Identifying the true owners of a corporate entity is a subject that governments and institutions are increasing focusing on as a method to tackle tax avoidance, maximising sanction enforcement, and facilitating policies for anti-money laundering.
Further to the Omani Law on Anti-Money Laundering and Combating the Financing of Terrorism (30/2016), (“AML Law”), Oman has sought to introduce greater transparency in its economy to comply with global standards, and increasing global expectations. On 2nd January 2023, Oman has joined other GCC members in introducing dedicated UBO regulations via the Ministry of Commerce, Industry and Investment Promotion (“MOCIIP”) Ministerial Decision No.630/2022 Promulgating the Ultimate Beneficiary Identification Procedures Regulations (the “Regulations”).
Application of the UBO
The Regulations apply to all commercial companies established under the Commercial Companies Law of Oman, RD18/2019, (“CCL”), excluding public joint stock companies, and all other companies must comply with the Regulations from 31st January 2023.
The Regulations introduce the following two key terms:
- Real Beneficiary, (“UBO”) which means: “The person having or practising ultimate effective control over a commercial company, whether directly or indirectly, as well as any person with control or ownership through a chain of ownership, or through any controls other than direct control”.
- Ultimate Beneficiary Register (“UBR”) means: “A register that includes the information of the partners and shareholders deemed as Ultimate Beneficiaries with at least 25% of the shares of the company, or which are equivalent to said percentage of shares”.
Obligations of Commercial Companies
Companies are required to establish a UBR containing information on its UBOs. Companies are also required to appoint a person, resident in the Sultanate of Oman, to act as the point of contact between the MOCIIP and the company to provide the company’s UBO information to the MOCIIP, and to maintain the UBR and register the same on the Commercial Registry maintained by the MOCIIP.
Companies must keep the UBR updated and require all UBOs to verify all information recorded in the UBR. Any changes to a UBO or their information must be recorded in the UBR within five days from the awareness of the change.
The Company’s records (which can be maintained electronically), must be retained for a period of not less than ten years and for a period not less than five years from dissolution or liquidating the company, although in the event of liquidation it is not clear who is required to retain the records.
Penalties for Non-Compliance
There are three main sanctions set out in the Regulations which the MOCIIP may impose on companies who fail to comply with the Regulations, which are:
- Written warning;
- Administrative fine not exceeding OMR 1,000; and
- Suspension of the Commercial Register for a duration not exceeding three months, (which stops the company from practising its commercial activities).
Fines and suspension penalties may be doubled in case of repetition of the violation.
Food for Thought
The scope of the Regulations will mean that even the smallest corporate entities incorporated in the Sultanate of Oman will be subject to the Regulations, and will therefore be required to maintain a UBR, giving rise to a new administrative burden.
While minor shareholders will not be required to be recorded on the UBR, given that definition of UBO includes individuals with indirect control, even where shareholders seek to own shares via numerous small holding companies they may still need to be recorded on the UBR if between the different holding companies the same person or entity will collectively control 25% of the shares of a company.
Considering the potential penalties for failure to comply with the Regulations, creation and maintenance of a UBR is something the management, board and shareholders of Omani companies cannot afford to ignore.
Should you have any questions regarding the Regulations, or corporate governance in general, Kennedys’ corporate team in the Sultanate of Oman and across the Kennedys’ global network have extensive knowledge and experience of advising corporations on this and other matters.