UBO Compliance in the UAE: Ultimate Beneficial Owner Rules Explained

Quick Read

• A UAE legal person must identify and maintain accurate, adequate and up-to-date information about its Ultimate Beneficial Owner (UBO).
• An individual who directly or indirectly owns 25% or more of a legal person’s capital or voting rights can qualify as the Beneficial Owner.
• Beneficial ownership can also arise through other forms of ultimate control, including the ability to appoint or dismiss the majority of directors.
• Ownership must be traced through chains of companies or other ownership structures until the natural person who ultimately owns or controls the entity is identified.
• If no natural person can be identified through ownership or control after reasonable measures, the person exercising control by other means — and ultimately the senior management official where applicable — may be treated as the Beneficial Owner.
• The Beneficial Owner Register must be maintained and updated when the legal person becomes aware of a change.
• Cabinet Decision No. 109 of 2023 is the key UAE regulation governing beneficial ownership procedures.

What Is UBO Compliance in the UAE?

Ultimate Beneficial Owner (UBO) compliance is the process of identifying the natural person who ultimately owns or controls a UAE legal person and maintaining accurate information about that person.

The UAE’s beneficial ownership framework is part of the country’s wider efforts to improve corporate transparency and strengthen measures against money laundering and illicit financial activity.

Under Cabinet Decision No. 109 of 2023 on the Regulation of Beneficial Owner Procedures, the Beneficial Owner is a natural person who ultimately owns or exercises ultimate control over a legal person, whether directly, indirectly, or through other means of control.

This means that identifying the UBO is not always as simple as looking at the names on a company’s trade licence or shareholder register.

Who Is Considered the Ultimate Beneficial Owner in the UAE?

The UAE rules use ownership and control tests to identify the Beneficial Owner.

An individual may qualify as the Beneficial Owner where they:

• Directly or indirectly own 25% or more of the legal person’s capital.
• Directly or indirectly hold 25% or more of the voting rights.
• Exercise ultimate control over the legal person through other means, including the right to appoint or dismiss the majority of its directors.

Ownership can also be traced through a chain of companies or other legal arrangements. Therefore, a company cannot necessarily stop its UBO analysis at the immediate shareholder level.

For example, if Company A is owned by Company B and Company B is ultimately controlled by an individual, the ownership structure may need to be traced through Company B to identify the natural person who ultimately owns or controls Company A.

The UAE Ministry of Economy has specifically stated that beneficial ownership may be traced through complex ownership structures and chains of control.

What If No Individual Owns 25% or More?

The 25% threshold is not the only test.

If no natural person can be identified as the ultimate Beneficial Owner after reasonable measures have been taken, or there is reasonable doubt about the person identified through ownership, the rules move to other forms of control.

The natural person who controls the legal person through other means may therefore be treated as the Beneficial Owner.

If no natural person can ultimately be identified through these control tests, the senior management official may be treated as the Beneficial Owner in accordance with the applicable rules.

This prevents companies from avoiding beneficial ownership identification simply because their ownership is divided among multiple shareholders below the ownership threshold.

How Does Indirect Ownership Affect UBO Compliance?

UBO identification does not stop at direct shareholders.

The UAE framework requires ownership and control to be traced through chains of ownership or control. This is particularly important where a UAE company is owned by another company, holding company, investment vehicle, or a more complex corporate structure.

Consider a simplified structure:

Individual → Holding Company → UAE Company

If the individual ultimately owns or controls the relevant percentage of the UAE company through the holding structure, that individual may need to be recorded as the Beneficial Owner.

The purpose is to identify the natural person at the end of the ownership or control chain, rather than simply recording an intermediate corporate shareholder.

What Is the Beneficial Owner Register?

UAE legal persons covered by Cabinet Decision No. 109 of 2023 are required to maintain a Beneficial Owner Register containing the required information about each Beneficial Owner.

The register includes information such as:

• Full name
• Nationality
• Date and place of birth
• Residential address or address for notifications
• Passport or identity document information
• The basis on which the person became a Beneficial Owner
• The date on which the person acquired Beneficial Owner status
• The date on which the person ceased to be a Beneficial Owner

The information must be kept accurate and up to date.

Where a change occurs, the Beneficial Owner Register must be updated within 15 days from the date the legal person becomes aware of the change.

Who Is Responsible for Maintaining UBO Information?

The legal person is responsible for taking reasonable measures to obtain and maintain adequate, accurate and up-to-date Beneficial Owner information.

This means UBO compliance should not be treated as a one-time registration exercise.

Companies should review their ownership and control structure whenever there is a change involving:

• Shareholders
• Ownership percentages
• Voting rights
• Directors or management
• Corporate ownership structures
• Control arrangements

A change in ownership can result in a change in the Beneficial Owner, making an update to the relevant records necessary.

What Happens When Ownership Changes?

The UAE rules place specific requirements around ownership changes.

