Ministerial Decision (MD) 424/2023 (Ministry of Commerce, Industry & Investment Promotion (MCIIP)) - Regulation for Identification of Ultimate Beneficial Owners (UBO Regulations)
MD 630/2022, which regulated the identification of ultimate beneficial owners of companies and only came into effect on 2 January 2023, was replaced by MD 424/2023 which came into effect on 7 August 2023. MD 424/2023 softened the requirements of MD 630/2022.
Identifying the ultimate beneficial owners (UBOs) of companies has been a legal requirement for many years in numerous countries. Banks and professional services firms often require both existing and new corporate customers to identify their UBOs with appropriate evidence. This requirement for more transparency in relation to corporate ownership has been driven by governments seeking to reduce money laundering and other crimes such as funding terroristsand drug smuggling.
With the UBO Regulations, Oman has adopted a regime similar to other countries which focus on "Persons with Significant Control".
The UBO Regulations apply to all companies (with the exception of public joint stock companies (SAOGs)) and requires them to maintain an up-to-date register identifying the company's UBOs (UBO Register).
If a company fails to do so, the MCIIP may impose a fine of up to OMR 1,000, suspend the "activity" for 3 months or cancel the "activity" as registered by the company on the Commercial Register.
Applies to all commercial companies (save for SAOGs)
Limited liability companies (LLCs), sole proprietor companies (SPCs), closed joint stock companies (SAOCs), general and limited partnerships, joint ventures and holding companies must maintain a UBO Register. MD 630/2022 explicitly allowed for the Register to be kept in electronic form, MD 424/2023 is silent on this.
Who is a UBO?
Any person who owns or exercises ultimate control over a company, directly or indirectly. For example, this would appear to apply to ownership or control through a chain of companies or through a so-called "sleeping partner" or "trust" arrangement. UBOs are the individuals who "sit" at the top of the ownership structure of each company.
What data must be on the UBO Register?
The name, date of birth, place of residence, and address of each UBO who owns or controls 25% or more of the company's shares. However, there is some uncertainty here because the meaning of some of the provisions is not entirely clear. Further provision provides that in the absence of a beneficial owner of a company, the most senior management officer of the company will be deemed to be the beneficial owner for the purposes of this Regulation. Perhaps this is intended to address the situation where the company is ultimately owned by a trust or similar entity where there is no individual UBO as such. Therefore, each company must consider each of its shareholders or partners and if they are not individual persons themselves but another corporate or other legal entity, the company must continue to investigate the ownership structure until it has identified and registered each UBO who owns or controls 25% or more of its shares.
Other obligations
Each company must also:
- authorise (and register with the MCIIP) an individual who is resident in Oman to file with the MCIIP all such information about the company's UBOs and generally to keep the information on the Commercial Register up to date:
- update the UBO Register within 5 working days from the date of any change of registered data or information:
- maintain all records of the company for not less than 10 years; and:
- establish and maintain a register of shareholders (which essentially repeats a provision of the Commercial Companies Law).
Our thoughts
In our experience, very few companies maintain a UBO Register despite the fact that this has been a legal requirement since 7 August 2023. Perhaps this is a reflection of the lack of concern for, and enforcement of, the requirement for companies to maintain a physical shareholders' register even though this has been a requirement under the Commercial Companies Law since 2019. This relaxed approach in the past is not a good reason for this continuing in the future. Although the fine for non-compliance is only OMR 1,000, failure to comply may also result in the MCIIP taking steps that could have a significantly adverse effect on the company's business. Companies who are non-compliant should identify their UBOs and establish and maintain their UBO Register.
Originally published February 5, 2024
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