United Arab Emirates: ADGM Regulations Of Corporate Beneficial Ownership And Control

Last Updated: 16 October 2018
Article by STA Law Firm
Most Read Contributor in United Arab Emirates, October 2018

People do not have to look any harder than turning on a news channel to see that corruption and crime are always in the news as central points for most news stories. However, what is less known by the public reading the stories but is the focal point to investigators is that the most monotonous details of a case are often the ones that matter the most. One such mundane detail is the role of beneficial ownership and its ability to aid in the commission of corruption and crime. Thus the proper regulation of such beneficial ownership is essential. 

The Abu Dhabi Global Market (ADGM) is a financial free zone in the capital, it has its own civil and commercial laws and offers market participants a legal system and regulatory regime. The establishment of ADGM was under Abu Dhabi Law Number 4 of 2013. Amongst the many regulatory frameworks provided for by ADGM, the beneficial ownership and control regulations of 2018 are of particular importance for this article. The regulation purports to make provision for beneficial ownership and control systems for legal entities registered in the Abu Dhabi Global Market.

A beneficial owner is an entity or person that reaps the benefits of the possession and ownership (such as receipt of income) of a piece of property even though the title is under another entity's name (called a 'nominee' or 'registered owner'). There is a desire for regulation of such ownership as many criminals will use the opacity of corporate vehicles to hide their identity, to conceal the actual purpose of the account.

The Regulation defines an ADGM Person as:

  1. "a company incorporated under the Companies Regulations;
  2. An L.L.P incorporated under the L.L.P Regulations;
  3. A foundation formed under the Foundations Regulations; or
  4. A trustee of a trust governed by the law of Abu Dhabi Global Market."

The Regulation provides the definitions for a beneficial owner in respect of a Company, LLP or partnership. In relation to an LLP or company, a beneficial owner will be a person who owns or controls (in each case whether directly or indirectly), included through bearer share holdings more than 25% of the shares of voting rights in the company or LLP. Also, it can be any person who controls the company or LLP; or any person who exercises control over the management of the company or LLP.

Regarding a partnership, a beneficial owner will be any person who ultimately is entitled to or controls more than 25% share of the capital or profits of the partnership or more than 25% of the voting rights in the partnership.

The meaning of a beneficial owner in the case of trusts as provided by the Regulation is that "an ADGM Person who is a trustee, means each of the following but only in respect of the trust governed by the law of the Abu Dhabi Global Market for which the ADGM Person is a trustee:

  1. The settlor of the trust;
  2. Any other trustee aside from the ADGM Person;
  3. Each beneficiary of the trust;
  4. Where there is no determination of the persons (or some of the persons) benefitting from the trust, the class of persons in whose primary interest, in the opinion of the Registrar, the trust have been established or operates; and
  5. Any additional person who has control over the trust.

Information duties of ADGM persons

The Regulations under Article 1 regulate the information duties that are upon ADGM persons concerning their beneficial owners. The ADGM Person must know the real, accurate and complete identity of the beneficial owner. This information is required by Article 2 to be kept in the record of beneficial owners. The required information to be kept in the record is as follows:

  1. In respect of a natural person:
  1. Country of residence;
  2. Full name, including any former names;
  3. Nationality;
  4. Date of birth;
  5. The date on which a person becomes a beneficial owner;
  6. Occupation; and
  7. The grounds on which that person is considered to be a beneficial owner; and
  1. In respect of an ADGM Person who is not a natural person:
  1. Registered address;
  2. Registered name;
  3. Registration number (or equivalent);
  4. Country of registration; and
  5. The date that that person became a beneficial owner.

If the required person has reason to believe that there has been a change to the relevant information, the ADGM Person must request in writing details of the relevant change from each person whose required particulars are recorded in its record of beneficial owners. A relevant change concerning a person occurs if:

  1. "the person is no longer a beneficial owner concerning an ADGM Person; or
  2. Any other change occurs, as a result of which the required particulars states for the person on the record or beneficial owners are incorrect or incomplete."

