On 28th August 2020, the UAE Ministry of Economy published Cabinet Resolution No. 58 of 2020 (the ‘Decision’) on the “Regulation of Procedures Related to Real Beneficiaries”. The Decision requires companies based in the UAE mainland and commercial free zones to maintain registers of their beneficial owners and shareholders. Further, the decisions require that the companies file their registers with the relevant registrar and licensing authorities.
One of the main drivers to introduction of these rules is Federal Decree Law No. 20 of 2018 and its implementing regulation, Cabinet Decision No. 10 of 2019, which deals with anti-money laundering crimes and combating the financing of terrorism and financing of unlawful organizations. The information maintained in the register could be shared by the Ministry of Economy with foreign governments at their request, as per international cooperation measures.
Similar beneficial ownership disclosure rules have been introduced in jurisdictions such as Jersey, the British Virgin Islands and the Cayman Islands. This development is a further step by the UAE to align internationally with the OECD’s transparency and BEPS initiatives, and builds on the work done to implement economic substance regulations. Beneficial ownership information may also be required to be reported under the UAE economic substance regulations.
The key highlights of this decision are as follows:
- Companies have to create and maintain the following registers at their office:
- Register of shareholders;
- Register of beneficial owners. i.e., whoever owns or controls through direct or indirect ownership at least 25% of the legal person’s shares or whoever has a voting right of at least 25% of the shares.
- Register of nominee directors, i.e. the person following the guidelines or instructions issued by another person.
- Companies covered by the Decision are required to maintain and submit the above mentioned (a) & (b) on or before 27th October 2020 (i.e., 60 days from date of promulgation or at the time of incorporation of a new entity) to their respective Registrars. ‘Registrar’ has been defined as the entity in-charge of supervising the commercial names register of the various types of establishments registered in the UAE, including the Licensing Authority.
- Companies must notify the Registrar of any change or amendment to the information provided within 15 days of such change or amendment.
- Companies are required to designate a point of contact whom the Registrar may contact in relation to any disclosure.
- Every company must take reasonable steps to ensure transparency, to obtain accurate information regarding the beneficial ownership, and to update the information on the registers on an ongoing basis.
- These rules do not apply to companies established in the UAE’s financial free zones (such as ADGM and DIFC) or to companies which are wholly owned by the federal or local government.
- Companies listed in well-regulated stock exchanges or companies owned by these listed companies may rely on the disclosures made to the relevant stock exchange rather than making independent inquiries as to the beneficial ownership.
Administrative sanctions for failure to comply with the rules are likely to be issued, but full details of these are yet to be released. The decision also mentions that the information contained within companies’ registers should be kept confidential by the Ministry of Economy and the Registrar.
Although the deadlines are fast approaching, there remains a lack of clarity or guidance in terms of the format and channel for submitting these registers.