The Kingdom of Bahrain has introduced a resolution of Ultimate Beneficial Owners ("UBO") to eliminate money laundering and other crimes that are related to tax evasion. A UBO is a person who is not officially shown as a stakeholder of the company but still gets the ultimate benefits from it.
Entities under the Ultimate Beneficial Owners Resolution:
Entities that fall under the UBO resolution include all people, even those on a domestic or a foreign stock, except those licensed by the Central Bank of Bahrain (CBB). This exemption is due to the licensing power they have after being licensed by the Central Bank of Bahrain. It doesn't depend upon the type of activity that runs under UBO.
Who are Ultimate Beneficial Owners by UBO Resolution?
According to the UBO resolution, the following types can fall into the category of a UBO:
1.Who as 10% or more capital of the registered person? (A person who is legally registered in the company under the authorities of the country).
2. The one with control over the registered entity, directly or indirectly.
Influencing decisions in any way such as financing the project, or part of a hierarchical chain of ownership.
3. Benefitting from the transactions made by the registered person.
4. Having any type of control indirectly or directly through the power of attorney or management. Maybe they are using their influence on different decisions of the company through their managing power.
Criteria for UBOs:
The same person can be an Ultimate Beneficial Owner (UBO) for more than one registered entity. In the same way, a registered person has more than one UBO, but in that case, the information must be submitted to MOICT (Ministry of Industry, Commerce, and Tourism).
There is no age or nationality limitation for qualifying as a UBO.
Identification of Ultimate Beneficial Owners behind Nominees:
The approach of substance over form is very important as the definition of UBO mentioned above is not enough. There are entities in Bahrain which may have a nominee. This concept allows a person to use their name for the registration of the company and the UBO may pay them some fee or sometimes they even pay them with a share in the company's profit.
The nominee in Bahrain provides an absurd shield to the UBO. So, to eliminate the tax-dodging persons, the authorities have to take keen and detailed measures.
Information Chart of Ultimate Beneficial Owner (UBO):
The following information is mandatory for submission to the Ministry of Industry, Commerce and Tourism (MOICT):
1. Full name.
Passport number and passport copy.
Copy of identification card and identification card number.
The documents must be submitted to the Ministry of Industry, Commerce, and Tourism (MOICT) while applying for commercial registration. They are to be uploaded to the online portal of MOICT. The registered entity must consider the point that they need an annual update and also the update is required in case of any change regarding the UBO.
In Case of Non-Compliance:
In Bahrain, if the registered entity fails to provide any of the required information regarding the ultimate beneficial owner, then the following actions will be taken against the registered entity:
The entity is going to face a suspension of the commercial registration.
The second significant penalty is a fine under the amount of BD1,000 per day in the case; it is the first offense.
In the case of a second or more offense within three years after the first one, the person will be fined a heavy amount of BD2,000 per day.
Assault the person from the commercial registration completely.
In almost every case the amount of the total fine must not go above BD100,000.
What measures should be taken by the businesses in Bahrain:
1. They should pay a lot of attention and focus on their companies' structure and try to filter out the ultimate beneficial owners according to the Ultimate Beneficial Owners Resolution requirements.
2. They must look into the details of the parent company by applying a substance over form approach.
3. They should collect detailed knowledge about the UBO internationally and see through it.
4. The information must be written very keenly to avoid all kinds of penalties by the MoICT.
5. The information on the UBO must be correct.
6. They must ensure to update on time.
The Resolution of Ultimate Beneficial Owners is designed to remove the gaps in government policies and identify tax evasion and financing crime. It has given a complete approach to reach out to the ultimate beneficial owners.
There are a few but detailed points given to target the Ultimate Beneficial Owner (UBO). A UBO can be any person who is directly or indirectly influencing the corporate. Additionally, the person may not influence the decisions or have recorded shares, but maybe he is taking benefit from the company's profit through the registered entity.
The resolution has also talked about the substance over form approach as many businessmen in Bahrain use nominees' technique. This can absurd the identity of Ultimate Beneficial Owners by applying another layer of secrecy. The resolution contains all the required information of UBO, which has to be submitted to the Ministry of Industry, Commerce, and Tourism (MOICT) correctly; otherwise, the penalties are highlighted above. So, businessmen have to take a proactive approach after this resolution in the Kingdom of Bahrain.