UAE companies are required to identify and disclose their ultimate beneficial owners under the country’s UBO framework. The rules apply to most private UAE companies, including many mainland, free zone, and offshore entities, and require companies to keep ownership records accurate and updated.
Ultimate Beneficial Ownership, or UBO, refers to the natural person who ultimately owns or controls a legal entity. This control may be direct or indirect, including through a chain of companies, nominees, or other arrangements.
The purpose of the UBO framework is to prevent corporate structures from being used to hide the identity of the real person who benefits from a business. Regulators treat this as important for combating money laundering, terrorist financing, and tax evasion.
The UAE introduced its UBO framework through Cabinet Decision No. 58 of 2020. The obligations were strengthened and expanded by Cabinet Decision No. 109 of 2023.
UAE companies must:
- Identify their UBOs
- Maintain a UBO register
- File that register with the relevant authority
- Keep the register updated
The obligations apply even if the company is not profitable, not actively trading, or dormant.
Companies Covered by the UBO Rules
The UBO framework applies to almost all companies incorporated on the UAE mainland and in non-financial free zones.
This includes offshore companies incorporated in jurisdictions such as:
- RAK ICC
- JAFZA
Financial free zones such as DIFC and ADGM have their own parallel frameworks.
Exemptions exist for companies that are directly or indirectly owned by the UAE federal or local government, and for entities listed on a regulated stock exchange with adequate beneficial ownership disclosure.
Most private UAE companies are therefore subject to UBO requirements.
The 25% Ownership Threshold
The main trigger for UBO status is ownership of 25% or more of a company’s shares or capital, either directly or indirectly.
A person is a UBO if they:
- Own 25% or more of the shares or capital of a UAE company
- Own 25% or more of another company that itself owns shares in the UAE company
- Hold 25% or more of the voting rights, even without equivalent economic ownership
- Have the right to appoint or dismiss the majority of the board of directors or equivalent governing body
If no individual meets these ownership, voting, or control tests, the company’s senior management official is treated as the UBO for compliance purposes.
Information Required in the UBO Register
The UBO register must include the following information for each beneficial owner:
- Full legal name
- Date of birth
- Nationality
- Country of residence
- Residential address
- Passport or national ID number
- Basis for UBO status, such as ownership, voting rights, or effective control
- Date the person became a UBO
- Date the person ceased to be a UBO, if applicable
Companies must also maintain a register of shareholders or partners showing each direct owner’s identity and shareholding.
If a direct shareholder is a corporate entity, the register must include that entity’s registration details.
Filing and Update Requirements
The UBO register must be submitted to the relevant registrar, usually the authority where the company is incorporated.
Changes to UBO information must be reported within 15 days of the change.
This means the register must be updated and filed promptly when:
- Shares change hands
- A new investor joins
- An existing UBO’s details change
- Ownership or control arrangements change
Companies that fail to maintain accurate registers or fail to notify changes may face administrative penalties under Cabinet Decision No. 109 of 2023.
Enforcement has increased materially since January 2024.
Common UBO Compliance Mistakes
One common mistake is using a nominee shareholder without registering the true beneficial owner. A nominee does not remove the obligation to disclose the actual person who benefits from the ownership.
Another mistake is treating the UBO register as a one-time filing. The register is a live document and must be updated whenever ownership, addresses, or shareholder details change.
Companies can also overlook indirect ownership. If a corporate entity holds shares, the UBO is the natural person who controls that entity, not the entity itself. The ownership chain must be traced back to an individual.
Offshore entities are also often misunderstood. RAK ICC and JAFZA offshore companies are subject to the UAE UBO framework. Offshore incorporation does not exempt a company from UBO disclosure obligations.
The main compliance risk is assuming that ownership disclosure is only required at incorporation or only applies to operating companies. In practice, most UAE private companies must maintain accurate UBO records, file them with the relevant authority, and update them within 15 days of any change.
Source article: knightsbridge.ae
