OVERVIEW OF BENEFICIAL OWNERSHIP REGULATIONS (INCLUDING RECENT UAE REGULATIONS)

1. INTRODUCTION

Tax
transparency continues to be a key focus of governments and the public, as
demonstrated by the continuing media coverage surrounding data leaks in recent
years. The availability of beneficial ownership information, i.e., the natural person
behind a legal entity or arrangement, is now a key requirement of international
tax transparency and the fight against tax evasion and other financial crimes.

The recent
movement towards transparency has its origins in international standards adopted
primarily to combat cross-border money laundering, corruption and financial
crimes.

One of the most
pressing corporate governance issues today is the growing trend towards
increased corporate transparency. Public and private companies around the world
are being mandated to identify and disclose the details of their Ultimate
Beneficial Owners (‘UBOs’) i.e., the individuals who ultimately own or control
them. Corporate transparency has also made its way into mainstream discourse.

Data leaks such
as the Panama Papers in 2016 and the Paradise Papers in 2017 have thrown the
spotlight on complex corporate structures, the identity of ‘true’ owners and
general tax avoidance.

In April, 2016 the public as well as media commentators were taken by
surprise by the leak of over 11.5 million confidential documents from Mossack
Fonseca, a Panamanian law firm. The so-called ‘Panama Papers’ scandal serves as
an example of how the rich and powerful in some cases may have used complex
legal structures to conceal their beneficial ownership in offshore
subsidiaries. The Panama Papers scandal has provided an opportunity to
policy-makers the world over to call for stricter rules to promote the
disclosure of ultimate beneficial ownership.

Legislators and
regulators have renewed their focus on corporate transparency, extending their
reach beyond anti-money laundering measures solely applicable to the financial
sector.

GLOBAL MEASURES TO IMPROVE TRANSPARENCY

The G8 Summit
in 2013, as a part of the fight against money laundering, tax avoidance and
corruption, exerted enormous pressure on countries to improve transparency to
ensure that the true owners of a corporate body or other entities can be
traced, instead of remaining hidden behind complex structures.

The Financial
Action Task Force (FATF), which is playing a significant role in respect of the
establishment of beneficial ownership regulations in various jurisdictions
across the globe, is an independent inter-governmental body that develops and
promotes policies to protect the global financial system against money
laundering, terrorist financing and the financing of weapons of mass
destruction. The FATF currently comprises 37 member jurisdictions and two
regional organisations, i.e., the European Commission and the Gulf Co-operation
Council, representing major financial centres in all parts of the world. India
is also a member of the FATF.

The ‘International
Standards on Combating Money Laundering and the Financing of Terrorism &
Proliferation’ issued by the FATF (FATF Recommendations) are recognised as
the global Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT)
standards. Various amendments have been made to the FATF recommendations since
the text was adopted by the FATF Plenary in February, 2012, the latest
amendments being made in October, 2020. In addition, in respect of ‘Beneficial
Ownership’ the FATF has also published the following:

a) Best
Practices on Beneficial Ownership for Legal Persons (in October, 2019);

b) The Joint
FATF and Egmont Group Report on Concealment of Beneficial Ownership (July,
2018);

c) The FATF
Horizontal Study: Enforcement and Supervision of Beneficial Ownership
Obligations (2016-17); and

d) FATF
Guidance on Transparency and Beneficial Ownership (October, 2014).

‘FATF Recommendation
# 24’ requires jurisdictions to ‘ensure that there is adequate, accurate and
timely information on the beneficial ownership and control of legal persons
that can be obtained or accessed in a timely fashion by competent authorities’.

OECD VIEW

OECD considers
beneficial ownership information at the heart of the international tax
transparency standards: both the exchange of information on request (the EOIR
Standard) and the automatic exchange of information (the AEOI Standard).

OECD considers
that from a tax perspective, knowing the identity of the natural persons behind
a jurisdiction’s legal entities and arrangements not only helps that
jurisdiction preserve the integrity of its own tax system, but also gives
treaty partners a means of better achieving their own tax goals. Transparency
of ownership of legal entities and arrangements is also important in fighting
other financial crimes such as corruption, money laundering and terrorist
financing so that the real owners cannot disguise their activities and hide
their assets and the financial trail from law enforcement authorities using
layers of legal structures spanning multiple jurisdictions.

