Announcement of Updated Resolution on Real Beneficial Owners in the UAE

UAE-Introduces-New-Resolution-on-Real

In a recent development, the UAE Cabinet has introduced Cabinet Resolution No. (109) of 2023 (“New Resolution”), effectively replacing and amending the previous Cabinet Resolution 58 of 2020 (“Old Resolution”). This new resolution specifically addresses the Regulation of Real Beneficiary Procedures in the country, introducing fresh practices and processes to oversee the minimum obligations of registration authorities and legal entities operating in the UAE.

Applicability of the New Resolution:

The New Resolution is applicable to all entities registered and licensed in the UAE, excluding those registered in Financial Zones (DIFC and ADGM), government entities, and their subsidiaries.

In this update, we aim to highlight the significant fines that may impact onshore limited liability companies (“LLCs”).

Key Focus Areas:

The Registrar, overseeing the register of commercial names of various establishments in the relevant emirate and/or free zone, now holds increased discretion and responsibility to determine the Real Beneficial Owner in cases involving complex structures. Key considerations for shareholders and managers of LLCs include:

  • Risk-Based Approach: Registrars are mandated to apply a risk-based approach to registered facilities, ensuring legal entities are not exploited for Money Laundering and Terrorist Financing Crimes.
  • Complex Structures: In instances where the Real Beneficiary cannot be identified within complex structures, the Registrar can make such determinations using the risk-based approach.
  • Anti-Money Laundering Unit: The New Resolution mandates the establishment of a Unit Combating Money Laundering and Terrorist Financing.
Announcement of Updated Resolution on Real Beneficial Owners in the UAE

Penalties for Non-Compliance:

While the New Resolution does not specify the exact monetary values or types of administrative sanctions, referring to an external “Administrative Sanctions Regulation,” details can be found in Cabinet Resolution No. (53) of 2021 Concerning the Administrative Penalties against Violators of The Provisions of Cabinet Resolution No. (58) of 2020. Penalties range from AED 1,000 to AED 100,000, including the suspension or restriction of trade licenses or powers of board members or directors.

Two notable fines include:

1. Failure to Create and Maintain Register of Beneficial Owner:

  • First time: Written warning.
  • Second time: AED 50,000 and a warning to rectify within thirty (30) days.
  • Third time: AED 100,000 and trade license suspension for at least twelve (12) months.

2. Failure to Maintain Adequate Beneficial Owner Data:

  • First time: Written warning.
  • Second time: AED 1,000 and a warning to rectify within fifteen (15) days.
  • Third time: AED 2,000 and trade license suspension for at least one month.

Recommendations:

Companies in the UAE are advised to assess their practices to mitigate the risk of non-compliance with UAE Companies Law and the New Resolution. In cases of complex corporate structures, seeking professional advice is recommended to ensure adherence to the relevant regulatory framework.

A comprehensive “health check” review of your company’s compliance with UAE law can provide valuable insights and mitigate potential risks.

Feel free to reach out for a thorough assessment and guidance tailored to your company’s specific needs and circumstances. Stay informed and ensure compliance with the regulatory landscape in the UAE.

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