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The UAE government issued Cabinet Resolution 58, replacing Cabinet Resolution 34 on 28 August 2020. The purpose of this resolution is to regulate Ultimate Beneficial Owner Procedures in order to increase corporate transparency. Guidelines on UBO for new companies as well as existing companies are covered in the resolution. The resolution shall affect all legal entities that are registered in the UAE mainland and free zones (with a few stated exceptions). The key point of this resolution is the requirement of preparing and maintaining an Ultimate Beneficial Ownership (UBO) register and supporting documents. Entities must keep this register available at their office at all times. They must also file it with the relevant authorities and notify the authorities of any changes that are made in the register.
The reason behind the declaration is to decrease the chances of monetary fraud at a corporate level. Unregulated entities can get involved in financial and economic crimes that can be harmful to a country’s business environment. UBO regulations mitigate this threat by having organizations and institutions identify the party that will ultimately benefit from the actions of a legal entity.
Since filing and maintaining an ownership register of the beneficial owners has become a hard requirement, all legal entities should quickly develop an understanding of all the requirements of resolution 58 and the filing processes as well.
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
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:
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.
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:
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:
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.
In respect of Individual Shareholders | In respect of Corporate Shareholders |
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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:
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:
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:
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
Sr. No | Licensing | Mode of Submission | Portal, Link, or Email |
1 | Dubai Silicon Oasis | Email to DSOA Licensing | Lic_section@dso.ae |
2 | Hamriyah Free Zone | Via e-portal | HFZA Portal |
3 | Ajman Free Zone | Via e-Portal | Ajman Free Zone Portal: Services- Company Services – Ultimate Beneficial Owner |
4 | Dubai DED | Service Centers | DED Portal |
5 | Fujairah Creative City | ubo@ccfz.ae ccfz@creativezone.ae | |
6 | SAIF Zone | Via e-portal | SAIF Zone Portal |
7. | Ras Al Khaimah Economy Zone (RAKEZ) | Via Portal | RAKEZ |
8. | Dubai Development Authority (DDA) | Via e-Portal | DDA |
9 | Um AlQuwain Free Trade Zone | Portal | UBO Um AlQuwain Free Trade Zone |
10 | Dubai Multi Commodities Centre | Via e-Portal | DMCC Form |
11 | Media Zone Authority (MZA) | Via e-Portal | |
12 | Dubai Aviation City Corporation (DACC) | license@dacc.ae | |
13 | JAFZA | Via e-portal | JAFZA 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:
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:
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.
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