"The concept of the Ultimate Beneficial Owner (UBO) is considered one of the most critical modern regulatory concepts. It refers to the natural person who ultimately owns or effectively controls the company, whether directly or indirectly, or exercises substantial influence over its decisions.
The Companies Law and the Ultimate Beneficial Owner (UBO) rules emphasize the importance of identifying the ultimate beneficial owner as a key tool for enhancing disclosure and governance. This is achieved by enabling competent authorities to identify the individuals who effectively benefit from the company or control its affairs, thereby steering companies toward achieving their legitimate purposes and safeguarding the Kingdom's commercial and financial system.
For practical application purposes :Companies must distinguish between the concepts of ownership and control when identifying the ultimate beneficial owner. Ownership refers to a natural person holding, directly or indirectly, a share of no less than (25%) of the company's capital. On the other hand, Control refers to the ability of a natural person to exercise effective influence or authority that enables them to dictate the company's material or strategic decisions, even if they do not own a share in its capital.
How to Identify the Ultimate Beneficial Owner?
This is achieved through:
- Tracing the ownership chain from the parent company to the individuals.
- Calculating the indirect percentage by multiplying ownership percentages across the companies.
- Aggregation of direct and indirect ownership, if any.
- In some cases, an individual reaches a percentage exceeding 25% indirectly (such as 68% or 76.5%), and is therefore considered an ultimate beneficial owner.
- In other cases, the percentage is lower (such as 8% or 17%), and thus they do not qualify as an ultimate beneficial owner.
Companies Obligated to Disclose:
General Partnership
Limited Partnership
Joint Stock Company
Simplified Joint Stock Company
Limited Liability Company
Foreign Company
Companies Exempt from Disclosure Requirements :
- Companies wholly owned by the State or any of its entities (directly or indirectly), as well as their subsidiaries.
- Companies subject to liquidation procedures under the Bankruptcy Law.
- Companies exempted by a decision of the Minister.
- Joint stock companies listed on the financial market.
The ultimate beneficial owner rules shall come into effect as of 05/10/1446 H (corresponding to 03/04/2025 ). Accordingly, every company or its founders shall be obligated to disclose the ultimate beneficial owner data by this date.
Company Obligations Regarding Ultimate Beneficial Owner Disclosure : =
The ultimate beneficial owner data must be included in the incorporation application, pursuant to Article Five of the Rules.
Companies shall disclose the ultimate beneficial owner data within a period ending by the annual verification date, during the first year of the Rules coming into effect.
Important Notice
The ultimate beneficial owner status has become tied to warnings and financial penalties from the Ministry of Commerce, following the issuance of a resolution regulating penalties for non-compliance with the following:
- Disclosing the ultimate beneficial owner data.
- Annual Verification.
- Updating Data.
Conclusion: To protect your company, you have two opportunities
The First Opportunity (The Warning) :
For first-time violations: A warning is issued alongside a 30-day grace period to rectify the status. Utilize it before it turns into a financial penalty.
Direct Financial Penalties (In case of failure to rectify :
Upon expiration of the grace period, a financial penalty shall be imposed based on the capital amount:
- Less than 500,000: SAR 4,000
- From 500,000 to 2.5 Million: SAR 20,000
- From 2.5 Million to 5 Million: SAR 40,000
- More than 5 Million: SAR 80,000
In the event of a repeated annual verification violation, the penalty shall be doubled and may reach up to SAR 500,000.
You may contact us
To submit a request for Ultimate Beneficial Owner (UBO) data disclosure, updates, or annual verification, we stand ready to assist you in completing all procedures with utmost accuracy and professionalism, in accordance with the approved regulations.
Contact us at 0500666883 to submit your request, or apply online by filling out the form.