Beneficial ownership requirements for a RAK ICC.

Beneficial ownership (BO) laws and regulations are part of the UAE government’s efforts to increase measures to combat money laundering and terrorism financing while maintaining best practices.

BO procedures for all corporate entities incorporated in the UAE mainland and the non-financial free zones (Commercial Free Zones) are regulated by UAE Cabinet Decision No. 109 of 2023 (the Decision), which took effect on 16 November 2023.

The following companies are exempted from the provisions of the Decision:

• Companies wholly owned by the federal or local government or any other wholly owned by such companies.
• Financial free zones
• Government partners

BO identification is necessary mainly to:

1. Safeguard companies from being used by financial criminals acting behind legal structures.
2. Combat money laundering and terrorism financing through improved disclosure and record-keeping requisites for companies.
3. Bring transparency to the UAE economic framework.

The Decision requires RAKICCs to maintain registers of s and shareholders and to file the registers with the relevant registrar and licensing authorities.

Determining beneficial ownership

Beneficial ownership is determined:

• By way of ownership (the natural person who owns the company through direct or indirect ownership of 25% shares or more.
• By way of voting rights (the natural person who holds 25% or more of the company’s voting rights and
• Through controlling rights (the natural person who holds the right (1) to appoint or dismiss the majority of the company’s managers or (2) any other means by which the person exercises ultimate control over the company.
• Where none of the above apply, the senior management official shall be the UBO (the natural person holding the senior managerial position in the company).

A corporate entity or legal person cannot be a UBO (ultimate beneficial owner); the latter must be a natural person.

New rules for company registers

The Decision has implemented new regulations requiring companies to create and maintain the following registers at their registered office and to submit them to the Registrar of Companies.

Register of beneficial ownership:

• Companies have 60 days from the issuance of the Decision or from their establishment date to create this register.
• Any changes in BO must be recorded within 15 days of the company’s knowledge.
• The register must include:
  • Full name, nationality, date and place of birth of the beneficial owner.
  • Residence address or notification address.
  • Travel document or ID card number, issuing country, and expiry date.
  • The date on which the person became or ceased to be a beneficial owner.

Register of partners and shareholders:

• This register should detail information on all partners and shareholders, including the number of shares held, categories of shares and voting rights, and the date of becoming a partner/shareholder.
• Any changes must be recorded within 15 days of the company’s awareness.
• Legal persons also must submit Beneficial Owner’s Records and the Register of Partners or Shareholders to the Registrar.

A Nominee Board Member (a person who acts under the directions, instructions or will of another person) who has been appointed or holds a position in the juristic personality and who usually represents a shareholder/member is also subject to disclosure requirements.

Submission deadlines:

• Companies have 60 days to submit the Register of Beneficial Owners and the Register of Partners or Shareholders to the Registrar. This timeframe is counted from the enforcement date of the Decision or the company’s licensing/registration date.
• Additional data requested by the Registrar must be provided within 14 days from the date of the request.

Registrar’s right in respect of complex company structures

The Registrar will employ a risk-based approach, focusing on companies with complex ownership that might be used to hide the identities of the real beneficiaries. In such cases, where traditional methods fail to reveal the true owner, the Registrar will have the authority to utilise the risk-based approach to identify them.

Beneficial ownership disclosure rules

The Decision distinguishes between public access and authorised disclosure of beneficial ownership information.

The following points are to be taken into consideration:

• Confidentiality: The Registrar and the Ministry of Economy are prohibited from publicly disclosing BO or partner/shareholder data without written consent from the beneficial owner or a designated management member acting on their behalf.
• Contact point: Companies must appoint a UAE resident as their point of contact for the Registrar regarding disclosure requests. This individual’s contact details, address, and a valid ID copy must be provided to the Registrar.
• Maintaining transparency: Companies are responsible for taking reasonable steps to ensure transparency in their ownership structure. This includes acquiring accurate information about beneficial owners and updating the registers with any changes.
• Listed company exemption: Companies registered in the UAE that are ultimately owned by a company listed on a regulated stock exchange with sufficient beneficial ownership transparency requirements are exempt from maintaining a separate beneficial owner register within the UAE.

Administrative penalties

Administrative penalties will be applicable for non-compliance with BO disclosure rules. These will act as a deterrent for companies who fail to meet their BO disclosure obligations. These penalties can vary depending on the severity of the non-compliance and can include: –

• Written warnings: For minor offences, the Registrar may issue a written warning to the company, highlighting the need for compliance.
• Monetary fines: The Registrar, after coordinating with the Minister of Finance, could impose significant monetary fines for more serious violations.

Grievance

A grievance may be filed with the Registrar to the Grievances Committee on the administrative penalties imposed within 30 days from the date of notification. A request to stop the implementation of administrative penalties may also be submitted. The Committee shall decide on this request within 45 working days.

Conclusion

In conclusion, implementing beneficial ownership requirements under UAE Cabinet Decision No. 109 of 2023 marks a significant step forward in enhancing transparency and combatting financial crimes such as money laundering and terrorism financing within the UAE.

For RAK ICC companies, adhering to these regulations is a legal obligation and a critical measure to protect against misuse by individuals hiding behind corporate structures. By maintaining accurate and up-to-date registers of beneficial owners, partners, and shareholders, companies contribute to a more transparent and secure economic environment in the UAE.

Compliance with these rules is essential to avoid administrative penalties and support the overarching goal of safeguarding the financial system’s integrity. The UAE’s commitment to rigorous disclosure and record-keeping standards reinforces its position as a global leader in financial governance, ensuring that corporate entities operate with the highest level of transparency and accountability.