In this regard
OECD has published ‘A Beneficial Ownership Toolkit’ prepared by the Secretariat
of the Global Forum on Transparency and Exchange of Information for Tax
Purposes.

However, in the
context of beneficial ownership referred to in Articles 10, 11 and 12 of the
Model Tax Convention, OECD’s view on ‘beneficial ownership’ is a little
different. For example, in the context of the Commentary on Article 10,
paragraph 12.6 explains as under:

‘12.6 The above
explanations concerning the meaning of “beneficial owner” make it clear that
the meaning given to this term in the context of the Article must be distinguished
from the different meaning that has been given to that term in the context of
other instruments¹ that concern the determination of the persons
(typically the individuals) that exercise ultimate control over entities or
assets. That different meaning of “beneficial owner” cannot be applied in the
context of the Article. Indeed, that meaning, which refers to natural persons
(i.e. individuals), cannot be reconciled with the express wording of
subparagraph 2 a), which refers to the situation where a company is the
beneficial owner of a dividend. In the context of Article 10, the term
“beneficial owner” is intended to address difficulties arising from the use of
the words “paid to” in relation to dividends rather than difficulties related
to the ownership of the shares of the company paying these dividends. For that
reason, it would be inappropriate, in the context of that Article, to consider
a meaning developed in order to refer to the individuals who exercise “ultimate
effective control over a legal person or arrangement.”’

Let us look at
specific measures taken by some key jurisdictions for improving transparency
through enhanced disclosures regarding beneficial ownership and control of
legal ownership.

2. DISCLOSURE REQUIREMENTS IN CERTAIN KEY JURISDICTIONS

One key measure
introduced by various countries is the requirement to prepare and maintain a
register identifying the ‘owners’ of the company. Specific reporting and
disclosure requirements vary by jurisdiction, with some countries requiring the
register to be publicly filed and others allowing for the register to be
privately held but accessible to government authorities.

a)         India

Section 89(10)
of the Companies Act, 2013 defining ‘beneficial interest’ was inserted and
section 90 dealing with the Register of Significant Beneficial Owners (‘SBOs’)
in a company was substituted by the Companies (Amendment) Act, 2017 w.e.f. 13^th
June, 2018. Section 90 as amended by the Companies (Amendment) Act, 2019
contemplates a statutory piercing of the corporate veil to find out which
individuals are SBOs of the reporting company. Section 90 has an
extra-territorial operation and would apply to foreign registered trusts and
persons who are residents outside India. Hence, its remit is very broad and
affects a number of stakeholders.

The Companies
(Significant Beneficial Owners) Rules, 2018 were prescribed effective from 13^th
June, 2018 and have been substantially amended by the Companies
(Significant Beneficial Owners) Amendment Rules, 2019 w.e.f. 18^th February,
2019. Whilst the amended SBO Rules are a marked improvement over the previous
ones, there still exists a considerable amount of ambiguity with regard to
determination of the SBO in certain situations.

b) Mauritius

The Mauritian
Companies Act, 2001 was amended in 2017 to provide that the share register of
companies should disclose the names and last known addresses of the beneficial
owners / ultimate beneficial owners where shares are held by a nominee. By the
Finance (Miscellaneous Provisions) Act, 2019 the requirement was further
amended to provide that the company shall also keep an updated record of (a)
beneficial ownership information, and (b) actions taken to identify a
beneficial owner or an ultimate beneficial owner. The 2019 definition is far-reaching
and brings thereunder persons who would otherwise not have been considered as
beneficial owners under the 2017 definition.