A legal person may not register or give effect to a document relating to a change in its ownership unless a statement is provided by or on behalf of the transferee addressing whether the transfer will result in a change in the Beneficial Owner.

Where there is a change, the relevant Beneficial Owner information must be entered into the register.

This creates a direct connection between corporate ownership changes and UBO compliance. Businesses therefore need to consider beneficial ownership as part of their corporate governance process rather than as a separate administrative task.

Are There Exemptions From Certain UBO Requirements?

Cabinet Decision No. 109 of 2023 provides an exemption from the requirement in Article 6(1) for certain legal persons that are owned by a company listed on a regulated market subject to sufficient Beneficial Owner transparency requirements, as well as certain majority-owned subsidiaries of such listed companies.

The exemption is specific and should not be interpreted as a general exemption for all publicly listed or group-owned companies.

Businesses should therefore determine whether their exact ownership structure falls within the exemption provided by the applicable legislation.

UBO Compliance and UAE AML Requirements

UBO compliance forms part of the UAE’s wider corporate transparency and Anti-Money Laundering (AML) framework.

The objective is to make it possible for relevant authorities to identify the natural persons who ultimately own or control legal entities and to reduce the risk of companies being used to conceal ownership or illicit financial activity.

The Ministry of Economy has described Cabinet Decision No. 109 of 2023 as part of the UAE’s strengthened AML/CFT and corporate transparency framework.

Common UBO Compliance Mistakes

Treating the Trade Licence as the UBO Record

The person named on a trade licence is not automatically the ultimate Beneficial Owner.

UBO identification requires an analysis of the underlying ownership and control structure.

Looking Only at Direct Shareholders

A corporate shareholder may itself be owned or controlled by another company or individual. The ownership chain may therefore need to be traced further.

Assuming 25% Is the Only Test

The 25% ownership or voting-right threshold is an important test, but the regulations also recognise other forms of ultimate control.

Failing to Update the Register

A UBO record cannot simply be created once and forgotten. Changes to the information must be reflected within the applicable timeframe.

Ignoring Complex Ownership Structures

Holding companies, layered ownership structures and indirect control can make UBO identification more complicated. The UAE framework specifically allows beneficial ownership to be traced through chains of ownership or control.

How Can UAE Businesses Stay UBO Compliant?

A practical UBO compliance process should include:

1. Map the company’s complete ownership structure.
2. Identify individuals holding 25% or more directly or indirectly.
3. Review voting rights and other forms of control.
4. Trace ownership through corporate shareholders and complex structures.
5. Identify the appropriate Beneficial Owner where no individual meets the ownership test.
6. Maintain the required Beneficial Owner Register.
7. Update the register when relevant information changes.
8. Keep supporting corporate records consistent with the UBO information submitted to the relevant authority.

UBO compliance should be reviewed whenever the company’s ownership or control structure changes.

Frequently Asked Questions

What is the UBO threshold in the UAE?

A natural person who directly or indirectly owns 25% or more of a legal person’s capital or holds 25% or more of its voting rights can qualify as the Beneficial Owner under Cabinet Decision No. 109 of 2023. Other forms of ultimate control can also qualify.

Is 25% ownership the only way someone can be a UBO?

No. A person may also qualify through other means of ultimate control, including the ability to appoint or dismiss the majority of directors.

What happens if nobody owns 25% of the company?

The company must consider other forms of control. If no natural person can be identified after reasonable measures, the applicable rules provide for identification based on control through other means and, where necessary, the relevant senior management official.

Does indirect ownership count for UBO purposes?

Yes. The UAE rules expressly cover direct and indirect ownership and allow beneficial ownership to be traced through a chain of ownership or control.

How often should a UBO register be updated?

The Beneficial Owner Register must be updated when a change occurs. Cabinet Decision No. 109 of 2023 requires changes to be included within 15 days from the date the legal person becomes aware of the change.

What information is recorded in the UBO register?

The register includes information such as the Beneficial Owner’s name, nationality, date and place of birth, address, identity or travel document information, the basis for Beneficial Owner status, and relevant dates.

Does every UAE company need to identify its UBO?

The applicable UBO requirements depend on whether the entity falls within the scope of Cabinet Decision No. 109 of 2023 and whether a specific exemption applies. Businesses should assess their legal form and ownership structure against the current UAE regulations.

Why is UBO compliance important in the UAE?

UBO compliance supports corporate transparency and enables the identification of the natural persons who ultimately own or control legal entities. It forms part of the UAE’s wider AML/CFT and transparency framework.

About Consult Kumar®

Consult Kumar® is a Dubai-based business setup and corporate advisory consultancy operating under Team Squaree Businessmen Services LLC. The firm advises businesses on company formation, tax registration, compliance and ongoing corporate requirements in the UAE.

This article is provided for general informational purposes and does not constitute legal or regulatory advice. UBO requirements can depend on the legal form, ownership structure and applicable exemptions. Businesses should verify the current requirements with the relevant UAE authority before taking action.

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