How to Identify an Ultimate Beneficial Owner | Push Digits Chartered Accountants

How to Identify an Ultimate Beneficial Owner?

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The UAE’s regulations regarding Ultimate Business Owner (UBO) identification have gone through some changes in 2020. The government passed cabinet resolution number 58 in August 2020. According to this resolution, all businesses that are registered in the UAE (except for legal entities licensed in free zones e.g DIFC and federally owned entities) are required to declare their UBO(s). The government has taken these steps in order to improve corporate transparency in the UAE.

If you are a business owner in the UAE, established in the mainland, or in a free-zone, you are required to declare your UBO(s). In order to do this, you must first be able to identify your UBO. A lot of people find the concept of UBOs rather confusing, this may make it harder for people to wrap their heads around this new law. Fortunately, once you develop a basic understanding of ultimate beneficiaries, things become much clearer.

What is a UBO?

The objective of resolution no. 58 of 2020 is to create a transparent business environment in the country where ultimate owners of a business are identified and documented. A UBO is a person or group of persons who gain the ultimate benefit from a business’s operations. UBOs receive the ultimate benefit because they own the majority of a company’s equity and they have direct or indirect control over the business itself.

An Ultimate Beneficial Owner is not the same as a beneficiary owner (BOs). Anyone who has a part in the ownership of a business (usually in the form of shares) is classified as a beneficiary owner. UBOs and BOs are similar in some aspects, they both have ownership in a company. However, unlike BOs, UBOs have direct/indirect control over a company. For instance, a UBO may be able to dismiss and reappoint a majority of a company’s board of directors. Along with ultimate control over a company, they also have a larger percentage of ownership (at least 25%) in the company.

Identifying UBOs

Detailed guidelines on the identification of UBO for new companies as well as existing companies are covered in the resolution.  In order to identify your UBO, you will need to analyze the chain of ownership. You must first identify everyone who holds a portion of ownership in your company. Then compare their ownership, share, and management control percentages in order to see who has the most control. The person with the greatest amount of control is the ultimate beneficial owner of your company.

UBO Identification Guidelines

Resolution 58 (Article 5) provides clear guidelines on identifying a UBO:

  1. Any individual who ultimately controls or owns a business (directly or indirectly) through the ownership chain or through other means (such as the ability to appoint/dismiss directors or have ownership of more than 25% shares in the company) shall be classified as the company’s UBO.
  2. A company’s UBO can be traced through all legal persons and/or other arrangements as required.
  3. If more than one natural person controls or owns a ratio of a company’s capital, all of them will be classified as joint controllers or owners of the ratio.
  4. If, after adequate effort, no UBO can be identified according to the conditions mentioned above, then any individual who has control over the company through other means shall be classified as the UBO.
  5. If no individual can be found who meets all the conditions mentioned above, the person with a higher management position in the company shall be classified as the UBO.

 

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