Saudi Arabia tightens beneficial ownership rules

The Kingdom’s ministry of commerce has updated the ultimate beneficial ownership regime originally announced in March, with newly clarified thresholds for exemptions or controlling interests in companies operating from the country.

The rules define the ultimate beneficial owner (UBO) of a company as any natural person who meets one of more specific criteria, including owning at least 25% of the company’s share capital, controlling at least 25% of the voting shares, the power to appoint or remove a majority of the board of directors, or the ability to act as a representative for someone else who fulfils those criteria instead.

The new update clarifies the 25% ownership rule, but also exempts subsidiaries of stock exchange listed companies – as they already have high ownership disclosure standards – and that partners or shareholders acting on another person’s behalf must disclose that owner’s information within 15 days.

Although there are no fees for UBO registration, the ministry confirmed it will remain confidential and only accessible for regulatory purposes, with disclosure requiring an annual update from companies on the anniversary of their commercial registration.

“The new rules mean companies must be aware of their CR anniversary and align their filings with this date,” explained Mohammed Yasin, an expert with Pinsent Masons in Riyadh.

“It is important for firms to make sure they have a board-approved UBO policy, and maintain documentation to track UBO obligations, especially for non-equity controllers.”

Companies failing to comply with the new regulations will face fines of up to SAR 500,000 (US$133,300).