Foreign and Ultimate Beneficial Ownership Changes in the UAE
While the benefits for foreign ownership of a company in the UAE are numerous, the government has worked to implement several compliance measures over the past few years to adhere to global financial standards. As part of this series of Economic Substance Requirements, the UAE added another requirement for companies registered there. How do these changes to foreign ownership rules in the UAE impact your reporting? We have all the details and a solution that will maintain proper compliance.
What are the new minimum UAE company ownership requirements you must disclose?
On 28 August 2020, the Cabinet Resolution No. 58 of 2020 on the Regulation of the Procedures of the Real Beneficiary (the Resolution), the piece of legislation that encompasses these changes, went into effect in the UAE. What did the Resolution lay out for companies in the UAE engaged in business activities?
Following the implementation of this law, all corporate entities in the UAE must maintain the following registers:
Beneficial Owners’ Register
Nominee Directors’ Register
How does this differ from the previous law concerning UAE foreign direct investment or company setup? While the shareholders’ register was a requirement up until this point as it was mandated in the Companies Law, the Beneficial Owners’ Register and Nominee Directors’ Register are brand-new requirements that all corporate entities in the UAE must maintain.
What does the addition of these new registries mean?
As we covered when discussing ultimate beneficial ownership, many people choose to remain anonymous when performing financial transactions when purchasing and selling securities or other assets. The idea of beneficial ownership is disclosing the person who ultimately controls or owns the customer or, in the case of a transaction performed on someone’s behalf, the person who is benefitting from it.
It also introduces the concept of a Nominee Director, which is someone acting in a director capacity on behalf of another person.
How does the UAE define beneficial ownership in the context of this legislation?
In the UAE a beneficial owner is a natural person who ultimately controls/owns or has the right to vote over at least 25% of a company’s share capital through either an indirect or direct chain or control. A beneficial can also be someone who can appoint or dismiss the majority of a company’s directors.
What happens if no one can meet the criteria or the identity of the person is in doubt, the legislation says that it can be any person who administers or manages the company. If that case is not possible, the beneficial owner would be a senior manager of the entity.
What entities must comply?
Much like the Economic Substance Regulation, the only entities exempt from this requirement are those that are government-owned. That means all Free Zone and Mainland companies must satisfy these requirements to maintain the three registers. While the UAE has made significant progress in its compliance processes to get on the positive list in the eyes of global financial regulators, the decentralised nature of the corporate registries in the country created a need to make the ongoing compliance requirements uniform across the board.
How can Europe Emirates Group help you?
Europe Emirates Group’s suite of Corporate Secretarial Services can maintain the three sets of corporate books mandated as part of the Resolution, the beneficial owners’ register, shareholders’ register and the nominee directors’ register. We will also act as your company’s secretary through an Appointment Document. Our basic tier package also includes the maintenance of these books, the filing of the Economic Substance Requirement documents, updates for the National Economic Register and arranging for all relevant statutory filings that may arise per local corporate requirements. We will also work with you to review your company’s status per the local conditions.
As you need all of the aforementioned in place to perform business activities in the UAE and renew your company licence, and navigating the paperwork as someone unfamiliar with the Emirati regulatory environment can be cumbersome, we recommend you leave it to us. Would you like to learn more? Contact us today.
CEO, Europe Emirates Group