On or around 21 February 2025, the Minister of Commerce decreed and published into law, the Ultimate Beneficial Ownership Rules (“UBO Rules”) of the Kingdom of Saudi Arabia (“KSA”).
These UBO Rules are designed to enhance transparency and align with international standards, particularly the recommendations of the Financial Action Task Force (FATF) and require all companies in KSA (other than companies publicly listed in KSA), to disclose and maintain accurate information about their ultimate beneficial owners.
Importantly, the UBO Rules come into effect from 3 April 2025 and below is a summary of the key aspects of the UBO Rules and their potential impact on your business.
Objectives and Scope
The primary objectives of the UBO Rules are to raise the transparency level of companies and create a comprehensive database to record and store beneficial owner data.
Criteria for Identifying Beneficial Owners
The UBO Rules define an “ultimate beneficial owner” as any natural person who meets any of the following criteria:
- owning at least 25% of the company’s capital (whether directly or indirectly);
- controlling at least 25% of the total voting rights in the company (whether directly or indirectly).
- having the power to appoint or dismiss the the majority of the board of directors of the company, or its chairman or general manager (whether directly or indirectly).
- having direct or indirect influence over the company’s operations or decisions.
- being the legal representative of any legal person that meets any of the above criteria.
The UBO Rules clarify that if an ultimate beneficial owner cannot be identified based on the above, then the KSA company’s manager, board members, or the chairman will be considered the ultimate beneficial owner.
Company Obligations
Some of the key obligations under the UBO Rules include the following:
- disclose the beneficial owner’s data when applying for incorporation.
- existing KSA companies must submit annual filings disclosing their ultimate beneficial owners to the Ministry of Commerce. Such filings are due on the anniversary of the date on which companies were registered on the commercial register.
- KSA companies will be required to create a special registry to record the ultimate beneficial owner’s data, which must be stored within KSA.
- ensure the beneficial owner’s data is updated and notify the Ministry of Commerce of any changes within fifteen (15) days.
- submit an annual confirmation of the disclosed data to the ministry.
(Important note – at this stage, there is no clarity on the level of documentation/format in which these filings should take place. It is expected that the Ministry of Commerce will publish guidelines covering its procedures and requirements for the identification of ultimate beneficial owners in due course).
Exemptions
Certain companies are exempt from application of the UBO Rules, including:
- companies wholly owned by the state or any state-owned legal entities (whether directly or indirectly); and
- companies undergoing liquidation procedures in accordance with the KSA Bankruptcy Law.
Note that the Minister of Commerce may issue exemptions on a case-by-case basis.
Confidentiality and Penalties
The ultimate beneficial owner registry will be kept confidential and accessible only to regulatory and competent authorities.
Companies that fail to comply with the disclosure, updating, or annual confirmation requirements may face penalties, including fines up to SAR 500,000.
Conclusion
The implementation of the UBO Rules represents a significant step towards greater corporate transparency in KSA. We recommend that all companies review their current ownership structures and prepare to comply with these new requirements.
Key Contacts
Ahmed Mahomed, Partner, a.mahomed@tamimi.com
Hesham Al Homoud, Partner, Head of Corporate Structuring - Saudi Arabia, h.alhomoud@tamimi.com
Omar Alhumaid, Partner, o.alhumaid@tamimi.com