New regulations concerning ultimate beneficial ownership have been implemented in the UAE, pursuant to Cabinet Decision No. 58 of 2020 on the Regulation of Procedures Related to Real Beneficiaries (the “Regulations”). The Regulations, which came into force on 28 August 2020, now require all businesses registered in the UAE (subject to some exceptions per below) to maintain registers of their direct shareholders and their ultimate beneficial owners (see below) and to submit those registers to their local regulatory authority.
The Regulations intend to standardise requirements for maintaining and disclosing details of a company’s immediate shareholders and those individuals with ultimate beneficial ownership interests (known as the “Real Beneficiaries”). The Regulations apply to all entities incorporated in the UAE, whether such entities are located in mainland UAE or in any of the UAE’s commercial free zones (the “Relevant Entities”), with the exception of entities (i) licensed in financial free zones, namely the Dubai International Financial Centre and the Abu Dhabi Global Market, where equivalent regimes already exist; and (ii) entities wholly owned by the Federal or Local Government.
All Relevant Entities are required to notify their respective registrar or licensing authority (the “Registrar”) of its shareholders and Real Beneficiaries by 27 October 2020, and thereafter on an ongoing basis. For companies registered in non-financial freezones, this would be their respective freezone authorities, and for companies registered “onshore”, this would be the local branch of the Ministry of Economy in their respective Emirate. We understand, following discussions with the Ministry of Economy, that the register of Real Beneficiaries has not yet been established, so this initial deadline may be delayed.
Identifying the Real Beneficiaries
Each Relevant Entity must identify its Real Beneficiaries, being:
- any natural person who owns or controls at least 25% of the Relevant Entity’s issued share capital, whether directly or indirectly, or any natural person who has the right to appoint or dismiss the majority of the directors/managers of the Relevant Entity; or
- if no natural person satisfies the criteria above, then any natural person who exercises control over the Relevant Entity through other means will be deemed to be a Real Beneficiary; or
- if the Relevant Entity is not able to identify any natural person who meets either of the criteria above, then the Real Beneficiary shall be the natural person(s) who is responsible for the senior management of the Relevant Entity.
Keys Considerations for all Relevant Entities
As a result of the Regulations, all Relevant Entities must now:
- maintain in their headquarters each the following registers:
- a register of its partners/shareholders, including details of the ownership interests and voting rights held by each of them;
- a register of its Real Beneficiaries, including the reason why they are a Real Beneficiary and the date on which they became so; and
- a register of its directors and nominee directors;
- submit such information related to its shareholders and Real Beneficiaries to the Registrar by no later than 27 October 2020 – note, this will be kept confidential by the Registrar;
- take reasonable measures to obtain accurate information and keep the registers up-to-date date on a continuing basis and notify the Registrar of any changes to the information provided within 15 days of such change occurring; and
- appoint an individual (who is resident in the UAE) with whom the Registrar can contact in relation to any information provided.
Relevant Entities in a regulated market, in a state of dissolution or liquidation are subject to different filing requirements and obligations under the Regulations. For instance, a Relevant Entity which is listed on a regulated stock exchange (or owned by such a listed entity) may rely on the disclosures provided to the relevant stock exchange instead of making independent inquiries regarding its Real Beneficiaries.
If a Relevant Entity is found to be in violation of the Regulations, sanctions may be imposed by the Minister of Economy or the Registrar. The list of administrative sanctions is yet to be issued.
This is another welcome step by the UAE authorities towards greater transparency when doing business in the region. The requirements in terms of identifying Real Beneficiaries are similar to those introduced by the “Persons with Significant Control” regime in the UK in 2016 which requires UK companies to identify and disclose their ultimate beneficial owners in a publicly available register (click here to see our article on the UK regime). While the registers in the UAE will remain confidential for the time being, it remains to be seen whether this may ultimately lead to a public companies’ register being available in the future, similar to those present in the UK and elsewhere.
For any further guidance on the Regulations, please do not hesitate to contact us.