Intending to curb money laundering, financial fraud, tax evasion, and terror finance, the UAE government is taking steps to ensure financial transparency. Many individuals take the advantage of the complex corporate ownership structures and indulge in such activities harming the interests of governments across the world. One important step to curb such activities is recognizing the ultimate beneficial owners of each entity and set responsibility on them.
The cabinet decision no. 58 of 2020, has created a mechanism to recognize the Ultimate Beneficiary Owners (UBOs) of an entity. UBOs are (1) individuals who have control or ownership (direct/indirect) or have the right to vote with a minimum 25% shareholding in a company or the individuals who have the right to appoint or dismiss the majority of the directors/managers. (2) If any natural person fails to satisfy the above conditions then UBO will be such an individual who exercises indirect control over the entity. (3) If conditions in (1) and (2) do not provide a clear UBO, then the individual responsible for senior management of the company shall be deemed as the Ultimate Beneficiary Owner of that entity.
A UBO is essentially a natural person i.e. a human being. A company or group of companies cannot claim this status. For instance, if one company owns the majority of shares of another company, then the natural person who owns the former will be recognized as UBO of the latter company too.
The cabinet decision requires the entities to maintain adequate and up-to-date information about their shareholders and the ultimate beneficiary owners. The organizations are required to file a register of UBOs, shareholders, nominee board members, and other supporting documents to the relevant licensing authority. These registers shall include the personal information of such individuals, including names, residential address, passport details, country of origin, and the date on which the person became UBO or ceased to become so.
The provision of the decision applies to the registrar and the licensed or registered legal person in the UAE including Commercial Free Zones.
As per Article 17 of the decision, companies might be subjected to administrative penalties up to AED 100,000 in cases of non-compliance with the UBO regulations.
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