New Real Beneficial Owner Resolution Announced

Recently, the UAE Cabinet enacted Cabinet Resolution No. (109) of 2023 (“New Resolution”) whereby the previous Cabinet Resolution 58 of 2020 (“Old Resolution”) was repealed, and in its place amended by the New Resolution. The New Resolution concerns the Regulation of Real Beneficiary Procedures.

Under the New Resolution, new practices and processes are put in place to regulate the minimum obligations of the registration authorities and legal persons in the UAE.

Who is impacted?

The New Resolution applies to all entities registered and licensed in the UAE, yet excludes entities registered in Financial Zones (DIFC and ADGM), and government entities and subsidiaries.

In this alert, we would like to highlight the key fines that could be imposed towards onshore limited liability companies (“LLCs”).

Key Focus Areas

The competent authority supervising the register of commercial names of different establishments registered in the relevant emirate and/or freezone (“Registrar”) has increased discretion and onus to determine the Real Beneficial Owner in cases with complex structures.

If you are a shareholder or a manager of an LLC, you should be mindful of the following actions that have been introduced under the New Resolution:

• Registrars are to apply a risk-based approach to the facilities registered with it, in order to ensure that legal person is not misused for Money Laundering and Terrorist Financing Crimes.
• In the event of complex structures where the Real Beneficiary cannot be identified, the Registrar can determine so using the risk-based approach.
• Establishment of a Unit Combating Money Laundering and Terrorist Financing.

Penalties for non-compliance

While the New Resolution does not specify the exact monetary values or types of administrative sanctions that can be imposed but refer to an external “Administrative Sanctions Regulation”, these can be found in the Cabinet Resolution No. (53) of 2021 Concerning the Administrative Penalties against Violators of The Provisions of the Cabinet Resolution No. (58) of 2020.

The fines vary depending on the type and frequency of the violation, and can range from AED 1,000 to AED 100,000, as well as suspension or restriction of the trade license or the powers of the board members or directors of the legal person.

Notably, there are two fines in particular to be aware of:

Failure of the legal person to create Register of Beneficial Owner and maintain its data:

• First time: written warning.
• Second time: AED 50,000 and warning the legal person to rectify its situation within thirty (30) Days as of the violation issue.
• Third time: AED 100,000 and suspension of the trade license for at least twelve (12).

Failure to maintain adequate, accurate, specific and updated data of the beneficial owner or fails to correctly record down the beneficial ownership:

• First time: written warning.
• Second time, the penalty is AED 1,000 and warning the legal person to rectify its situation within fifteen (15) Days as of the violation.
• Third time, the penalty is AED 2,000 and suspension of the trade license for at least one month.

What can be done?

We recommend you assess practices adopted by your UAE company, to reduce the risk of finding yourself/ your company in breach of UAE Companies Law and New Resolution, such breach can result in fines being imposed by the authorities.

In the instance your corporate structure is rather complex, we recommend seeking advice to ensure compliance with the relevant regime.

We would be delighted to conduct a “health check” review of your company, to assess its UAE law compliance.

How can we help?

For further details, please contact our expert Partners in the Corporate Structuring team, Sherif Rahman and Izabella Szadkowska.