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Ultimate Beneficial Owner

UBO Filing: UAE Businesses Should Avoid Heavy Penalties

The UAE’ business landscape has transformed over the years and continues to evolve with a set of regulatory reforms. It began with the introduction of VAT and strengthened with the roll-out of Economic Substance Regulations (ESR). The mandate to file the information on Ultimate Beneficial Owners (UBO) is the latest among a set of economic transparency procedures introduced by the UAE.

The entities in the UAE were required to file the UBO information no later than 30th June 2021. Companies that failed to comply with the UBO procedures now face consequences including penalties and suspension of trade licenses. The first phase of punishment starts from 1st July 2021 where the Minister of Economy (MOE) will send warning notes to violators. The second phase will kickstart from 8th July where the violators will be subjected to administrative penalties up to AED 100,000.

The Cabinet Decision No. 53 of 2021 contains the set of violations and the corresponding UBO administrative penalties. Read ahead to know the consequences of UBO non-compliance in the UAE.

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

A written warning will be issued for the first time. In the second instance, a penalty of AED 50,000 will be imposed along with a warning to the legal person to rectify its situation within 30 days of the violation issue. If the violation occurs for a third time, a fine of AED 100,000 will be imposed along with the suspension of the trade license for at least 12 months.

2. Failure to include the data mentioned in Clause (2) of Article (8) of Cabinet Resolution No. (58) of 2020

For the first time, a written warning will be issued to the violator. In the second time, a penalty of AED 20,000 will be imposed along with a warning to rectify the situation within 15 days as of the violation issue. In the third instance, the fine of AED 40,000 will be slapped and the entity’s trade license will be suspended for at least six months.

3. Failure to maintain adequate, accurate, specific and updated data of Beneficial Owner / Failure to correctly record the Beneficial Ownership

First-time offenders will receive a written warning. A penalty of AED 10,000 will be imposed in the second instance along with a warning to rectify its situation within 15 Days as of the violation issue. If the violation is repeated for the third time, a penalty of AED 20,000 and suspension of the trade license for at least one month will be imposed.

4. Failure to provide the Registrar with the data regarding the details of the director or nominal board member

The entities will be issued a warning in the first instance. If the violations are repeated, the company will have to incur a fine of AED 20,000 with a warning to rectify its situation 15 Days as of the violation issue. Further recurrence of the offence will result in a penalty of AED 40,000 and restriction of the powers of the board members or directors, who are held liable for the violation.

5. Failure of the legal person to create the Register of Partners or Shareholders

The legal person will first receive a written warning. The second time, the entity will be subjected to a fine of AED 50,000 along with a warning to rectify its situation within 60 days of the violation issue. A legal person that commits the same violation for the third time will incur a penalty of AED 100,000 and their trade license will be suspended for at least 12 months.

6. Failure of the legal person to maintain the information of all partners or shareholders in the Register of Partners or Shareholders

The companies that flout this requirement will be served a warning letter in the first instance. If the company fails to comply with the regulation for a second time, a penalty of AED 30,000 will be incurred along with a warning to rectify the non-compliance within 15 days of the violation issue. Legal persons that repeat the violation for the third time will incur a penalty of AED 60,000 and their trade license will be suspended for at least 6 months.

7. Failure of the legal person to provide the Registrar with information of the beneficial owner and the Register of Partners or Shareholders and maintain such registers from damage, loss or destruction

This class of violation will prompt the authority to send a written warning to the violator in the first instance. If the entity repeats the offence for a second time, a penalty of AED 15,000 will be imposed. The entities will also get a warning to rectify their situation within 15 Days as of the violation issue. Further reception of the violation will result in a penalty of AED 30,000 and suspension of the trade license for three months.

8. Failure of the legal person to provide any additional information required by the Registrar

Any company operating in the UAE that commits this violation will receive a warning in the first instance. Then, if the offence is repeated one more time, a penalty of AED 5,000 will be imposed on the entity with a warning to rectify its situation within 15 days of the violation issue. If the violation is repeated for the third time, a fine of AED 10,000 will be imposed along with the suspension of the trade license for at least one month.

9. Failure of the company to provide the Registrar with the name of a natural person residing in the UAE and authorised to disclose to the Registrar all data and information required by the mentioned Federal Decree-Law or Executive Regulations thereof

This violation attracts the lowest penalty amount compared to other violations. After a written warning in the first instance, the violators are subjected to a penalty of AED 1,000 for repeating the offence. The Authority will warn the companies to rectify their non-compliance position within 15 days as of the violation issue. If the violation recurs for a third time, a fine of AED 2,000 and suspension of the trade license for at least one month will be the consequences.

10. Legal person to issue shareholder’s share guarantees

First-time offenders will receive a written warning. Repeating the violation for a second time will attract a penalty of AED 5,000. Entities are subjected to a fine of AED 10,000 if the violation occurs for a third time.

11. Failure of the legal person, on the issuance of shares or stocks in the name of persons or board members, to disclose to the Registrar the information in respect of such shares or stocks and the identity of such persons or board members within 15 days as of such issuance

This kind of violation will first attract a written warning in the first instance. It will be followed by a penalty of AED 5,000 in case the violation is repeated. The offenders will get 15 days to rectify the situation. If the violation is repeated for the third time, consequences include a penalty of AED 10,000 and restriction of the powers of the board members, directors or owners, who are proved liable for the violation.

12. Failure of the legal person to hand over to the liquidator the Register of Beneficial Owner and Register of Partners or Shareholders within 30 days as of appointing the liquidator

Companies that fail to comply with this requirement will be served with a written warning at first. If the violation occurs for a second time, a penalty of AED 5,000 will be imposed along with a warning to rectify its situation within 15 days of the violation issue. If the entities commit this violation for a third time, a penalty of AED 10,000 will be levied and will lead to suspension of the trade license for at least one month.

13. Failure of the legal person or the liquidator to maintain the records and all information referred to herein for at least five years as of the date of dissolution, liquidation or de-registration

The violators will first receive a written warning. The second recurrence of the violation will attract a penalty of AED 20,000.  Violators will be subjected to a fine of AED 40,000 if the violation occurs for a third time.

How can Jitendra Business Consultants Help You?

Penalties up to AED 100,000 is a hefty amount that will bring a company down to its knees. However, UBO consultants in Dubai such as Jitendra Business Consultants (JBC) can help the companies ensure UBO compliance without incurring penalties. JBC has a team of highly qualified business setup consultants and Chartered Accountants who will ensure that the entities are in full compliance with UBO guidelines. JBC can train and guide the staff of the companies to maintain the Real Beneficiary Register (RBR) and Partners or Shareholders Register(PSR). JBC can also help the business owners in maintaining the registers on their behalf and provide secretarial services to maintain and update the registers regularly and comply with the regulations at the time of incorporation, renewal and making any amendments.