The UBO Declaration UAE is an important corporate compliance requirement for businesses operating in the United Arab Emirates. UBO stands for Ultimate Beneficial Owner, meaning the natural person who ultimately owns or controls a legal entity, either directly or through a chain of ownership or control.

The UAE has established beneficial ownership rules to improve corporate transparency and support efforts against money laundering and other financial crimes. The current framework is primarily set out in Cabinet Resolution No. 109 of 2023 on the Regulation of Real Beneficiary Procedures. The resolution requires relevant legal persons to take reasonable measures to obtain and maintain appropriate, accurate, and up-to-date beneficial ownership information.

For companies with straightforward ownership, identifying the UBO may be relatively simple. However, businesses with corporate shareholders, multiple ownership layers, or international structures may need to examine their ownership and control arrangements more carefully.

What Is a UBO Declaration in the UAE?

A UBO Declaration identifies the individual who ultimately owns or exercises control over a legal entity.

Under Article 5 of Cabinet Resolution No. 109 of 2023, a real beneficiary generally includes a natural person who directly or indirectly owns 25% or more of the capital of a legal person or has 25% or more of the voting rights. The rules also consider other forms of ultimate control, including certain rights to appoint or remove the majority of the board of directors.

Importantly, beneficial ownership may need to be traced through multiple companies or arrangements. This means that the immediate shareholder shown on a company's licence is not always the ultimate beneficial owner.

For example, if a UAE company is owned by another company, the ownership structure may need to be followed until the natural person who ultimately owns or controls the structure is identified.

Why Is UBO Declaration Important?

The purpose of UBO requirements is to increase transparency around the ownership and control of legal entities.

A company may have a registered shareholder that is itself another legal entity. Without looking through that structure, it may not be clear who ultimately owns or controls the business.

UBO requirements help establish this information and form part of the UAE's broader corporate transparency and anti-money laundering framework. The UAE Ministry of Economy & Tourism lists Cabinet Resolution No. 109 of 2023 and Cabinet Resolution No. 132 of 2023 among the country's relevant financial-crime legislation.

For businesses, maintaining accurate UBO information is also useful from a corporate governance perspective. Banks, financial institutions, auditors, licensing authorities, investors, and other parties may need accurate information about a company's ownership structure.

Who Needs to Maintain UBO Information?

The beneficial ownership framework applies to relevant legal persons established or registered in the UAE, subject to the exclusions and conditions set out in the applicable legislation.

Businesses should therefore determine whether their legal entity falls within the scope of the regulations and whether a specific exemption applies.

Free zone businesses should also pay attention to these requirements. Being established in a free zone does not automatically mean that a company is outside the beneficial ownership framework. The exact administrative process can, however, depend on the relevant registrar or licensing authority.

Companies should check the current requirements applicable to their particular jurisdiction rather than relying on an outdated UBO form or general checklist.

Who Qualifies as a UBO?

Determining the UBO requires more than simply looking at the largest shareholder.

Under the UAE framework, a natural person who directly or indirectly owns 25% or more of the company's capital or voting rights may qualify as the real beneficiary. Control through other means may also be relevant.

The regulations also provide a process for situations where a controlling natural person cannot be identified through ownership. If the available methods have been exhausted, the rules consider individuals exercising control through other means. Where no natural person can be identified through the relevant criteria, the senior management officer may be treated as the real beneficiary under the resolution.

This makes it important for companies to assess both ownership and control when preparing their UBO information.

How to Identify the UBO of a UAE Company

The first step is to review the company's ownership structure.

For a company directly owned by individual shareholders, the process may be straightforward. The company can review each shareholder's ownership percentage and voting rights and determine whether the applicable beneficial ownership criteria are met.

The situation can be more complicated when shareholders are companies rather than individuals.

Suppose Company A in the UAE is owned by Company B, which is registered in another country. Company B is not necessarily the ultimate beneficial owner because the UAE framework focuses on the natural person who ultimately owns or controls the legal person.

The ownership chain may therefore need to be followed through Company B and any other entities until the relevant natural person or persons are identified.

Companies should also examine shareholder agreements and other arrangements that may give an individual effective control even where their direct ownership percentage does not tell the whole story.

What Information Is Required for a UBO Declaration?

The exact documentation and submission process can depend on the relevant registrar or licensing authority. However, businesses generally need sufficient information to identify the beneficial owner and document their relationship with the company.

Depending on the applicable requirements, information may include:

• Full name of the beneficial owner
• Nationality
• Date and place of birth
• Identification or passport details
• Ownership percentage
• Voting rights
• Nature of control
• Details of the ownership structure

Businesses should ensure that the information is accurate and consistent with their corporate records.

For example, a difference between the name on a passport and the name recorded in corporate documentation may create unnecessary administrative issues. Similarly, an old ownership percentage should not be used after a share transfer.

UBO Register and Corporate Records

UBO compliance is not simply about completing a declaration and forgetting about it.

