A person or party that owns or controls more than 25% of a company’s shares and/or voting rights. It is also the person or party that ultimately benefits from any transactions made by a company. A UBO’s control or ownership of a company can be direct or indirect. The Resolution (cabinet resolution 58) has provided clear-cut application guidelines which are to be followed by all the applicable entities.

UBO Identification

1. According to the resolution, the UBO shall be the person who, directly or indirectly, owns and controls a company. Individuals with ownership of at least 25% shares and voting rights of a company or someone with the power to dismiss and appoint a majority of a company’s directors shall be considered as a UBO.
2. In case there is no natural person who meets the above-mentioned conditions, then the UBO shall be someone who has control over a company through other means.
3. If no natural person can be identified who meets the conditions stated in the first two points, a person appointed to a higher management position in the company will be considered as the UBO.
4. If the conditions stated for identifying a UBO are shared by more than one person (e.g. 25% of voting rights are shared by two individuals) then all of them will be identified as joint owners of the ratio.

The resolution also states that for the purpose of identifying a company’s UBO, any manner of arrangement may be acceptable. This means that companies can turn to multiple legal persons and/or third parties for support. After a UBO has been identified, a company must make sure to maintain an updated record of the UBO’s details at all times.

Ultimate Beneficial Owner Vs Beneficial Owner

A UBO is different from a Beneficial owner. Beneficial owners are people who hold shares in a company. UBOs are individuals who have ownership of at least 25% of a company’s shares. Furthermore, they also have the ability to control a company through direct or indirect means. UBOs have the power to pull the strings of entire organizations. It goes without saying that these individuals can end up holding a lot of power.

Declaration

Now that we have a basic understanding of UBOs and Resolution 58’s regulations regarding them, let’s take a look at what do UAE legal entities have to do in order to comply with this law. The resolution has provided a set of detailed Guidelines that legal entities can follow in order to declare their UBO.

According to the resolution, all entities licensed in the UAE have to declare their UBO. The exceptions include:

• Legal Entities licensed in free-zones (Dubai International Financial Center and Abu Dhabi Global Markets)
• Legal entities that are directly or indirectly owned by the Emirate or Federal government.

Entities licensed by free zones aren’t required to declare their UBO by the resolution. However, most financial free zones have their own mechanics for identifying and declaring UBOs already in place. The basic conditions for a person qualifying as a UBO and the reason for their identification are similar to resolution 58. However, every free-zone handles this matter in its own manner. For information on UBO declaration in the free zones, you can learn more by contacting your desired free zone’s client relations teams.

• At the time of their registration and licensing, companies are expected to provide all required details accurately.
• Companies should share their trade name and their official address in the Emirates on all of their documents.
• If there is a doubt about who is the real beneficiary, the company should intimate this to all of its beneficial owners.
• Once the UBO has been identified and declared, companies must provide relevant details of the UBO in the register. They must also make sure to keep the register updated. Any changes that a company becomes aware of should be amended in the register within 15 days after the change came to notice.
• Companies should provide all data regarding their UBO (and other requirements of the resolution) no later than 60 days after the enactment of cabinet resolution 58. Or, no less than 60 days after the registration and licensing of a company has been completed.
• Provide information to the registrar as required. The same information must be shared with authorized personnel.
• Any changes made in the data shared with the registrar must be intimated to the registrar within 15 days of making the changes.

Refer to the Cabinet Resolution No. (58) of 2020 Regulating the Beneficial Owner Procedures to understand the requirements and responsibilities of legal entities with respect to UBO compliance.

Legal entities that fail to comply with this law will face repercussions. They will have to face sanctions placed by the Ministry of Economy. Once these sanctions have been placed, the legal entity will have to submit an appeal that will then be processed before the sanction(s) can be lifted.

Example

We have established that a UBO is someone who gains the ultimate benefit from a legal entity’s decisions. Let’s take a look at some examples of UBOs to further clarify the concept:

Example 1

ABC is an overseas company that has 100% ownership of 123 FZ-LLC, a company in a free zone in the UAE. The shares of ABC are equally distributed amongst Mr A and Mr C (50% each). This makes Mr A and Mr B the UBOs of 123 FZ-LLC. Note that this does not make them UBOs of ABC.

