New Saudi Arabia beneficiary owner rules will enhance corporate transparency

The new regulations, aimed at the identification and disclosure of UBOs of companies operating within the Kingdom, mandate comprehensive disclosure requirements. From 3 April, companies in Saudi Arabia will be required to disclose and maintain accurate and up to date records of their ultimate beneficial owners with the Ministry of Commerce.

The new UBO rules provide that the Ministry will establish a UBO register, where all companies’ UBO information will be recorded. Existing companies will have to make annual UBO filings to the ministry in the 30 days before the anniversary of the company’s incorporation and report any changes to the recorded information within 15 days of such changes. Those looking to incorporate a company in the Kingdom after the new rules take effect will have to disclose UBO information at the time of the company’s incorporation.

Christopher Neal, corporate law expert at Pinsent Masons, said: “Investors should be mindful of these new requirements and ensure that all the information required under these regulations is readily available to avoid any potential delays for their proposed investments or acquisitions.”

The rules are part of Saudi Arabia’s broader efforts to strengthen its regulatory framework and ensure compliance with international norms. By requiring companies to disclose their ultimate beneficial owners, the Kingdom aims to enhance corporate governance, prevent money laundering, and curb illicit financial activities.

Abdulrahman Alangari, corporate law specialist at Pinsent Masons said: “The new UBO rules mark a significant step towards enhancing corporate transparency in Saudi Arabia by aligning with global standards, and strengthen the Kingdom’s efforts to combat financial crimes while attracting foreign investment.”

Under the new rules, a UBO owner is defined as any natural person who meets one of more of the set criteria. These include owning at least 25% of the company’s share capital; controlling at least 25% of the voting shares; an entitlement to appoint or remove a majority of the company’s board of directors, manager or president, or to influence decision making; or the ability to act as a representative of any legal person to which any of the criteria apply.

If a UBO cannot be identified using these criteria, the company’s manager, board members or president will be regarded as the ultimate beneficial owner.

UBOs will be required to disclose standard identification information, primarily, their name, national ID, resident ID or passport details in case of non-nationals, national or residential address, mobile number and email address. All the information recorded on the Ministry’s register will be confidential and may only be disclosed to other competent authorities for regulatory purposes.

Failure to comply with the new regulations may result in fines of up to SAR 500,000 (US$133,300).

All entities incorporated in Saudi Arabia are subject to the UBO reporting requirements other than publicly listed joint-stock companies, companies whose entire capital is owned by the state or one of its legal entities, either directly or indirectly, companies subject to any liquidation procedure under Saudi Arabia’s Bankruptcy Law, and companies specifically exempted by a decision of the minister of commerce.