Tag: Corporate and Commercial

The UAE has introduced new administrative sanctions on all entities that fail to comply with the requirements of Cabinet Decision 58 of 2020 concerning the Regulation of Real Beneficiary Procedures (Decision 58 of 2020).

 

Issued on 23 May 2021, Cabinet Decision 53 of 2021 (Decision 53 of 2021) empowers the Ministry of Economy and the relevant licensing authorities in the UAE to administer various penalties on violators of Decision 58 of 2020.

 

To provide our readers with a brief background, the UAE enacted Decision 58 of 2020 on 24 August 2020. The Decision places a number of obligations on all entities licensed to conduct business in the UAE (with the exception of those licensed in a financial free zone in the DIFC and the ADGM), including identifying, recording, submitting and maintaining details of the shareholder(s)/partner(s) (the Shareholders) and the real beneficiaries or the ultimate beneficial owner(s) (the UBO). Please refer to our October 2020 inBrief for further information on your obligations under Decision 58 of 2020.

 

Further to the issuance of Decision 58 of 2020, various licensing authorities in the UAE had issued a deadline of 30 June 2021 for all licensees to submit, amongst other things, details of their UBO and Shareholders. However, some authorities have issued different deadlines or none altogether.

 

We have set out below a summary of the key fines:

Under Decision 53 of 2021, entities that fail to create and maintain records of their UBO, will be issued a written notice in the first instance. If the entity does not rectify these failures, a fine of AED 50,000 will be imposed along with another notice to remedy the position within 30 days. If the entity fails to remedy its position within the 30-day period, the entity shall face a fine of AED 100,000 and the suspension of its licence for a minimum period of one year.

 

Entities that fail to create records of their Shareholder(s) will be issued a fine of AED 50,000 and will be given notice to remedy the position within 60 days. If the entity fails to remedy its position within the 60-day period, it shall face a fine of AED 100,000 and the suspension of its licence for a minimum period of one year.

 

A written notice will be sent to entities that fail to maintain the records of their Shareholder(s), after which a fine of AED 30,000, and a notice to rectify the failure within 15 days will be issued. If not rectified, it will result in a fine of AED 60,000 and a suspension of its licence for a minimum period of six months.

 

Similarly, entities that fail to submit the details of its UBO and its Shareholder(s) to licensing authorities, shall be issued a written notice in the first instance, and thereafter a fine of AED 15,000 will be issued along with a notice to rectify the non-compliance within 15 days. If the failure is not rectified after the second warning, a fine of AED 30,000 will be levied along with the suspension of the licensee’s licence for at least three months. On a practical level, we are aware of action being taken by the relevant licensing authorities to implement the provisions of Decision 53 of 2021, with notifications being sent to licensees that have not fulfilled these obligations.

 

Providing incorrect, incomplete, non-updated information or the omission of the information on the UBO as well as the manager(s) or nominee director(s), is subject to fines along with a suspension of licence. Such entities will be issued a written notice first. Thereafter, a fine between AED 10,000 to AED 20,000 will be levied on the second instance with a notice of 15 days to rectify the fault. A third recurrence will result in a fine of AED 20,000 to AED 40,000 and the suspension of licence for at least one month. At the same time, Decision 53 of 2021 states that the authorities or the Ministry shall also restrict the authority of the board of directors or managers of entities who have provided inaccurate, incomplete or non-updated information. We await to see how this will be implemented in practice.

 

Entities currently under liquidation or those which have been liquidated are also required to comply with the relevant provisions of Decision 58 of 2020. The liquidated entity (or entity under liquidation), or its liquidator, who fails to maintain the details of the UBO, the Shareholder(s), manager(s) and director(s) of such liquidated entity for a period of 5 years from the date of dissolution, shall firstly be issued with a written notice followed by a fine of AED 20,000 upon non-compliance and then a fine of AED 40,000 upon the third recurrence.

 

With these strict enforcement measures in place and the enactment of new legislation concerning anti-money laundering and economic substance, the UAE has affirmed its strong position to craft a robust legal framework to combat the modern-day economic and financial crimes. ■

 

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Afridi & Angell’s corporate department has extensive experience in advising on ultimate beneficial ownership obligations. Should you have any questions, please contact the authors or your usual Afridi & Angell contact.

In what appears to be a seismic move, His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, has passed a decree allowing foreign investors to own 100 per cent of UAE companies based on the mainland (i.e. outside of the free zones). This change is expected to come into effect as early as December 2020.

 

This is a remarkable change, removing the requirement to have a majority Emirati shareholder (i.e. at least 51 per cent). Certain sectors such as oil and gas, transport and utilities and strategic areas are exempt.

 

The UAE Commercial Companies Law is set to be amended to allow for such changes.

 

The transformation will certainly enhance the UAE’s position in the global market. The doors are open to foreign investors.

 

We will provide more updates as the story develops. ■

On 24 August 2020, the UAE issued Cabinet Resolution 58 of 2020 on Regulating the Procedures of the Real Beneficiary (the Resolution). The Resolution, amongst other things, aims to establish a legal framework for identifying and recording details of real beneficiaries of entities licensed to conduct business in the UAE.

 

The Resolution is an additional step towards the UAE’s efforts in combating money laundering, the financing of terrorism and illegal organisations. Many countries around the world have enacted similar legislation regarding real beneficiaries. Even prior to issuance of the Resolution, many licensing authorities in the UAE had already started requesting information about the ultimate beneficial ownership of entities licensed by them. However, the Resolution now requires a more streamlined and uniform approach to the information that must be maintained.

 

The Resolution was published in the Official Gazette on 27 August 2020 and came into force the following day. The Resolution introduces a filing requirement which is discussed further below.