Example 2

XYZ Group of companies is a parent company of 5 companies: A, B, C, D, E. Each of the five companies is owned by an individual. John owns company A, Adam owns company B, Sam owns company C, and Paul owns company D and E. XYZ’s ownership is divided equally amongst its 5 companies, meaning that A, B, C, D, and E each represent 20% of XYZ’s total equity. Since Paul owns companies D and E, he has a share of 40% in XYZ. This means that Paul is the UBO of XYZ.

In order to identify and verify a business’s UBO, the following approach should be taken:

• Acquire a legal entity’s credentials to check whether the company is registered and legitimate.
• Acquire data on a legal entity’s ownership chain in order to determine all persons who have direct or indirect ownership in the entity through shares or interests.
• Compare the ownership share, share percentage, and management control of all beneficiary owners. This will help you identify the individuals with the greatest amount of control in the company.
• Compare the ownership and control levels of each BO with the UBO identification conditions outlined by resolution 58. The individual who meets the conditions will be the UBO.

Having expert help from third parties can make UBO verification easier. Once a UBO has been identified, a company must gather the necessary information and compile the Register of Beneficial Owner so that it may be submitted to the authorities.

Though each licensing Authority has its own list of details, broadly, the Register of Beneficial Owner shall include the following data in respect of each Beneficial Owner:

• • • Full name
    • Nationality
    • Date & Place of Birth
    • Passport / Identity card No., place of issuance, its issue date, and expiry date
    • Residential Address or address where notice can be sent
    • Email address and Phone number
    • Number of shares held and its nominal value
    • Date when a person became Beneficial Owner
    • The date on which person ceased to become Beneficial Owner if any

The Regulation lists the details required to be maintained in respect of Shareholders of the reporting entity which are as under. However, each licensing has issued its own list of details and format to submit shareholders’ details.

The declaration process involves identifying a UBO and then gathering data related to them that is then entered into the UBO register. The resolution requires legal entities to produce and maintain the following:

• Register of Beneficial Owner
• Nominee Board Member information
• Register of Partners or Shareholders

The Register of Beneficial Owner will contain updated information about a company’s identified UBO. The following data of the UBO must be entered in the register:

• Full name, place and date of birth, and nationality
• Residential address(es) to which notices shall be sent.
• ID card or passport number, issuing country, and the issue date and expiry date
• The date and the basis on which the individual became the company’s UBO.
• The date on which the individual stopped being the company’s UBO.

You can get details of all the data you need to compile the above-mentioned documentation in Cabinet Resolution 58/2020’s guidelines.

Gathering information on your UBO and then compiling documentation for submission can be an extensive and delicate process. Having expert help from a third party like  GSPU can make a huge difference. GSPU is a Consultancy Agency that is an expert in helping businesses adhere to governmental compliance properly. GSPU can help you with:

• Analyzing your ownership chain and verifying UBOs.
• Help you collect data for your UBO, Nominee Directors/Managers, Partners/Shareholders registers, and compile them. They can make sure that your documentation follows the resolution’s guidelines to the letter.
• Help you arrange the filing process with the authorities.
• Help you maintain your registers and make sure that all information in them is updated.

Certificate

Upon successfully complying with the resolution, legal entities receive a UBO Certificate. This provides proof that the company has verified its UBO and that it maintains an updated register containing data on its UBO.

A UBO Certificate can prove to be invaluable if a company ever has to face law enforcement in matters related to financial malintent. The Certificate is issued by the Licensing Authority that is in charge of the registration of companies in a state.

LINKS TO SUBMIT UBO

It is to be noted that each Licensing Authority has its own standardised set of requirements. For example, the Department of Economic Development (‘DED Dubai’) released the Form in respect of details to be submitted. However, it has separately mailed its customers to file the Form (and submit the supporting documents) physically at its Service Centres. They have not mentioned any specific deadline for submissions. Further, when inquired over the phone, they have also clarified that only those entities whose “Beneficial Owners” are Corporates are required to file the details. The legal Person which is owned by an Individual is not required to file the Ultimate Beneficial Owner (UBO) details.

