Unveiling the corporate veil: Requirements to declare real beneficiaries in the UAE.

Cabinet Decision No. 58 of 2020 regulating the procedures of the real beneficiary was adopted in the UAE to develop the business environment of the UAE under international principles. Recent changes require mandatory introduction of regulatory mechanisms to collect and maintain the “real beneficiary” data.

We have written about this resolution before, and in this article we want to deepen the concept of the ‘real beneficiary’.

A ‘Real beneficiary’ is defined as the ‘a Legal Person who has the ultimate ownership or exercises ultimate control over a Legal Person, directly or through a chain of ownership or control, or other indirect means, as well as the natural person who conducts transactions on behalf thereof, or who exercises ultimate effective control over a Legal Person’.

How to identify a real beneficiary:

The resolution states that a real beneficiary will be tracked down by through any number of legal persons or arrangements of any kind, thus showcasing the broad scope of this regulation.

The resolution makes it mandatory for all companies to declare and register the data of whoever owns or finally controls the legal person through :

• direct or indirect shares or
• equity of the legal person’s capital at 25% or more;or
• has the right to vote therein at 25% or more, including retaining that ownership through a chain of ownership or control;or
• through control through any other means such as the right to appoint or dismiss the majority of the directors.

Further, in the instance, it is not possible to identify a real beneficiary for the company as per the process mentioned above then, the natural person who occupies the senior management official and possesses the decision-making authority for the company will be deemed as the real beneficiary.

Onus on the Company :

The regulation requires the creation of a ‘real beneficiaries register’ for all companies, unless those specifically excepted(govt owned) within 60 days from the date of the enactment of the resolution.

The real beneficiary register shall record the information of the name, nationality, date and place of birth, place of residence, or address of notification, passport or id number as well as the basis on which the person became the real beneficiary.

Subsequent amendments to the register should also be taken into account, such as the date on which a particular person is no longer the real beneficiary of the legal entity.

To effect a change of ownership in a company, the transferee of shares is required to submit a statement noting whether the transfer will result in a change in the real beneficiary of the company and the data of the new real beneficiary and listing such data in the register.

At any given point, the company is placed under the onus to inquire about the status of any person the company has reason to believe is a real beneficiary. In the instance no reply is received within 15 days time from the date of inquiry the, company is required to issue written notice requesting information for verifying or supplementing the identification of the real beneficiary and the subsequent incorporation in the register.

In the instance, the addressee does not respond to the notification within 15 days from the dispatch date, and the company is required to include the details in the real beneficiary’s register.

Any person holding capacity of interest may request the competent court for a correction of the real beneficiary’s register if, among others, if the name is entered without sufficient reason or if the said person is no longer a real beneficiary.

Does the resolution apply to free zones in the UAE?

Yes, Article 3 of the resolution explicitly states that the provisions of the resolution apply to free zones.

The only exceptions provided for in the resolution are:

• companies that are either wholly owned by the federal or local government or any other companies wholly owned by such companies, and the Financial Free Zones.

Further, under Article 6(2) of the resolution, the exemption is provided from obtaining and maintaining accurate, updated information on an on-going basis on the real beneficiary for a company listed in an organized market(stock exchange) which supports disclosure and transparency requirements.

Confidentiality protection and disclosure obligations:

The data listed in the real beneficiary register maintained with the registrar will not be disclosed to any unless, with the written approval of the real beneficiary or his nominal board member.

However, the above-mentioned confidentiality provisions would be excluded and disclosure would take place under the conditions in force with regard to the fight against money laundering or the combating financial terrorism and illegal organizations acts and international treaties.

Newly introduced terms:

The resolution also introduced and defined new terms such as “Nominal Board Members,” “Trustee” ,”Testator” and “Deed of Trust.”

‘Nominal Board Member’ as a natural member who acts under the guidelines, instructions or will of another person.

‘Testator’ as a natural or Legal Person who transfers the management of his funds to a trustee by virtue of a document.

‘Trustee’ as a natural or legal person enjoying the rights and powers granted to him by the testator or the trust fund, under which he manages, uses and disposes of the testator’s funds in accordance with the conditions imposed on him by any of them.

‘Trust Fund’ as a legal relationship whereby the testator places the funds under the control of the trustee for the benefit of a beneficiary or for a specific purpose and is considered independent funds from the trustee’s property and the right to the trustee’s funds remain in the name of the testator or in the name of another person on behalf of the testator

Deadline for declaring the true beneficiary:

The cabinet regulation has extended disclosure requirement to the companies incorporated in the mainland, offshore and freezones with corresponding deadlines.

Dubai Development Authority (DDA)- 27th of October 2020

Dubai Media City (DMC)-27th of October 2020

International Freezone Authority (IFZA)-27th of October 2020

Dubai Studio City-27th of October 2020

Ras Al Khaimah Economic Zone (RAKEZ)- 27th of October 2020

Fujairah Creative City (FCC)-27th of October 2020

Sharjah Media City Free Zone (SHAMS)-27th of October 2020

Dubai Multi Commodities Centre (DMCC)-Before 31st of October 2020

Ajman Free Zone Authority (AFZA)-Before 31st of October 2020

Hamriyah Free Zone (HFZA)-5th of November 2020

Dubai Airport Free Zone (DAFZA)-Awaiting for the ministry’s confirmation

Dubai Internet City (DIC)- 30th of September

Other authorities which have not been listed above are awaiting for the ministry approval based on the request made for extension.