Summary on provisions applying to legal persons regarding Real Beneficiaries

BackgroundThe United Arab Emirates (UAE) recently issued Cabinet Decision No. 58 of 2020 on the Regulation of Procedures Related to Real Beneficiaries (“the Regulation”), which came into effect on 28 August 2020 and repealed Cabinet Decision No. 34 of 2020 issued earlier this year.

The objective of the Regulation is intended at combating anti-money laundering crimes, the financing of terrorism and financing of unlawful organisations, and likelihood of battling tax avoidance and providing greater transparency to the UAE’s business environment in line with the international guidelines and requirements.

Scope                   

The provisions of the Regulation shall apply to legal person licensed or registered in the State including commercial free zones in the UAE. The resolution excludes companies that are wholly owned by the federal or local government or any other companies wholly owned by such companies and the Financial Free Zones.

Key Takeaways

  • A Real Beneficial Owner is defined as whoever that ultimately controls the legal person, whether directly or indirectly, through at least 25% of the capital or voting rights or through effective control. If no Real Beneficiary is determined, the physical person who is in charge of the Senior management shall be deemed as the Real Beneficiary.
  • Covered Companies are required to designate an individual who the Registrar may contact in relation to any disclosure, however, companies listed in an organized market that are subject to disclosure requirements shall be exempt from such requirements.
  • Existing companies operating in the UAE and covered under the scope of the Regulation will be required to create and maintain: 1.) Register of Real Beneficial Owners; and 2.) Register of Partners or Shareholders including details of nominal management member with following details
    1. Full name, nationality, date and place of birth;
    2. Place of residence, or address to which notifications are send hereunder;
    3. Passport or ID number, country and date of issue and expiry;
    4. The basis on which he became a Real Beneficiary of the legal person, and the date on which it acquired that capacity;
    5. The date on which a person ceases to be a Real Beneficiary of the legal person.
  • There is a requirement for information in these registers to be submitted to competent licensing authorities within 60 (sixty) days from the day following the date of publication of the Regulation or from the date of licensing.
  • Covered Companies must notify the competent licensing authority of any change or amendment to the information provided within 15 days of such change or amendment.

Deadline

  • As the Regulation has been enacted on 28 August 2020, the deadline for submitting the details of the Real Beneficiaries for existing entities covered under the scope shall be within 60 days from the date following the date of publication. In addition, the Regulations also refers to certain other sub-deadlines which the Covered Companies should adhere to.

Administrative Sanctions

  • In case of a violation of the Regulation, The Minister or the Licensing Authority, shall impose one or more administrative sanctions. The administrative sanctions are not yet specified in the Regulation.

Conclusion and Way Forward

  • In a short span of time, UAE has taken substantial steps in strengthening its regulatory framework. But outside of the DIFC (Dubai International Financial Centre) and ADGM (Abu Dhabi Global Market), the two financial centers, there was a pressing need to standardize ongoing compliance requirements in commercial free zones and mainland. This is what the Regulation broadly intends to address and also enhance its cooperation with international authorities.
  • In view of the above, companies should immediately review their existing structure, collate the relevant data and ensure to comply with the requirements within the stipulated time frame.

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