A Summary of the UAE Regulations Relating to Beneficial Owner Procedures

On 24 August 2020, Cabinet Decision No. (58) of 2020 Regulating the Beneficial Owner Procedures (Decision) was issued by the UAE government.

The Decision is applicable to all companies in the UAE including the Commercial Free Zones. It is not applicable to Financial Free Zones and to companies that are wholly owned by the local or federal government or to wholly owned subsidiaries of such companies.

Broadly speaking, the Decision deals with licensing and registration of legal persons (i.e. companies), registration of ultimate beneficial owners (UBOs), nominee board members (NBMs), registration of partners / shareholders and confidentiality.

Here is a summary of the key areas covered in the Decision:

1. Licensing or Registration of Companies

The Decision states that a company may not be licensed or registered under a trade name that is previously registered or under a name that is similar to an already existing name to the extent that it may cause confusion. In this context, the founders of a company in UAE are required to provide the following information at the time of incorporation:

• Name, legal form and memorandum and articles of association.
• Principal address and, in case of a foreign company, the name and address of its legal representative in the UAE with a proof thereof.
• Names and other particulars of the relevant persons holding higher management positions in the company.

2. Ultimate Beneficial Owners and their Registration

UBOs are persons, who own or control a company either directly or indirectly. Some examples of UBOs are:

• A person controlling the chain of ownership.
• A person exercising the right to appoint or dismiss directors of the company.
• A person possessing at least 25% shares and / or voting rights of the company.
• A company conducting transactions on behalf of the UBO.

If any of the above scenarios are triggered, then the Decision will be applicable upon the company and the UBO.

Occasionally, some individuals (i.e persons in charge of the company) are deemed to be UBOs. These include situations wherein no person is identified as an UBO, or when there is a reasonable doubt about the identification of the UBO.

It is the duty of the entities in the UAE to maintain a register comprising of the updated records of the UBOs, such as:

• Name, nationality, date, and place of birth.
• Address
• Number on the identity card, the country of issuance, date of issuance, and date of expiry.
• Date on which a person became the UBO.
• Basis on which a person became the UBO.
• Date on which a person ceased to be the UBO, if applicable.

A company must form the register within sixty (60) days from date of its incorporation or the date of the Decision.  Interestingly, a company in the UAE that is listed on a recognized stock exchange does not have to maintain this register. Going forward, a company may modify the records of the register, within fifteen (15) days of becoming aware of the relevant change.

Also, a company has to provide to the registrar the data contained in the register of UBOs, and any additional information that the registrar may seek from the company. A company will also need to provide to the registrar the name and other particulars of the UAE resident, who is authorized to disclose on its behalf to the registrar the relevant information.

3. Nominee Board Members

An NBM is a person who acts according to the instructions of another person. Any manager or a board member acting as an NBM has to inform the concerned company of his capacity, within fifteen (15) days of becoming the NBM. Any person acting as an NBM prior to 24 August 2020 must inform the company of his capacity within thirty (30) days therefrom. The intimation should be supported with the following data:

• Details of shares held and voting rights.
• Date on which the partner or shareholder acquires that capacity in the company.
• In case of natural partners or shareholders, the full name, nationality, address, place of birth, particulars of employer, along with a copy of the ID.
• In case of corporate partners or shareholders, the data that is provided at the time of registration and licensing of a company (mentioned under point 1 above).

Change in the data, if any, must be intimated within fifteen (15) days of such change.

If an NBM ceases to be an NBM, then he shall inform the company within fifteen (15) days of leaving the post.

4. Partners or Shareholders and their registration

Similar to UBOs, a company is responsible to record in a separate register the following details of its partners and shareholders:

• Details of shares held and voting rights.
• Date on which the partner or shareholder acquires that capacity in the company.
• In case of natural partners or shareholders, the full name, nationality, address, place of birth, particulars of employer, along with a copy of the ID.
• In case of corporate partners or shareholders, the data that is provided at the time of registration and licensing of a company (mentioned under point 1 above).
• Data of partners or shareholders acting as a trustor or NBM.
• Data of persons represented by any trustee or NBM.

A company may modify the records of the register, within fifteen (15) days of becoming aware of the relevant change.

A company has to provide to the registrar the data contained in the register of partners and shareholder, and any additional information that the registrar may seek from the company. A company will also provide to the registrar the name and other particulars of the UAE resident, who is authorized to disclose on its behalf to the registrar the relevant information.

5. Confidentiality

The Ministry of Economy and the registrar are obligated to not disclose to any person the data contained in the register of UBOs or the register of partners or shareholders, without the written consent of the UBO or NBM.

The decision is also applicable to offshore companies in UAE. InZone provides company formation and compliance services in the UAE. We ensure that your company is compliant with the latest UAE laws. Please feel free to contact us for any assistance relating to beneficial owner procedures and related enquiries.