 

Applicability of the Resolution 

The Resolution applies to registrars of companies (including the Dubai Department of Economic Development, Jebel Ali Free Zone Authority and the Dubai Development Authority) (each a Registrar) and entities licensed and/or registered in the UAE (including within the commercial free zones of the UAE). However, companies directly or indirectly wholly owned by the federal or state governments and companies licensed in the Dubai International Financial Centre or the Abu Dhabi Global Market free zone shall be exempted from the provisions of the Resolution.

 

Real Beneficiary

A real beneficiary of an entity is someone:

 

a) who ultimately owns that entity through direct or indirect ownership of shares representing 25% or more interest in the capital of such an entity; or

 

b) who has voting control of 25% or more of the capital of such an entity by exercising control over such an entity (by for example, having a right to appoint or remove the majority of the entity’s directors/managers).

 

If it is not possible to identify the real beneficiary (i.e. a natural person) of an entity, then the natural person who exercises control over the entity shall be considered as the real beneficiary.

 

Obligations of UAE Entities

 

Entities in the UAE are required to take reasonable measures to obtain proper, accurate and updated information relating to their real beneficiary(ies) and maintain a register of real beneficiaries containing such information. This register of real beneficiaries is required to be created within 60 days from the date the Resolution was published (i.e. by 27 October 2020).

 

The Resolution does however state that the obligation to maintain a register of real beneficiaries shall not extend to those entities that are owned by a listed company in a regulated market which is subject to sufficient ultimate beneficial disclosure requirements or any affiliates which are majority owned by such listed company.

 

The register of real beneficiaries shall include at least the following information on each real beneficiary:

 

a) full name, nationality, date and place of birth;

 

b) place of residence or address for communication;

 

c) passport or identity card details;

 

d) the basis on which the identified real beneficiary became a real beneficiary and the date of acquiring such capacity; and

 

e) the date on which a person ceases to be a real beneficiary.

 

If an entity discovers that a person who might be a real beneficiary and his beneficial ownership was not registered in the register of real beneficiaries, then such an entity is required to enquire about the status of such a person by following the process laid down in the Resolution. The Resolution further provides for the process required to be followed in case a party (not mentioned as a real beneficiary of an entity) requires amendment (i.e. inclusion of its name) to the register of real beneficiaries.

 

The Resolution also provides that an entity must not register or execute any documentation in connection with the transfer of its shares unless the transferee provides information confirming whether such transfer will result in the change of the real beneficiary of the entity and the nature of such change.

 

All entities are also required to maintain the details of its partners/shareholders in a register of partners or shareholders.

 

Any change in the register of real beneficiaries and the register of partners or shareholders (together the Registers) must be notified to the relevant Registrar within 15 days from the date of such change.

 

 

Sharing of Information with the Registrar

 

Within 60 days from the date of publication of the Resolution, each entity is required to provide the Registers to the relevant Registrar. At present we have been informed that the Dubai Department of Economic Development is still in the process of establishing the way in which the Registers will be provided to it. The Resolution also provides for certain timelines required to be followed by the entity in case of any change in the Registers. Note that each Registrar has been given broad powers to request additional documents and information regarding the Registers and the real beneficiaries.

 

If an entity is in the process of liquidation, the Resolution also obliges the appointed liquidator to submit the Registers (or a true copy thereof) to the Registrar within 30 days of its appointment.

 

It should also be noted that under the Resolution, the entity, the management of the entity or the liquidator must maintain the Registers for at least five years from the date of the dissolution and liquidation of the entity.

 

Confidentiality

 

The Resolution requires authorities not to disclose information in the Registers to any person without the consent of the real beneficiary(ies). However, this will not prohibit an authority from sharing information required pursuant to international laws and agreements entered into by the UAE.

 

The Resolution, provided implemented effectively, will improve the transparency and wider availability of uniform information relating to entities incorporated in the UAE and will bring the UAE closer towards more established and regulated jurisdictions of the world. ■

Afridi & Angell was pleased to have advised Dubai Tourism on the testamentary and inheritance framework in Dubai in the process leading up to the much-welcomed announcement of the ‘Retire in Dubai’ programme.

 

The announcement, made on Wednesday 2 September 2020 offers resident expatriates and foreigners aged 55 and above an opportunity to retire in the Emirate. As part of the programme, eligible applicants will be provided a Retirement Visa, renewable every five years.

 

The new scheme, unveiled under the directive of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, intends to showcase Dubai as the world’s preferred retirement destination. Led by Dubai’s Department of Tourism and Commerce Marketing (Dubai Tourism) in collaboration with the General Directorate of Residency and Foreigners Affairs – Dubai, the global retirement initiative aims to boost economic development in the country and enhance its global reputation as a business investment centre.

 

The initial phase of the programme will focus on UAE residents working in Dubai who have reached retirement age. Interested retirees must apply through the Retire in Dubai website and qualify as an eligible applicant under specified requirements. Applicants must be at least 55 years of age at the time of applying, have valid UAE health insurance and need to meet one of the financial requirements: earn a monthly income of at least AED 20,000 or have savings of AED 1 million or own AED 2 million worth of property in Dubai. Applicants may also make an application for their spouse on the condition the retiree continues to meet the criteria.

 

A competitive offering is confirmed through the collaborative work of Dubai Tourism and their partners in developing key propositions for retirees covering healthcare, real estate, insurance and banking. The newly introduced global retirement initiative revolves around seven key factors that make Dubai the ideal destination for retirees: a unique lifestyle, convenience, recreation, an active and fit society, proximity and connectivity, a world class healthcare system and legacy management with the DIFC Wills Service Centre offering discounts of up to 35-45 per cent on fees for registration of wills.

 

Should you have any questions with respect to applying for a retirement visa or on legacy management matters, please contact the authors or your usual Afridi & Angell contact. ■