Disclaimer: The following article is not aimed to constitute legal or financial advice to its readers. It is aimed at being informational and educational in nature. Readers are encouraged to hire a legal professional to advice them on such matters.
In recent years, the UAE has made great strides in increasing business transparency and building a more resilient and regulated environment to do business in.
Various new legislatives have been implemented as part of these efforts such as the introduction of VAT in 2018, more detailed AML laws and renewed foreign company ownership laws amongst others.
Increasing transparency and ease of doing business
The leaders of the United Arab Emirates have spared no efforts in advancing the country to be one of the leading financial and business hubs on a global scale. This has been validated by the UAE's ease of doing business rank increasing from 31 in 2015 to 16 in 2020.
As of 2020 data, the UAE is the 16th easiest country in the world to do business in from nearly 200 nations that are surveyed to curate the rankings. This puts the UAE ahead of Canada, Ireland, China, Germany and several other very prominent business markets. (Source: Ease of Doing Business Rankings)
UBO regulations are among some of the latest legislatives that have been announced to further said objectives. Read on to learn more about them, whilst also learning about the latest updates as of 2021.
What are the UBO Regulations in the UAE?
Aimed at further increasing the transparency of business practices in the UAE, the UAE Cabinet issued Cabinet Resolution no (58) of 2020 concerning regulation of the real beneficiary procedures (“UBO Regulations”). The UBO Regulations came into force on 28 August 2020.
The UBO Regulations establish a framework for reporting and registering beneficial interests, ultimate beneficial owners (“UBO”) and professional directors.
All UAE companies, whether mainland, freezone or offshore, must comply with the reporting obligations under the UBO Regulations. Companies are required to report on said UBO disclosures to the respective governing authority of the jurisdiction they are registered in. Dubai mainland companies for instance are required to report to the Department of Economic Development (DED), whilst freezone companies are required to report to their respective freezone governing authority.
What jurisdictions are expect from UBO regulations?
It should be noted that DIFC and ADGM registered companies remain unaffected by the new regulations.
What are the UBO reporting deadlines?
The first deadline given for reporting was 27th October 2020. However, not every authority has put in place the necessary reporting mechanisms yet, so it is a little ambiguous how fixed this deadline is. As of June 2021, various governing authorities have made final and well decided deadline announcements that businesses are require to comply with.
What do the UBO regulations require companies to report on?
Under the new UBO Regulations, a company must prepare and maintain:
(1) A UBO Register– for the purposes of the UBO Regulations, a UBO is a natural person who ultimately own or control or have the right to vote with minimum 25% shareholding of the company, whether through direct or indirect ownership or who have the right to appoint or dismiss the majority of the Directors/Managers of that company.
If no natural person satisfies the foregoing condition, then any natural person who exercises control over the company through other means shall be deemed to be the UBO and if no natural person satisfies this condition then a natural person who is responsible for the senior management of the company will be deemed the UBO.
(2) A Register of Professional Directors/Managers– to include details of directors/managers acting in accordance with the instructions of a third party; and
(3) A Register of Members- to include the number of ownership interests held by each partner/shareholder and the voting rights attached to such ownership interests and the date of acquisition of such interests.
Almost all companies registered in UAE will already have a share register. Under the UBO Regulations, any changes to any of the information provided must be given to the relevant regulatory authority within 15 days of such change or amendment.
What are the repercussions on non-compliance?
Non-compliance with the preparation and subsequent updating of any of these registers may lead to administrative fines.
What are recent updates on UBO deadlines?
In recent updates on filings and deadlines;
- Dubai mainland companies have been notified by DED to register UBOs on DED portal.
- Freezone jurisdictions have provided varying deadlines for registered businesses to report on their UBOs.
- As of June 12, 2021, companies registered in SHAMS, Sharjah have been given till June 30th to register their UBOs via SHAMS' online form.
- Ajman Freezone companies have been allowed till June 29th to submit their UBO information on the AFZ portal.
- There is some variance in requisites and deadlines from jurisdiction to jurisdiction. Business-owners are recommended to check with their respective licensing authorities for specific guidelines on filing their UBOs.
For more information on reporting requirements please contact your respective governing authority. Feel free to reach out to us if you have any doubts or are unsure of whom to contact.
Conclusive remarks:
As business-owners in the UAE, we must appreciate and comply with such new regulations. At the end of the day increased business transparency and strict regulation benefits us all by creating a more resilient environment to do business in.