The Registrar
of Companies issued Practice Direction (No. 3 of 2020) pursuant to sections
12(8) and 91(8) of the Companies Act, 2001 on 16^th March, 2020
regarding Disclosure of Beneficial Owner or Ultimate Beneficial Owner to the
Registrar of Companies and to assist stakeholders to better understand the
provisions of the law relating to Beneficial Owners.

c) Singapore
(private register)

In Singapore,
the measures to improve the transparency of ownership and control are included
in legislation regulating all entities having a separate legal personality,
such as companies, limited liability partnerships and trusts and are contained
in the latest versions of the Companies Act, Limited Liability Partnerships Act
and the Trustees Act.

The disclosure
requirements came into force on 31^st March, 2017. Under the Companies
Act the disclosure requirements require Singapore companies to maintain a
Register of Registrable Controllers (‘RORC’) and a Register of Nominee
Directors (‘ROND’). Foreign companies registered to carry on business in
Singapore (which includes Singapore branches of foreign companies) are also
required to maintain an RORC as well as a Singapore-based Register of Members.

The term controller
refers to an individual or legal entity that has a ‘significant interest’ or
‘significant control’ over a company. Controllers have an obligation to provide
their data for the Register.

The RORC is a
private company document listing all controllers and beneficial owners of a
company. It is not available to the public. The Register must include the
beneficial owners’ names and identifying details, as well as information about
their citizenship or places of registration in the case of legal entities.

The Accounting
and Corporate Regulatory Authority (ACRA), the national regulator of business
entities, has issued guidelines to help companies understand and comply with
the requirements pertaining to the RORC.

d) United
Kingdom (public register)

Since April,
2016 most companies incorporated in England and Wales have been required to
keep a register of ‘people with significant control’ and to file a copy of the
same with Companies House, the local registrar. These requirements were first
introduced in the Companies Act, 2006 and the Register of People with
Significant Control Regulations, 2016, before being extended to comply with
the EU Directive through the Information about People with Significant
Control (Amendment) Regulations, 2017. Each company’s register is public
and there is no charge to access the register.

e) The EU
Directive

The Fourth
Money Laundering Directive [(EU) 2015/849] as supplemented and amended by
the Fifth Money Laundering Directive [(EU) 2018/843] (together, the ‘EU
Directive’) came into force in the European Union in 2017. The EU Directive
leads the largest multinational effort to harmonise measures against money
laundering and financial crime across the member states. Article 30, in
particular, requires member states to ensure that companies incorporated within
their jurisdiction obtain and hold adequate, accurate and current information
on their beneficial owners, including details of the beneficial interests held.
Such information should be held in a central register (in the relevant member
state) and be accessible to specified authorities, firms carrying out customer
due diligence and any other person or organisation able to demonstrate a
legitimate interest. The EU Directive also provides that mechanisms to verify
that such information is adequate, accurate and current should be put in place
and breaches should be subject to effective, proportionate and dissuasive
measures or sanctions.

Although the EU
Directive applies to all member states, as a minimum harmonising directive,
each member state must adopt national implementing legislation that is equally
or more stringent than the EU Directive. The majority of member states have yet
to implement adequate centralised registers and for those countries that have
implemented the registers, the regime looks slightly different in each
jurisdiction.

f) France
(private register)

The EU Directive
was transposed into French law by Ordinance No. 2016-1635 in December,
2016, clarified by the Decree No. 2017 – 1094 in June, 2017 and
re-enforced by Decree No. 2020-118 in February, 2020. Companies and
other entities registered with the Trade and Companies Registry (Registre du
Commerce et des Societes) have to obtain and maintain up-to-date and
accurate information on their UBOs. This information must then be sent to the
court clerk office.

g) United
States of America (no register)

There are
currently no specific requirements to disclose information on ‘beneficial
owners’ of US corporations or limited liability companies. However, on 22^nd
October, 2019 the US House of Representatives passed the Corporate
Transparency Act of 2019 (HR 2513) (CTA). If passed in the Senate, the CTA
would bring the US in line with international standards governing the
disclosure of beneficial ownership and would require applicants seeking to form
a corporation or limited liability company to file a report with the Financial
Crimes Enforcement Network (FinCEN) listing the beneficial owners of the entity
and to update this report annually.

If enacted, the
CTA would cover any corporation or limited liability company formed under any
state law as well as any non-US entity eligible to register to do business
under any state law. Certain exceptions would apply for entities such as
issuers of registered securities.

