Ultimate Beneficial Ownership UAE (push digits)
The UAE government introduced Cabinet Resolution 58 on 28 August 2020, replacing Cabinet Resolution 34, with the aim of enhancing corporate transparency through the regulation of Ultimate Beneficial Owner (UBO) procedures. The resolution applies to both new and existing companies and encompasses legal entities registered in the UAE mainland and free zones, with specific exceptions outlined. A pivotal aspect of this resolution mandates the creation and maintenance of a register for Ultimate Beneficial Ownership along with supporting documents. Entities must keep this register accessible at their offices, file it with the relevant authorities, and promptly notify authorities of any changes made to the register.
The primary rationale behind this resolution is to mitigate the risk of corporate-level monetary fraud. Unregulated entities can potentially engage in financial and economic crimes that pose a threat to a country’s business environment. UBO regulations address this threat by compelling organizations to identify the ultimate beneficiary of a legal entity’s actions.
With the requirement for filing and maintaining an ownership register of beneficial owners now a stringent mandate, all legal entities need to swiftly comprehend the specifics of Resolution 58 and the associated filing procedures. Before delving into these details, it’s crucial to establish a clear understanding of the term “ultimate beneficial owner.”
What is an Ultimate Beneficial Owner?
The Ultimate Beneficial Owner (UBO) is an individual or entity that possesses ownership or control exceeding 25% of a company’s shares and/or voting rights. Additionally, the UBO is the party that ultimately derives benefits from transactions undertaken by the company. The control or ownership exercised by a UBO over a company can be either direct or indirect. Cabinet Resolution 58 has outlined precise application guidelines that must be adhered to by all relevant entities.
UBO Identification
1. As per the resolution, the Ultimate Beneficial Owner (UBO) is defined as an individual who directly or indirectly owns and controls a company. Individuals possessing a minimum of 25% shares and voting rights in a company or having the authority to appoint or dismiss a majority of the company’s directors qualify as UBOs.
2. If there is no natural person meeting the criteria outlined above, the UBO is someone exercising control over the company through alternative means.
3. In instances where no natural person fulfilling the conditions from the first two points can be identified, an individual appointed to a higher management position within the company is deemed the UBO.
4. If the conditions for identifying a UBO are met by more than one person (e.g., two individuals sharing 25% of voting rights), all of them will be recognized as joint owners in proportion to their share.
The resolution emphasizes that, for UBO identification, any arrangement or structure may be acceptable. This flexibility allows companies to seek support from various legal entities or third parties. Once a UBO is identified, it is essential for the company to maintain an updated record of the UBO’s details at all times.
Ultimate Beneficial Owner Vs Beneficial Owner
A Beneficial Owner and a UBO (Ultimate Beneficial Owner) are distinct entities. Beneficial owners are individuals holding shares in a company. In contrast, UBOs are those individuals who possess ownership of a minimum of 25% of a company’s shares and also wield control over the company, either directly or indirectly. UBOs hold significant influence, as they have the authority to manipulate the operations of entire organizations. The implication is that these individuals can wield considerable power.
Declaration
Now that we have a foundational understanding of UBOs and the regulations set forth in Resolution 58, let’s delve into the requirements for UAE legal entities to adhere to this law. The resolution has outlined comprehensive guidelines that legal entities can follow to disclose their UBO.
As per the resolution, all entities licensed in the UAE are obligated to declare their UBO, with certain exceptions:
- Legal entities licensed in free zones (such as Dubai International Financial Center and Abu Dhabi Global Markets).
- Legal entities directly or indirectly owned by the Emirate or Federal government.
Entities licensed by free zones are exempt from UBO declaration according to the resolution. However, most financial free zones have established their own protocols for identifying and declaring UBOs. While the fundamental criteria for a person to qualify as a UBO and the rationale behind their identification align with Resolution 58, each free zone manages this process uniquely. To obtain information on UBO declaration in specific free zones, it is advisable to reach out to the client relations teams of the desired free zone.
Legal Entity’s Responsibility
- During their registration and licensing processes, companies are required to provide accurate details.
- Companies should display their trade name and official Emirates address on all documents.
- If uncertainty arises about the actual beneficiary, the company must inform all beneficial owners.
- After identifying and declaring the UBO, companies must enter relevant UBO details in the register, ensuring the register remains updated. Any identified changes should be reflected in the register within 15 days of awareness.
- Companies must submit all UBO data (and other resolution requirements) no later than 60 days after the enactment of Cabinet Resolution 58 or within 60 days after completing company registration and licensing.
- Provide necessary information to the registrar, ensuring the same information is shared with authorized personnel.
- Notify the registrar of any changes made in the shared data within 15 days of implementing the changes.
