Beneficial Ownership

Beneficial ownership refers to the natural person(s) who ultimately own or control a legal entity, even where the registered ownership appears under another name (“Ultimate Beneficial Owners” or “UBO”). Unlike legal ownership — which may be held by a corporate structure, nominee arrangement or other legal vehicle — an Ultimate Beneficial Owner is the individual who ultimately owns, controls or derives the principal economic benefit from or decision-making power over the entity.

Identifying and disclosing beneficial ownership is a cornerstone of anti-money laundering (‘AML’) and counter-terrorism financing (‘CTF’) frameworks. It helps ensure that the individuals who ultimately own or control legal entities can be identified, reducing the risk of financial crime and the misuse of corporate structures to conceal illicit activity.

ADGM was the first jurisdiction in the MENA region to introduce dedicated beneficial ownership legislation, reflecting its commitment to the highest international standards set by the Financial Action Task Force (“FATF”) and the Organization for Economic Co-operation and Development (“OECD”). Under the Beneficial Ownership and Control Regulations 2022 (“BOCR 2022”), applicable ADGM Persons are required to identify, record, maintain and, where required, notify the Registrar of information relating to their Ultimate Beneficial Owners.

The BOCR 2022 applies to all ADGM Persons, including companies, limited liability partnerships, foundations, trusts, partnerships and certain branches registered in ADGM, subject to the exemptions and exclusions set out in the Regulations.

A nominee director is a person who acts on the instructions of another person in relation to some or all of their functions as a director. ADGM requires prescribed information relating to nominee directors and the persons who nominate them to be maintained and kept up to date.

No. Beneficial ownership may change through changes in ownership, voting rights, control arrangements, governance rights, trust arrangements or other circumstances that affect who ultimately owns or controls an entity.

ADGM uses a cascade approach when identifying UBOs. This means working through a series of tests in order, until one or more Ultimate Beneficial Owners are identified. The tests differ depending on the type of entity, but generally begin with ownership, then move to control, and finally to senior management where no individual can be identified through ownership or control.

Three tests apply in sequence:

• Ownership Test — any individual who directly or indirectly holds 25% or more of the shares, voting rights or ownership interest in the entity.
• Control Test — any individual who exercises ultimate control over the entity, regardless of whether someone was identified under the ownership test. This includes the right to appoint or remove the majority of the board, or otherwise exercise dominant influence over the entity’s decisions.
• Senior Managing Official Test — if no individual is identified under either of the above tests, the senior officer(s) responsible for managing the entity are treated as the UBO.

A similar ownership, control and senior management cascade applies, adapted to the partnership structure.

All of the following individuals must be identified as UBOs:

• The settlor (the person who established the trust)
• The trustee(s)
• The protector, if any
• The beneficiaries, or where individual beneficiaries have not yet been determined, the class of persons in whose main interest the trust is established or operates
• Any other individual who exercises control over the trust

The following must be identified:

• the founder;
• the foundation council members (except those who are ADGM-registered company service providers);
• the guardian, if any;
• the named beneficiaries, or the designee if no beneficiaries are named; and
• any other natural person who exercises ultimate control over the foundation.

Generally, a UBO must be a natural person rather than a legal entity. However, Schedule 1 of BOCR 2022 provides that certain entities are treated as UBOs for the purposes of the Regulations, including:  

1. a listed company;
2. a company that is wholly-owned by the Federal Government of the United Arab Emirates;
3. a company wholly-owned by any government of a member Emirate of the United Arab Emirates; or a company created by Emiri decree within the United Arab Emirates; or
4. a company wholly-owned by a government or government agency of a Relevant Jurisdiction.

Where any ownership or control role is held by a company, LLP, or partnership, the ownership chain should be assessed to identify the relevant Ultimate Beneficial Owner(s), unless an exemption applies.

All applicable entities must maintain an accurate and up-to-date Record of Beneficial Owners and notify the Registrar of any prescribed changes within the applicable time period set out in the Regulations.

No. The Record of Beneficial Owners is not published publicly. Access is limited to designated personnel of the ADGM Registration Authority. The Registrar may disclose information only in circumstances permitted by law, including to competent authorities and other persons authorized under the Regulations.

You need to:

• Take all reasonable steps to identify your Ultimate Beneficial Owner(s)
• Keep a Record of Beneficial Owners
• Make sure the information is accurate and up to date and under review on an ongoing basis
• Provide the information to ADGM when required

These obligations apply throughout the life of your entity.

Beneficial ownership is not a one-off requirement.

You must monitor your ownership and control structure on an ongoing basis and update your records when changes occur.

You must look through any corporate or nominee arrangements to identify the real individual who ultimately owns or controls the entity.

If no individual can be identified through the ownership test or the control test, the entity must identify the relevant senior management (such as directors) as the UBOs in accordance with the Regulations.

If you miss the prescribed deadline, a late filing fee will apply.

This follows a graduated structure:

• USD 150 for the first month late.
• An additional USD 150 for the second month.
• A further USD 150 for the third month.

Late fees apply where you eventually submit the required information. They do not remove your obligation to file.

Late filing fees are administrative fees and are separate from any enforcement action the Registrar may take in relation to non-compliance.

Failure to notify changes is a more serious contravention than a late filing.

This may lead to:

• Regulatory enforcement action, including financial penalties; and
• Other enforcement measures available to the Registrar under the Regulations.

ADGM Persons are expected to meet their obligations on an ongoing basis.

Common issues include:

• Not filing changes within the prescribed periods
• Updating internal records but not notifying the Registrar
• Maintaining incomplete or incorrect information on beneficial owners or nominee directors
• Failing to identify individuals who exercise control through arrangements other than share ownership
• Failing to reassess beneficial ownership following restructurings, ownership transfers or changes to governance arrangements.

These issues are often administrative, but they are treated as non-compliance under the Regulations.

Providing false or misleading information to the Registrar is one of the most serious breaches under the beneficial ownership framework.

This can result in:

• Significant financial penalties (currently up to USD 54 million);
• Regulatory restrictions or other enforcement measures;
• Licence suspension or cancellation in serious cases; and
• Director disqualification where appropriate.

Firms should ensure all information submitted is accurate, complete, and up to date.