The CTA defines
a beneficial owner as ‘a natural person who, directly or indirectly, through
any contract, arrangement, understanding, relationship or otherwise exercises
substantial control over a corporation or limited liability company, or owns
25% or more of the equity interests of a corporation or limited liability
company, or receives substantial economic benefits from the assets of a
corporation or limited liability company’. The definition excludes certain
natural persons, including employees of corporations or limited liability
companies whose control of the entity is a result of their employment.

h) Canada
(private register)

By way of
background, Canadian corporations can be governed under the federal corporate
statute in Canada, the Canada Business Corporations Act (CBCA),
or under the corporate statute in any province or territory in Canada.
Corporations organised and existing under the CBCA are required to prepare and
maintain a register of individuals with significant control since June, 2019.

i) China
(private register)

The Measures
for the Reporting of Foreign Investment Information issued by the Ministry
of Commerce (MOFCOM) and the State Administration for Market Regulation (the
AMR) effective from January, 2020 (the Measures) prescribe disclosure
requirements for the ‘ultimate actual controller’ of a foreign-investment
entity in the People’s Republic of China. Details of the ultimate actual
controller must be provided using the AMR’s online enterprise registration
system. The information will then be shared with the MOFCOM.

j) Brazil
(private register)

Provisions
similar to the EU Directive came into force in May, 2016 through the Normative
Instruction No. 1,634 (NI 1,634/2016) as amended by Normative
Instruction No. 1,863 (NI 1,863/2018) (the Normative Instruction). Pursuant
to the Normative Instruction, upon enrolment with the National Corporate
Taxpayers Registry (Cadastro Nacional da Pessoa Juridica or CNPJ) or
upon request by the tax authorities, certain entities must disclose old and new
registers of UBOs.

k) British
Virgin Islands

The Beneficial
Ownership Secure Search System Act, 2017 (the BOSS Act) came into force in the
BVI on 30^th June, 2017. The BOSS Act was almost immediately amended
by the Beneficial Ownership Secure Search System (Amendment) Act, 2017, which
also came into force on 30^th June, 2017.

This BOSS Act
facilitates the effective storage and retrieval of beneficial ownership
information for all BVI companies and legal entities using the Beneficial
Ownership Secure Search system.

The BVI Government signed an exchange of notes agreement with the UK
Government in April, 2016. The Beneficial Ownership Secure Search system is
built to ensure that the BVI can efficiently exchange that information in
relation to the exchange of notes. The beneficial ownership information in the
system will also be available to other authorities in the BVI to ensure that
they are able to meet their international obligations. Importantly, the system
will not be accessible by the public.

Under section
9(6) of the BOSS Act, the obligation to provide updated beneficial ownership
information rests on the BVI company. A BVI company that fails to comply with
this section commits an offence and may be subject to a fine of up to US
$250,000 or to imprisonment for a term not exceeding five years, or both.

l) Jersey

Jersey adopted
the Financial Services (Disclosure and Provision of Information) (Jersey) Law
2020 (Disclosure Law) on 14^th July, 2020 and registered it in the
Royal Court of Jersey on 23^rd October, 2020.

The intention
of the Disclosure Law is to place on a statutory footing the ‘FATF’s
Recommendation # 24’ relating to the beneficial ownership of legal persons. The
Disclosure Law seeks to maintain the current situation whereby the Jersey
Financial Services Commission (Commission) collects and makes public certain
information, but enables the State of Jersey to make regulations which
determine additional information which may be made public.

The Disclosure
Law will come into effect on 6^th January, 2021 and, consequently,
the filing deadline for the new annual confirmation statement will be 30^th
April, 2021.

m) Cayman
Islands

Under the Cayman Islands beneficial ownership legislation, i.e., The Companies
Law (Revised), The Limited Liability Companies Law (Revised), The Beneficial
Ownership (Companies) Regulations, 2017, The Beneficial Ownership (Companies)
(Amendment) Regulations, 2018, The Beneficial Ownership (Limited Liability
Companies) Regulations, 2017 and The Beneficial Ownership (Limited Liability
Companies) (Amendment) Regulations, 2018 (the Legislation), certain Cayman
Islands companies are required to maintain details of their beneficial owners
and relevant legal entities on a beneficial ownership register. The registers
are not publicly available, although they can be searched in limited
circumstances by the competent authority in the Cayman Islands.

n) Isle of Man

The Isle of
Man’s ‘Beneficial Ownership Act, 2017’ (the Act) came into effect on 21^st
June, 2017 repealing the previous 2012 legislation. Subsequently, the new
central database for the storage of the data to be collected under the Act (the
Isle of Man Database of Beneficial Ownership) went live on 1^st July,
2017. The Act has been introduced in response to the global initiative to
improve transparency as to asset ownership and control, similar to legislation
introduced in other jurisdictions. The Act introduces important changes which
affect legal entities incorporated in the Isle of Man, the main objective of
which is to ensure that the beneficial ownership of Isle of Man bodies
(companies) can be traced back to the ‘ultimate beneficial owners’.

The Beneficial
Ownership (Civil Penalties) Regulations, 2018 contain civil penalties for
contravention of the various provisions of the Act.

o) Guernsey

The Beneficial
Ownership of Legal Persons (Guernsey) Law, 2017 came into force on 15^th
August, 2017. Since that date, all Guernsey companies have been required to
file beneficial ownership information. New companies must file beneficial
ownership information on incorporation. All companies must ensure that any
changes in the beneficial ownership information are submitted to the Registry
within 14 days. Resident-agent exempt entities are not required to file a
beneficial ownership declaration.

The definition
of beneficial ownership for the purposes of registration is set out in The
Beneficial Ownership (Definition) Regulations, 2017.

From the above
discussion it is evident that most of the tax heavens have done away with
bearer securities and now the disclosure of the BO is mandatory.

3. UNITED ARAB EMIRATES (UAE)

A. UAE
Anti-Money Laundering Law

The UAE Federal
Decree law No. (20) of 2018 dated 23^rd September, 2018 (which was
issued on 30^th October, 2018) on Anti-Money Laundering and Combating
the Financing of Terrorism and Financing of Illegal Organisations (UAE
Anti-Money Laundering Law) together with Cabinet Decision No. (10) of 2019
concerning the implementing regulation of Decree law No. (20) of 2018 comprises
the UAE Anti-Money Laundering Law.

Article 9 of
the Cabinet Decision No. (10) of 2019 placed an obligation on corporate
entities to disclose any individual ownership (whether beneficial or actual) in
an entity which owns 25% or more of the company, to the relevant regulator.

B. Regulation
of the Procedures of the Real Beneficiary

(i)         The UAE on 24^th
August, 2020 issued Cabinet Resolution No. 58 of 2020 (Resolution 58) on the Regulation
of the Procedures of the Real Beneficiary (RB Regulations).

Let us study
some of the salient features of these Regulations.

(ii)        Entry into effect

The RB
Regulations came into effect on 28^th August, 2020. Article (19) of the
Regulations repealed the earlier Cabinet Resolution No. 34 of 2020 on the
Regulation of the Procedures of the Real Beneficiary (issued earlier in 2020)
as well as any provision that violates or contradicts the provisions of the
Resolution No. 58.

One of the main
drivers for the introduction of the RB Regulations is the above-referred
Federal Decree Law No. 20 of 2018 and its implementing regulation, Cabinet
Decision No. (10) of 2019, which deals with anti-money laundering crimes and
combating the financing of terrorism and of unlawful organisations and is
generally in accordance with the UAE’s recent legislation to increase
transparency in its business environment.

(iii)       Objectives of the Regulations

The stated aim
and objective of the RB Regulations is (a) to contribute to the development of
the business environment, the state’s capabilities and its economic standing in
accordance with international requirements, by organising the minimum
obligations of the registrar and legal persons in the state, including
licensing or registration procedures, and organising the real beneficiary
register and the partners or shareholders register, and (b) develop an
effective and sustainable implementation and regulatory mechanism and
procedures for the real beneficiary data.