JAFZA Regulations:

On the other end, JAFZA had intimated its customers to file the details by December 31, 2020. While we are writing this, we understand that JAFZA has withdrawn the “Beneficial Owner” form from its Dubai Trade Portal and have indicated that they are enhancing the service and would notify the new deadline and availability of service.

As per the old form, the details are to be filed by all the Legal Person irrespective of whether the beneficial owner is an individual or corporate by login to its portal http://eservices.dubaitrade.ae/.

Though it did not mention of submission of any supporting documents apparently, the announcement specifies that the documents and records should be made available when asked for.

Further, JAFZA form was detailed. It connected the details of ESR as well.  It was divided into 5 Sections:

• Company Details
• Section A: Ownership and Control Arrangements
• Section B: Business Model
• Section C: General (Financial)
• Section D: General (bank name)

On telephonic inquiry, we understand that Legal Person also needs to submit a notarized and attested copy of an official document from the registrar confirming the ultimate beneficiary of the company. In case attestation takes time, a normal copy can be submitted with the registered agent letter conforming that the attested original will be submitted once ready.

We now await the portal to open for filing the details of Ultimate Beneficial Owner.

DAFZA Regulations

Further, DAFZA has set a deadline of 28 December 2020 for Submissions of details of the Beneficial Owner. DFZA provides a specific exemption from complying with UBO Regulations when the shares of the Entity or its ultimate holding company are listed on a UAE stock exchange or foreign stock exchange which is subject to transparency and disclosure requirements, such as the London Stock Exchange (LSE), or the New York Stock Exchange (NYSE).

DAFZA Beneficial Owner details form and copies of the supporting documents must be submitted online by using DAFZA’s CRM portal. (Login into the CRM portal -> Services -> Licensing Services -> UBO, Share Holders, Directors, Managers & Officers Declaration Forms)DAFZA has also mentioned that the support as required under the Regulations must be made available within 3 business days, whenever asked for an inspection.

Way Forward to Beneficial Owner Procedures

One needs to remember that Filing of Forms as stipulated by the Licencing Authorities is not the only requirement of the Beneficial Owner Procedures Regulation of the UAE. A legal person is also required to maintain the following Registers and update them, as stipulated in Article 6 of the Regulation:

• Beneficial Owner register,
• Nominee Directors/managers register and
• Shareholders Register

It is also advisable to notify the Beneficial Owner and keep the confirmation, in case the details have not been directly received from the Beneficial Owner.

GSPU has the experience and knowledge needed to help entities comply with the resolution. Verifying and declaring your UBO is a sensitive matter. The data that you collect and present needs to be accurate and reliable.

• Current Status Overview: We have the manpower and expertise needed to provide you with the necessary guidance. They will help collect and verify all the initial information that you must register with your authorities.
• Assistance in Registration: After collecting the needed data, they can organize it and compile it according to the guidelines provided by the authorities. They make sure that your registration submission is free of errors and in accordance with the resolution.
• Provide Continuous Support: During the registration process, entities are often required to present more information as required. We can help you prepare any further data that you need quickly and reliably.
• Regular Review: Entities are required to notify the authorities of any amendments in the data that they provide in their registers. We can monitor all amendments in your data and act swiftly whenever an update needs to be provided to the authorities. They can make sure that you don’t fail to notify the authorities within 15 days.
• >Deregistration: If your UBO ever changes, you must notify the relevant authorities. We can help you through this process, ensuring that you deregister in accordance with the law.
• >Data Confidentiality: The data submitted to the authorities in the registers is not disclosed to anyone. Being a professional and reputable agency, GSPU can ensure that your data is kept safe (in accordance with the data confidentiality clauses of Cabinet Resolution 58/2020’s Article (15) clauses 1-2).