UBO Register: Another Chapter in the Regulatory Mirage of UAE
The previous years have already seen the United Arab Emirates (UAE) inch towards more open and transparent information levels regarding Ultimate Beneficiary Owners (UBOs) of corporations. This began in the wake of the 2000s with UAE’s Central Bank circular No. 24, related to all public shareholding companies and was expanded in 2008 by the Anti Money Laundry Notice No. 2922, extending UBO disclosure to all businesses while opening bank accounts in the UAE. As recent as Federal Decree Law No. 20/2018 and Cabinet Decision No. 10/2019 provided then further tight grips by UAE’s Anti-Money Laundering and Anti-Terrorism financing regime.
Now, Cabinet Decision No. 58/2020 (published August 27, 2020) aims to further establish an environment of full transparency as far as UBOs of corporations go. It sets into place new obligatory tasks which allow the completion of data sets on entities incorporated in the UAE mainland and non-financial free zones. These tasks include the formation of a UBO registry and to update all relevant UBO information within 15 days of any changes occurring within the entity. Previously, this applied to just a handful of free zones – this decision merely extends it to nearly all remaining ones.
Implementation is as usual – ambitious: All entities are obliged to submit their “UBO Registers” by October 27, 2020 with their concerned Regulatory Authority.
Prior to outlining these changes in detail, it is most vital to understand what an UBO is in the eyes of this cabinet decision. An UBO is defined as follows:
A person which controls or owns the corporation/entity through direct- or indirect ownership. For this, the benchmark of 25% of share capital is set.
Should it be the case that such a person does not exist, the person which controls the corporation/entity is the UBO.
If a corporation fails to determine said person at hand of the above standards, then the UBO shall be the one in charge of Senior Management of the corporation.
This does not necessarily need to be one single person, as multiple people can be identified as the UBO/s.
In the case of a Nominee Manager/Director, they shall notify the entity of their nominal status and submit all necessary data required within 15 days of their appointment, or within 30 days of this decision if they are an existing Nominee Manager/Director. This information has to be submitted to the relevant authorities as shall any removal of the capacity as a Nominee Manager/Director within 15 days from the date of the removal of the Nominee capacities.
When the UBO has been identified, the corporation must then take further steps to assure the following obligations:
Creation of an UBO register
Submitting the relevant data to the relevant authority
Keeping all information accurate and maintained to a standard of a maximum of 15 days after changes take place
The preservation from damage, loss or destruction of all such register information
To do so seamless and swift, a point of contact for the corporation has to be identified. This point of contact must be a resident of the UAE and their contact information shall be provided to the relevant authorities. In the case of follow up requests for further data, this point of contact is responsible to deliver those at the hand of strict deadlines to be followed. The violation of this provision will bring forth sanctions by the Minister of Economy or the Licensing Authority.
The UBO register is to be created by every legal person licensed or registered mainland or in a free zone (including offshore registers). In other words: All entities are affected, except the entities / licensees in Dubai International Financial Center (DIFC) and Abu Dhabi Global Markets (ADGM).
The relevant data requested by the authorities, according to Article 8 of the Cabinet Decision is:
Full name, nationality, date and place of birth
Place of residence and address
Passport or ID number
Date and basis on which the person became UBO
Date on which the person ceased to be UBO, if applicable
Lastly, it is important to note the several exceptions to this new decision, namely:
Publicly traded companies, given that transparency already exists in their case
Companies in DIFC and ADGM
Companies directly or indirectly owned by the Government (federation or emirate level)
Shifts like these reflect the continued ambition towards transparency and cooperation within the UAE and internationally as it introduces provisions allowing for exchange of a wider set of data. And, obviously, it is a further effort to keep the in its demands increasing OECD compliance on acceptable level.
It is worth mentioning that regulation – if implemented correctly – is always positive and that companies should not need to fear the increasing scrutiny of governing bodies.
However, the UAE legislator failed so far to publish any clear (and important) implementation guidance. Neither towards UAE registered entities, nor towards the appointed regulatory authorities = economic & free zone authorities!
With view to – in opposite – the usually very clear stated penalties, entities are once again forced to deploy their paperwork “out of the blue” and in hope for compliance with future implementation requirements. Such historically in-transparent managed regulatory changes, e.g. introduction of VAT back in 2018, ESR in 2019/20 etc., make it for UAE based entities again unpredictable and uncertain in their aim to operate compliant and according to the law.
Your next steps
MCI CLT has already began the process of detailed analysis on the practical procedures of this Cabinet Decision. Similar to the recent changes towards ESR reporting, MCI CLT sees this new layer of UBO registers as a slowly developing “corporate transparency box”. Together with you, we are happy to make sure that your company fulfils all current- and future regulations, so that you can avoid fines and sanctions. For further information and support in getting your entity ready for this resolution, please do not hesitate to reach out via the contact page or at mcicares@mciclt.com.