The RB Regulations address the disclosure requirements at the corporate
registration stage as well as the requirement to subsequently maintain ‘The
Partners or Shareholders Register’ and the ‘Real Beneficiary Register’.

(iv) Compliance
requirements

Article 8(1) of
the RB Regulations provides that ‘The Legal Person shall, within sixty (60)
days from the date on which this Resolution is effective or the date the Legal
Person’s presence, keep the information of each Real Beneficiary in the Real
Beneficiary Register he creates. The Legal Person shall also update this
Register and include any change occurring thereto within fifteen (15) days from
the date of being aware thereof.’

Further,
Article 11(1) provides that a legal person shall, within 60 days from the date
of the publication of the Resolution, i.e., 28^th August, 2020 or the
date of the Legal Person’s registration or license, provide the Registrar with
the information of the Real Beneficiary Register or the Partners or Shareholders
Register. The Legal Person shall take reasonable measures to preserve its
registers from damage, loss or destruction.

Since the
Resolution 58 became effective from 28^th August, 2020, within 60
days therefrom, i.e., by 27^th October, 2020, all the existing
companies were required to file the beneficial ownership information with the
relevant Registrar.

(v) Scope of
the Regulations

The RB
Regulations cover all corporate entities that are licensed or registered in the
UAE (including in any commercial free zones) (an Entity / a legal person).

The only
entities that are not covered by the RB Regulations are wholly-owned government
entities (and their subsidiaries) and entities that are established within the
UAE’s two financial free zones, i.e., the Dubai International Financial Centre
and the Abu Dhabi Global Market. However, corporate entities licensed in these
financial free zones should nevertheless take note of the disclosure
requirements of Resolution 58 if they have shareholdings in onshore or other
commercial free zone companies in the UAE.

The RB
Regulations provide a more robust and prescriptive regime to record and
disclose ultimate beneficial ownership of UAE entities.

(vi) Meaning of
‘Real Beneficiary’

Article 1
defines the term ‘Real Beneficiary’ as follows:

‘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, that is determined according
to the provision of Article (5) hereof.’

Thus, the term
Real Beneficiary is used in the RB Regulations to describe an Ultimate Beneficial
Owner.

Article 5
contains the provisions relating to Real Beneficiary Identification. Article
5(1) provides that whoever either

(i)         owns or finally controls 25% or more of
an entity’s shares directly or indirectly; or

(ii)        has the right to vote representing 25% or
more of an entity’s shares directly or through a chain of ownership and
control; or

(iii)       controls the entity through any other
means, such as by appointing or dismissing the majority of directors

shall be
considered as the Legal Person’s Real Beneficiary.

While
determining whether someone is a ‘real beneficiary’, it is important to look
through any number of legal persons or arrangements of any kind, intermediaries
or other entities that are used in a chain of ownership / control so as to
identify the ultimate natural person.

It is
worthwhile to note that the term ‘Legal Person’ is not defined in the Federal
Law No. 2 of 2015 on Commercial Companies, or the UAE Anti-Money Laundering
Law, or the RB Regulations. Therefore, it has to be understood in its ordinary
meaning as compared to a natural person and meaning as companies or corporate
entities.

However, in the
context of Article 5(2) for real beneficiary identification which uses the term
legal ‘arrangements’, in Article 1 of the UAE Anti-Money Laundering Law, the
term ‘Legal Arrangement’ has been defined as under:

‘Legal
Arrangement: A relationship established by means of a
contract between two or more parties which does not result in the creation of a
legal personality such as trust funds or other similar arrangements.’

Further, ‘real
beneficiary’ includes any joint or co-owners of particular shares (such as
family members holding shares through a trust or similar structure). The RB
Regulations are clear that it is both direct and indirect ownership / control
that are to be considered.

If it is not
possible to ascertain whether anyone is considered to be a ‘real beneficiary’
based on any of the tests set out above, then the natural person who occupies
the senior management position (i.e., the decision-making authority of an
entity) will be deemed to be the ‘real beneficiary’ under the RB Regulations.