An ADGM Person must take all reasonable procedures to make sure the security and confidentiality of data disclosed to him under the Regulations, and must not disclose such information other than in compliance with a duty imposed, or in exercise of a power conferred, under the Regulations or any additional regulation applicable in the Abu Dhabi Global Market.

Register of beneficial owners of legal persons:

As per the Regulation, there must be a Register kept that holds all the relevant information about the beneficial owners. It goes further to state that such information must be kept by the Registrar and may be in electronic form.

This data will be kept confidential and secure in the Register, and the Registrar is under an obligation not to reveal to any additional persons the Register or any portion of it, or documents or knowledge obtained by him or disclosed to him, other than disclosures permitted as per the Regulation. The Registrar may disclose information when such disclosure will be in pursuance of section 967 of the Companies Regulations.

The Registrar may reject applications where there has not been compliance with the provisions of the Regulations or any other enactment. He may also reject any submission on such terms and conditions as he thinks fit if it appears to him that there is non-compliance with provisions of these Regulations or any other enactment in respect of that submission or other matter.

Offenses, fines, and enforcement:

The Regulation provides the offenses, fine and their enforcement for contravening provisions of the Regulation.

False or misleading information – a contravention here will be where persons intentionally or negligently provide the registrar with a document or information or make any such statement to the registrar that is deceptive, misleading or incorrect in a material manner. Such a person will be liable to a prescribed fine.

Fines – the board of the ADGM may make any rules concerning the procedures relating to the imposition and recovery of fines. However, the Registrar can send a written notice (a "monetary penalty notice") to the person and impose a monetary fine for a contravention. A monetary penalty notice is a written notice requiring the person to pay the Registrar a find of an amount determined by the Registrar as the Registrar may consider appropriate. The fine may not exceed a level 7 fine (as provided for under the Commercial Licensing Regulations 2015 (Fines) Rules 2015), or such other amount as the Registration Authority may prescribe from time to time.

Fees payable to the Registrar:

The Board as per the Regulation can require payment to the Registrar of any fees in connection with the Registrar's administration of the Regulation. The amount of the fees will be determined depending on the different levels of fees for each ADGM Person. When submitting information or documentation to the Registrar, he/she has been provided with the power to reject such submittal until the making of the payment.

In wider UAE

In cases of ownership of a company, the beneficiary is the actual owner of the company, which receives income and other benefits due to his ownership in the company. An individual may be deemed beneficiary if he is directly or indirectly engaged in the company's business in the UAE and is, in fact, the owner of the company. In practice, the beneficiary enjoys the status of the owner of the company, whereas formally ownership may belong to other persons.

Ways in which a beneficial owner can be detrimental to others:

When persons get divorced, one spouse may wish to conceal his/her ownership of community property by titling: bank accounts, property, vehicles, in the name of an intermediary (i.e., a nominee). The divorcing spouse discretely and without being known controls these assets while the nominee seems to own them. This person acts as a protective layer which hides the divorcing spouse's beneficial ownership of the assets.

A beneficial owner of a shell company can engage in the crime of money laundering and due to the anonymity of a shell company such owner will not be required to disclose the fact that they own the company. In many countries, the legislature requires the name of an agent, the number of shares that make up the company or an address. Therefore, by just omitting the name of the real owner, companies can be formed with no record of who indeed controls and benefits from that company. 

In the case of 159/2009 on 29/03/2010, the court had to determine whether a legal owner or beneficial owner of a business would be liable for a claim filed against the company. The claimant had requested the issuance of a court order having them jointly pay the claimant the amount of AED 234,631.31. The first respondent was the person to whom the business license belonged, the second respondent controlled to business in his capacity as the authorized signatory of the business.

The Court of First Instance rejected to claim against the first respondent and order the second respondent to pay the amount claimed to the claimant. This judgment was appealed, and the court of appeal annulled the court of first instance's decision concerning its decision to reject the claim against the first respondent and decided that they two respondents shall jointly and severally pay an amount to the claimant. In an appeal in cassation, the court decided to uphold the judgment of the appeal court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions