On August 28, 2020, the UAE Cabinet passed Resolution 58, which replaced Resolution 34 on August 28th. This resolution aims to establish corporate transparency by regulating Ultimate Beneficial Owner Procedures. The resolution also contains recommendations on establishing a UBO for new companies and existing ones. The resolution covers all companies incorporated in the UAE mainland and free zones (with certain exceptions). This resolution emphasizes the need for establishing and maintaining an Ultimate Beneficial Ownership (UBO) register and supporting documentation. This register must be maintained at all times by businesses. They must also submit an update to the authorities and notify them of any changes in the register.
To minimize the possibilities of corporate monetary fraud, both state and federal governments made this announcement. Unregulated entities may engage in financial and economic crimes that pose a threat to a country’s business climate. A UBO eliminates this risk by forcing organizations and institutions to identify the party that will benefit from a legal entity’s activities.
All legal entities must quickly develop an understanding of all the requirements of resolution 58 and the filing processes, particularly because obtaining and maintaining a list of the beneficial owners has become a difficult duty. Let’s start by defining the phrase “ultimate beneficial owner.”
A person or entity that has more than 25% of a firm’s shares and/or voting rights. It’s also the individual or entity that benefits from any corporate transactions. A company can have a direct or an indirect UBO. The Resolution (cabinet resolution 58) has made clear-cut application procedures that all relevant parties must adhere to.
Any sort of arrangement may be utilized to identify a firm’s UBO, according to the resolution. This implies that organizations may call on a variety of legal persons and/or third parties for assistance. A business must always keep an up-to-date record of the UBO’s information after it has been discovered.
A Beneficial Owner is not the same as an UBO. People who are considered beneficial owners of a firm are referred to as shareholders. UBOs are people who control at least 25% of a firm’s equity. Furthermore, they have the power to influence a firm in a variety of ways, including through direct or indirect control. The UBOs have the ability to control the actions of entire organizations. It should go without saying that these people might have a lot of power.
Now that we’ve covered what UBOs are and how Resolution 58’s rules the work, let’s look at what legal entities in the UAE need to do to comply with this legislation. The resolution has established a set of clear rules for companies to follow in order to report their UBO.
All corporations licensed in the UAE are required by the resolution to disclose their UBO. The following are the exceptions:
The resolution doesn’t require entities licensed by free zones to declare their UBO. However, many financial-free zones already have their own procedures for identifying and reporting UBOs. The basic conditions for qualifying as a UBO, as well as the reason for their identification, are identical to those in Resolution 58. However, each free zone has its own approach to this issue. For more information on how to make a UBO declaration in the free zones, contact your chosen free zone’s client service teams.
To comprehend the regulations and responsibilities of legal entities when it comes to UBO compliance, consider the Cabinet Resolution No. (58) of 2020, which regulates beneficial owner procedures.
If organizations don’t follow this rule, they will be penalized. The Ministry of Economy will take measures against them. Once these penalties have been imposed, the legal entity must submit an appeal, which will be handled before the sanctions may be discontinued.
That person has the ultimate gain from a legal entity’s decisions, as we’ve shown. Let’s look at some UBO examples to help you understand the concept better.:
ABC is an offshore firm with complete control over 123 FZ-LLC, a commercial entity located in the UAE’s free zone. Mr. A and Mr. C each own one share of ABC (50% each). The UBOs of the corporation are Mr. A and Mr. B, who are both shareholders. This does not, however, make them UBOs of ABC.
Example 2
Company XYZ is the parent company of five firms: A, B, C, D, E. Each of the five firms is controlled by a single person. John owns organization A, Adam owns organization B, Sam owns organization C, and Paul owns organization D and E. XYZ is owned by five firms, each of which owns half of the company. A, B, C, D, and E all represent 20% of XYZ’s total equity. Paul has a stake of 40 percent in XYZ since he owns companies D and E. This implies that Paul is the UBO of XYZ.
The following approach should be used to determine and authenticate a company’s UBO:
Third-party assistance may make UBO verification more simple. Once a UBO has been discovered, a firm must gather the required information and compile the Register of Beneficial Ownership in order for it to be submitted to authorities.
The procedure of identifying a UBO and then gathering information about them that is subsequently entered into the UBO register begins with a declaration. The following are required of legal persons under the resolution:
The Register of Beneficial Owners will contain up-to-date information regarding a company’s prominent UBO. The following information from the UBO must be recorded in the register:
In Cabinet Resolution 58/2020, you may find out exactly what information you’ll need to create the preceding documentation.
It’s not easy to acquire information on your UBO and then compile documentation for submission. A third party, such as BestaxCA, can make a significant difference. The BestaxCA is a Consultancy Agency that specializes in assisting businesses with government compliance.BestaxCA can assist you with:
A UBO Certificate is given to legal persons who comply with the resolution. This shows that the firm has confirmed its UBO and keeps an up-to-date register of its UBO information.
If a firm ever has to deal with law enforcement in connection with financial malintent, a UBO Certificate may be quite beneficial. The Certificate is given by the Licensing Authority, which is in charge of the registration of firms in a state.
BestaxCA can assist organizations to adhere to the agreement because it has the necessary expertise and understanding. It’s a delicate issue to verify and declare your UBO. Your facts must be accurate and trustworthy.
Professional assistance from a third party may make the UBO registration process more manageable for your firm. It will also ensure that you fulfill all criteria on time and without problems.
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