Cabinet Resolution No. 109 of 2023 defines a Beneficial Owner's Record and a Register of Partners or Shareholders. The resolution requires relevant legal persons to take reasonable measures to obtain and maintain appropriate, accurate, and up-to-date beneficial ownership information.

This means companies should maintain organized records and review them when their ownership or control structure changes.

Keeping the UBO register aligned with shareholder registers, constitutional documents, ownership charts, and other corporate records can make compliance management easier.

When Should UBO Information Be Updated?

A company should review its UBO information whenever a change may affect beneficial ownership or control.

Examples include a transfer of shares, the addition or removal of shareholders, changes in voting rights, corporate restructuring, or changes in the ownership of a corporate shareholder.

For companies with international or layered ownership, even a change several levels above the UAE entity may potentially affect the ultimate beneficial owner.

Regular reviews can therefore help businesses identify changes before they result in inconsistent corporate records.

UBO Declaration for Free Zone Companies

UBO compliance is also relevant to many UAE free zone businesses, depending on the applicable legal framework and exemptions.

The practical procedure can differ between free zones because individual registrars may have their own forms, portals, documentation requirements, and administrative procedures.

A company should therefore determine the rules applicable to its specific free zone rather than assuming that every free zone follows exactly the same process.

This is particularly important for businesses with foreign shareholders or holding-company structures, where determining the ultimate natural person may require additional documentation and ownership analysis.

Common UBO Declaration Mistakes

One of the most common mistakes is listing the immediate shareholder instead of identifying the person who ultimately owns or controls the company.

Another common issue is failing to update UBO information after a change in shareholding. Companies can also encounter problems when ownership percentages, personal identification details, or control information are inconsistent across different corporate documents.

Businesses with complex structures may face additional challenges because beneficial ownership needs to be traced through multiple legal persons or arrangements. Cabinet Resolution No. 109 of 2023 specifically provides that beneficial ownership can be traced through any number of legal persons or arrangements.

Maintaining a clear ownership chart and supporting documentation can make this process easier.

Administrative Penalties and Compliance

The UAE has also established an administrative penalty framework relating to violations of the beneficial ownership procedures. The Ministry of Economy & Tourism lists Cabinet Resolution No. 132 of 2023 as the resolution concerning administrative penalties for violations of Cabinet Resolution No. 109 of 2023.

For this reason, businesses should treat UBO compliance as an ongoing corporate responsibility rather than a one-time administrative exercise.

The appropriate approach is to maintain accurate records, monitor ownership changes, and follow the requirements of the relevant registrar.

How Audit.ae Can Help With UBO Compliance

Businesses that are uncertain about their UBO structure can benefit from professional assistance in reviewing their ownership and corporate records.

Audit.ae can help businesses understand their UBO compliance requirements, review ownership structures, identify relevant beneficial ownership information, and organize supporting documentation.

Professional support can be particularly useful for businesses with multiple shareholders, corporate shareholders, foreign ownership, holding companies, or complex ownership arrangements.

A structured review can help ensure that the company's beneficial ownership information accurately reflects its underlying ownership and control.

Final Thoughts

The UBO Declaration UAE is an important part of maintaining corporate transparency and complying with the UAE's beneficial ownership framework.

Under Cabinet Resolution No. 109 of 2023, businesses need to identify the relevant natural person or persons who ultimately own or control the legal entity, maintain appropriate records, and keep beneficial ownership information accurate and up to date.

For companies with simple ownership structures, this process may be relatively straightforward. Businesses with corporate shareholders or multiple ownership layers, however, should carefully trace their ownership and control structure before completing their UBO records.

Keeping UBO information aligned with the company's shareholder records and other corporate documents can help businesses maintain better compliance and respond more efficiently when information is requested.

Frequently Asked Questions About UBO Declaration UAE

What does UBO mean in the UAE?

UBO means Ultimate Beneficial Owner. It generally refers to the natural person who ultimately owns or exercises ultimate control over a legal entity.

What is the UBO ownership threshold in the UAE?

Under Article 5 of Cabinet Resolution No. 109 of 2023, direct or indirect ownership or voting rights of 25% or more can be relevant when determining the real beneficiary. Other forms of control may also apply.

Is UBO Declaration required for UAE free zone companies?

Relevant legal persons in commercial free zones can fall within the beneficial ownership framework, subject to applicable exclusions and requirements. The specific procedure depends on the relevant registrar.

When should UBO information be updated?

Companies should review and update their beneficial ownership information when changes in ownership, voting rights, control, or corporate structure affect the identity of the ultimate beneficial owner.

Can a company be the ultimate beneficial owner?

The beneficial owner is generally a natural person. If a UAE company is owned by another legal entity, the ownership structure may need to be traced through the chain to identify the natural person who ultimately owns or controls it.

Why is UBO compliance important?

UBO compliance promotes transparency regarding company ownership and forms part of the UAE's broader corporate and financial-crime compliance framework.