entity.
For example, we can identify the shareholders holding more than 25% in the case of a private company, but in the case of a public company/listed company generally, no individual shareholder will hold more than 25% shares or voting rights. Also, the decision to appoint/dismiss a majority of the directors would not be with a single individual. In such scenarios, the members of higher management are considered to be Beneficial Owner.