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.

Companies and financial institutions are expected to know who they are doing their business with, and comply with KYB (Know Your Business) requirement. This requires detection of the ownership structure and their business relationships.

Applicability

1. The provisions of this Decision shall apply to the Registrar and the licensed or registered Legal Persons in the State, including the Commercial Free Zones.

2. The provisions of this Decision shall not apply to the companies which are wholly owned by the Local or Federal Government, or any-other companies wholly-owned by such companies, and the Financial Free Zones.

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.

The FATF focuses on two types of UBO, based on “ultimate ownership” and “ultimate effective control”.

The beneficial owner is thus;

–   the person you are doing business with, who may be the legal owner of the entity, or
–   the person, or group of persons, who own/s or controls that business.

A company may have more than one beneficial owner or group of owners, to conceal the identity of absolute controlling person or interests.

The “ultimate beneficial owner” of a legal entity is thus:

–   The Beneficial Owner of the Legal Person shall be whoever person that ultimately owns or controls, whether directly through a chain of ownership or control or by other means of control such as the right to appoint or dismiss the majority of its Directors, 25% or more of the shares or 25% or more of the voting rights in the Legal Person.

–   ‘Nominee director’ appointed on behalf of another person and used to conceal the identity of the true owner of the company or some illicit activity; or

–   Company or other legal entity who is a ‘corporate director’, who may be used to construct complex and opaque corporate structures across multiple jurisdictions to facilitate illicit activity; or

–   Holder of ‘bearer shares’ which do not require registration of the owner, and can be transferred simply with changing hands of the share certificate. This anonymous ownership may be used for tax evasion, money laundering or illegal activities.

A further look into the requirements imposed by the Resolution Register of UBOs

  • Register of UBOs
  • Register of Nominee Director / Manager
  • 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.

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.

Consequences of UBO non-compliance

Where UBO information is not compiled at the time of KYC or UBO screening has not been performed, the company may face huge penalties, from jail time to fines, or both.

Besides the penalties, as a company, you may face the loss of reputation and lose out on customer confidence. Another more serious consequence gaining traction is de-risking, where institutions may develop severe business relationships with you or banks may close your account to minimize their risk exposure.

How can RVG help?

Unfortunately, ownership won’t necessarily be neat, within a single jurisdiction or entity type, and it could be many layers deep depending on the structure of the customer.

Gathering and analyzing the information needed to understand corporate ownership structure and discover UBOs takes anything from several hours to days. 

At RVG, we offer a range of products that will help your business adhere to regulatory compliance and verify the Ultimate Beneficial Owner of any company.

● Prepare registers of the UBOs, Partners / Shareholders and Nominee Directors / Managers (if applicable), in accordance with the Resolution.

● Arrange filing with the authorities.

● Inform the relevant authority of any changes or amendments to the information provided.