Refer to Cabinet Resolution No. (58) of 2020 Regulating Beneficial Owner Procedures for a comprehensive understanding of legal entities’ obligations and responsibilities regarding UBO compliance.
Failure to comply with this law will result in repercussions for legal entities, including sanctions imposed by the Ministry of Economy. Following the imposition of sanctions, the legal entity must submit an appeal, which will undergo processing before the sanctions can be lifted.
How to Verify Ultimate Beneficial Owner
To ascertain and authenticate a business’s Ultimate Beneficial Owner (UBO), the following approach should be undertaken:
- Obtain the credentials of the legal entity to verify its registration and legitimacy.
- Gather information on the ownership structure of the legal entity to identify all individuals with direct or indirect ownership through shares or interests.
- Analyze the ownership share, percentage of shares, and management control of all beneficial owners (BOs) to pinpoint individuals with the highest level of influence in the company.
- Compare the ownership and control levels of each BO against the UBO identification criteria specified in Resolution 58. The individual meeting these conditions will be recognized as the UBO.
Seeking assistance from third-party experts can simplify the UBO verification process. After identifying the UBO, the company must collect the necessary information and compile the Register of Beneficial Owners for submission to the authorities.
The declaration process involves the identification of a UBO and subsequent collection of data related to them, which is then recorded in the UBO register. As per the resolution’s requirements, legal entities must establish and uphold the following:
- Register of Beneficial Owner
- Nominee Board Member information
- Register of Partners or Shareholders
The Register of Beneficial Owner is designed to contain updated information about a company’s identified UBO. The UBO register should include the following details:
- Full name, place and date of birth, and nationality
- Residential address(es) for sending notices
- ID card or passport number, issuing country, issue date, and expiry date
- The date and basis on which the individual became the company’s UBO
- The date on which the individual ceased to be the company’s UBO
For comprehensive details on the data required for compiling the mentioned documentation, refer to the guidelines in Cabinet Resolution 58/2020. The process of gathering information on the UBO and compiling documentation for submission can be extensive and intricate. Seeking assistance from a third party, such as Push Digits, can be highly beneficial. Push Digits is a Consultancy Agency with expertise in helping businesses comply with governmental regulations. They can assist you in:
- Analyzing your ownership chain and verifying UBOs.
- Collecting data for your UBO, Nominee Directors/Managers, Partners/Shareholders registers and ensuring compliance with the resolution’s guidelines.
- Facilitating the filing process with the authorities.
- Ensuring the maintenance of your registers and updating all information in accordance with the guidelines.
Certificate
After successfully adhering to the resolution, legal entities are issued a UBO Certificate. This certificate serves as evidence that the company has verified its UBO and maintains an up-to-date register containing information about its UBO.
The UBO Certificate can be of great value in situations where a company may need to address law enforcement inquiries related to financial malfeasance. Issued by the Licensing Authority responsible for registering companies in a given jurisdiction, the certificate confirms the company’s compliance with UBO verification and reporting requirements.
How can Push Digits Help?
Push Digits possesses the expertise and understanding necessary to assist entities in fulfilling the resolution’s requirements. Verifying and declaring your UBO is a delicate process, demanding accuracy and reliability in the data collection and presentation.
- Current Status Overview: We have the personnel and expertise required to offer you essential guidance. We will assist in collecting and verifying all the initial information that must be registered with the authorities.
- Assistance in Registration: After gathering the required data, we can structure and compile it according to the guidelines provided by the authorities. We ensure that your registration submission is error-free and aligns with the resolution.
- Provide Continuous Support: Throughout the registration process, entities may be required to provide additional information as needed. We can assist you in promptly and reliably preparing any additional data required.
- Regular Review: Entities are obligated to inform the authorities of any changes in the data submitted in their registers. We can track all modifications in your data and promptly take action whenever an update needs to be communicated to the authorities. We ensure that you adhere to the requirement of notifying the authorities within the stipulated 15-day period.
- Deregistration: In the event of a change in your UBO, it is imperative to notify the relevant authorities. We can assist you throughout this process, ensuring that you deregister in compliance with the law.
- Data Confidentiality: The information provided to the authorities in the registers is kept confidential and not disclosed to any third party. As a professional and reputable agency, Push Digits can guarantee the security of your data, aligning with the data confidentiality clauses outlined in Article 15, clauses 1-2 of Cabinet Resolution 58/2020.
Seeking professional assistance from a third-party can simplify the UBO registration process for your company, ensuring timely compliance with all requirements and avoiding any issues.
UBO Templates:
The following templates are crucial for comprehension and submission of the declaration:
- Cabinet Resolution No. (58) of 2020 Regulating the Beneficial Owner Procedures
- UBO Declaration Form Template
- Required Data for UBO Declaration