The United Arab Emirates (UAE) recently issued Cabinet Resolution No. 58 of 2020 on the Regulation of the Procedures of the Real Beneficiary (the Resolution), which came into effect on 28 August 2020 and replaced Cabinet Resolution No. 34 of 2020 issued earlier this year.
The Resolution aims to introduce the requirement for a beneficial ownership register in the UAE mainland and unify the minimum disclosure requirements for corporate entities incorporated in the UAE mainland and in the non-financial free zones.
The Resolution addresses the disclosure requirements at the corporate registration stage, as well as the requirement to subsequently maintain a shareholder register, a register of beneficial owners and a register of nominee directors. Companies are now required to file the beneficial ownership information with the relevant Registrar by 27 October 2020.
Key takeaways
- All companies in the UAE, both mainland and free zone companies (with the exception of companies incorporated in the financial free zones (Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC) and companies owned by the Federal Government and their subsidiaries), must now keep at their office premises:
a. a shareholder register;
b. a register of beneficial owners; and
c. a register of nominee directors. - Companies must file such information relating to the shareholders and beneficial owners with the relevant registrar and licensing authorities responsible for supervising the register of trade names for the various types of establishments registered in the UAE (the Registrar) by 27 October 2020.
- Companies must notify the Registrar of any change or amendment to the information provided within 15 days of such change or amendment.
- Companies are required to designate an individual who the Registrar may contact in relation to any disclosure.
- Each company must take reasonable steps to ensure transparency, to obtain accurate information regarding the beneficial ownership, and to update the information on the registers on an ongoing basis.
- Companies which are listed in well regulated stock exchanges or companies which are owned by these listed companies may rely on the disclosures made to the relevant stock exchange rather than making independent inquiries as to the beneficial ownership.
In depth
The UAE Federal Law No. 20 of 2018 on Anti-Money Laundering (the UAE Anti-Money Laundering Law), which was issued on 30 October 30 2018, placed an obligation on corporate entities to disclose any individual ownership (whether beneficial or actual) in an entity which owns twenty five percent or more of the company, to the relevant regulator. Following the issuance of the UAE Anti-Money Laundering Law, several free zones in the UAE introduced requirements for the disclosure of the ultimate beneficial ownership.
- Shareholder Register
The concept of a shareholder register is set out in the UAE Commercial Companies Law. The Resolution, however, sets out the specific information that must be maintained in relation to each shareholder, including details of the senior managers of each shareholder. - Register of Beneficial Owners
Article 5 of the Resolution provides that within sixty days of the issuance of the Resolution, each company must introduce a register of beneficial owners. For the purposes of the Resolution, the beneficial owner of a company shall be:
a. any natural person who ultimately owns or controls or has the right to vote over at least 25% of the company’s share capital, whether through a direct or indirect chain of ownership or control, or any natural person who has the right to appoint or dismiss the majority of the directors of the company;
b. if no natural person meets the criteria under point (a) above or if there are doubts as to the identity of the beneficial owner, the beneficial owner shall be any natural person who manages or administers the company; or
c. if the company is unable to identify any natural person that meets the criteria under points (a) and (b) above, the beneficial owner shall be the natural or a legal person who is the senior manager of the company. - Register of Nominee Directors
This is a new concept introduced under the Resolution and requires a company to maintain a register of any director or manager who acts in accordance with the guidelines, instructions or will of another person.
Circular 323 /DDA
The Federal Law 20 of 2018 on Anti Money Laundering and Countering the Financing of Terrorism (the “AML Law”) and Cabinet Decision 10 of 2019 issued under the AML Law require business licensing agencies in the UAE to identify the ultimate individual beneficial Owner(s) of businesses licensed by them. The Dubai Development Authority (the“Authority”) now requires all the business partners it licenses (whether as FZLLCs or Branch Offices – “BusinessPartners”) to disclose their ultimate beneficial owners.
An Ultimate Beneficial Owner is an individual who ultimately owns or controls 25% or more of a Business Partner,whether directly as a shareholder, or indirectly via control of companies, other entities or structures that control theBusiness Partner (the “UBO”).
It is important to note that the UBO is not necessarily the shareholder. ( For example only, an overseas company called ABC Limited owns 100% of the shares in a free zone company called XYZ FZLLC. Bill and Ted each own 50% of the shares in ABC Limited. The UBOs of XYZ FZLLC are Bill and Ted (not ABC Limited).) As from 1 July 2019, all new business partners registering as an FZLLC or as a Branch Office of a foreign (non-UAE)
Company will be required to complete and submit the UBO Form as part of the registration and licensing process. All existing business partners registered as an FZLLC or as a Branch Office of a foreign (non-UAE) Company will be required to complete and submit the UBO Form as part of their licence renewal at the next renewal date after 1 July 2019
It is a condition of issue and renewal of a licence to a Business Partner in the Dubai Development Authority Free Zone that a Business Partner provides UBO information to the Authority and updates that UBO information as and when the UBO changes.
PO Box 478844, Dubai, UAE
T +971 800-4-DDA (332)
F +971 4 427 2449
dda.gov.ae
The Authority reserves the right to request any Business Partner to supply additional documentation and other verifiable information to evidence disclosures made in the UBO declaration.
Certain Business Partners are exempt from making a UBO declaration. Those exceptions are set out in Section 2 of the UBO Form.