Given the
breadth of the RB Regulations, specifically, the definition of ‘real
beneficiary’, there is a view that a beneficiary under a nominee arrangement
would be within the scope of the RB Regulations, i.e., the beneficiary would be
considered as holding shares or exercising control in spite of it doing so
through a nominee.

(vii)
Disclosure requirements and registers

As per Articles
8 and 10 of the RB Regulations, from 27^th October, 2020 all entities
covered within the scope of the Regulations must keep the Real Beneficiary
Register and Partners or Shareholders Register (the Registers).

a) Real
Beneficiary Register

However,
Article (8)(2) of the RB Regulations sets out specific information that should
now be maintained in relation to each Real Beneficiary. The Real Beneficiary
Register must include the following information for each Real Beneficiary of an
entity:

b) Partners or
Shareholders Register

The requirement
to keep a Shareholder Register is not new in the UAE as Article 260 of the UAE
Federal Law No. 2 of 2015 on Commercial Companies provides that ‘Private
Joint Stock Companies shall have a register where the names of the shareholders,
the number of shares held by them and any dispositions of the shares are
entered. Such register shall be delivered to the shares register secretariat.’

Now under the
RB Regulations, the following information is required to be kept in the
Partners or Shareholders Register:

•          For every partner /
  shareholder who is a person:

•           the nationality;

•           address;

•           place of birth;

•           name and address of employer; and

•           a true copy of a valid Emirates ID or
passport.

•          For every partner /
  shareholder that is a legal entity:

•           the name, legal form and a copy of
its Memorandum of Association;

•           the address of the main office or
headquarters of the entity, and if it is a foreign entity, the name and address
of its legal representative in the UAE and the supporting documentation
providing proof of such information;

•           the ‘statute’ or any other similar
documents approved by the relevant authorities concerned with the
implementation of the UAE’s anti-money laundering laws and regulations; and

•           the details of the person(s) who hold
senior management positions.

(viii) Trustees
and nominal management members

In addition to
the details of partners / shareholders, a legal person, i.e., corporate entity,
must also maintain the same information required for real beneficiaries, for
any trustees or board nominal members (nominal members) as part of its Partners
or Shareholders Register.

The RB
Regulations broadly define a ‘Board nominal member’ as a natural member
acting in accordance with the guidelines, instructions or will of another
person. A ‘Trustee’ means 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.

As per the
provisions of Article 9(1), all nominal members must notify and submit the
required information to the legal person within 15 days of being appointed as a
nominal member. In addition, a legal person is required to disclose the details
concerning the interests or shares and identity of the holders of any shares
issued in the names of persons or nominee members within 15 days of such
issuance to the relevant authority.

All existing
nominal members are required to notify the legal person and submit the relevant
information for recording their data in the Partners or Shareholders Register
within 30 days of the RB Regulation’s publication date, 28^th August,
2020, i.e., by 27^th September, 2020.

Any changes to
nominee members (including their particulars) must be notified by the nominee
members to the Entity within 15 days of such a change taking place.

(ix)
Compliances deadlines

The Registers
need to be created and filed with the Registrar from 27^th October,
2020 onwards. Newly-incorporated legal persons will need to file the Registers
with the Registrar within 60 days of incorporation.

A legal person
is primarily responsible for maintaining and filing the Registers and must take
reasonable measures to obtain accurate and updated information regarding its
real beneficiaries on an ongoing basis. However, if a real beneficiary is
licensed or registered in the UAE or is listed (or owned by a company that is
listed) on a reputable exchange that has adequate disclosure and transparency
rules, then a legal person can rely on the information that such a company may
have filed or disclosed to the relevant regulators without having to make
further investigations as to the validity of such information.

Any change to
the information contained in the Registers must be updated and notified to the
Registrar within 15 days of such change. A legal person must also appoint, and
subsequently notify the Registrar, of a person who is resident in the UAE and
is authorised by the legal person to submit all information and Registers
required under the RB Regulations.

It is worth
noting that there is a positive obligation on legal persons to act if they
become aware of a person that could be a real beneficiary but who is not listed
as such in the Registers.

