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Saudi Arabia is advancing its corporate transparency initiatives with the introduction of new Ultimate Beneficial Ownership (UBO) Rules, issued by the Ministry of Commerce on February 21, 2025.
These rules, effective from April 3, 2025, are designed to align the Kingdom with global standards, particularly those outlined by the Financial Action Task Force (FATF), while combating financial crimes such as money laundering and tax evasion.
- Key Requirements for Businesses
A UBO is defined as any natural person who owns or controls at least 25% of a company’s shares or voting rights, holds the authority to influence major corporate decisions, or exercises significant control over business operations.
Under the new regulations, most companies operating in Saudi Arabia are required to disclose and maintain up-to-date records of their ultimate beneficial owners. If no individual meets these criteria, senior executives such as directors or managers will be considered the default UBOs.
To comply, businesses must meet several new obligations:
- Disclosure at incorporation: All new entities must declare their UBOs with supporting documentation during company formation.
- Annual updates: Companies must file updated UBO information on the anniversary of their commercial registration.
- Maintaining a UBO register: A dedicated internal register must be kept with accurate and current UBO details.
- Timely reporting: Changes to UBO information must be reported within 15 days.
- Annual confirmation: Businesses are required to confirm the accuracy of UBO records annually.
- Exemptions and Enforcement
Some entities are exempt from these obligations, including publicly listed companies, state-owned enterprises, and those in liquidation under Saudi Bankruptcy Law. However, exempt businesses may still need to provide proof of their exempt status if requested.
Non-compliance carries steep penalties, with fines reaching up to SAR 500,000 (approx. USD 133,000), along with the risk of increased regulatory scrutiny and reputational damage.
- Business Implications and Next Steps
Companies, especially those with complex or offshore structures, must now assess their internal governance frameworks. Compliance teams should audit current ownership setups, ensure accurate identification of UBOs, and develop systems to track and report changes. Recommended actions include:
Reviewing corporate ownership to identify all UBOs.
Setting up internal procedures for data management and reporting.
Appointing compliance officers to oversee adherence.
Training staff on the new regulations.
Seeking legal counsel for compliance assurance.
Why Compliance Matters?
Beyond avoiding penalties, aligning with the UBO Rules enhances credibility with investors, regulators, and financial institutions. It also opens doors to government contracts and business opportunities, particularly for foreign investors seeking to establish operations in Saudi Arabia.
As the Kingdom pushes forward with economic reforms and transparency initiatives, companies that prioritize compliance will be better positioned for long-term success.
Want to dive deeper into the new UBO requirements?
Visit our blog for a full breakdown including compliance tips, and legal insights. Find the link here.
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