In those
circumstances, a legal person must send an inquiry to the suspected real
beneficiary and, if they do not receive a response within 15 days, must send a
formal notice (with certain prescribed information included) asking the person
to confirm whether he is a real beneficiary. If the suspected real beneficiary
fails to respond to such notice within 15 days, then the details of that person
must be entered on the Registers. If a person/s thinks they have been
incorrectly recorded as a real beneficiary on a legal person’s register, then
an application to a competent court in the UAE can be made to correct the
information.

Article 11(5)
of the RB Regulations provides that no legal person who is licensed or
registered in the UAE may issue bearer share guarantees.

In regard to
companies that are under dissolution or liquidation, the appointed liquidator
has an obligation to provide a true copy of the updated Real Beneficiary
Register to the Registrar within 30 days of the liquidator’s appointment.

(x)
Confidentiality

The Registrar
is required to keep information that is disclosed to it under the RB
Regulations confidential and not to disclose such information without approval
from the person involved. However, the UAE Government may disclose information
it receives under the RB Regulations to third parties in order to comply with
international laws and agreements that are in place, in particular those aimed
at countering money laundering and the financing of terrorism.

(xi) Penalties

At present, the
RB Regulations do not include specific penalties for violations. However,
Article 17 provides that the Minister of Economy or the delegated authorities
may impose one or more sanctions from the Administrative Sanctions Regulations.

It is expected
that a list of penalties and sanctions for non-compliance will be issued soon
along with a framework and additional guidance on how information is to be
collected and submitted.

(xii) Local and
international co-operation

Article 16 of
the RB Regulations provides that the Ministry of Economy will share the
information and data provided by a legal person, including from the legal
person’s Real Beneficiary and Partners or Shareholders Register, with the
Government entities tasked with enforcing the UAE anti-money laundering regime.

Besides, the Ministry of Economy will facilitate international
co-operation by allowing foreign authorities access in certain circumstances to
the data from the Real Beneficiary Register and the Partners or Shareholders
Register.

4. THE ROAD AHEAD – RECOMMENDED STEPS FOR THE MNES

It is undeniable that there is a trend towards increased corporate
ownership transparency around the world. However, despite the international
push towards transparency, local frameworks for determining and reporting
beneficial ownership remains inconsistent, with specific requirements varying
from jurisdiction to jurisdiction.

The current
lack of consistency poses unique challenges for multinationals managing the
various compliance requirements in different jurisdictions, including the
different information that needs to be provided and timelines imposed for
reporting.

In addition,
the underlying legislation in many jurisdictions remains new and subject to
refinement through interpretative guidance and accompanying regulations that
have yet to be published.

As with all
disclosure obligations, companies need to strike a balance between providing
sufficient and accurate information while avoiding over-disclosure that can
cause confusion.

5.  CONCLUSION

UAE’s RB
Regulations’ objective is to bring the country’s company registration process
in line with international standards and further enhance the State’s
co-operation with its international counterparts in the common effort of
combating money laundering, terrorism and criminal financing. It does not seek
to recognise or regulate a new legal concept such as equitable interests but
merely acknowledges that such type of interest exists and is recognised under
the legal framework of some of its international counterparts.

In this article
we have given brief information about some of the illustrative jurisdictions
where beneficial ownership regulations have been introduced / expanded. While
incorporating any entity in any foreign jurisdiction, it would be advisable to
keep in mind the beneficial ownership regulations in those jurisdictions.

Readers would be well advised to carefully look into applicable
Beneficial Ownership Regulations along with Guidance, clarifications, etc.,
provided thereon, before taking necessary action in respect of the same.

2020
Returns in US Markets

Tesla $TSLA: +743%

Peloton $PTON: +434%

Moderna $MRNA: +434%

Zoom $ZM: +396%

Bitcoin: +304%

$AAPL: +82%

$AMZN: +76%

Nasdaq 100 $QQQ: +49%

$MSFT: +43%

$GOOGL: +31%

Gold: +24%

Small Caps $IWM: +20%

S&P $SPY: +18%

LT Treasuries $TLT: +18%

Oil: -21%

— via @charliebilello