Saudi Arabia is taking a significant step towards enhancing corporate transparency with the introduction of new Ultimate Beneficial Ownership (UBO) Rules. Effective from April 3, 2025, these rules mandate most companies to disclose their UBOs to the Ministry of Commerce. This move aligns the Kingdom’s corporate framework with international standards and aims to prevent financial crimes, enhance anti-money laundering (AML) measures, and ensure greater corporate accountability.

What Are the New UBO Rules?

The UBO Rules require companies to register and maintain accurate records of their ultimate beneficial owners. An ultimate beneficial owner is defined as any natural person who:

• Directly or indirectly owns at least 25% of the company’s share capital.
• Controls at least 25% of the company’s voting rights.
• Has the authority to appoint or remove the majority of the board members.
• Exercises significant influence over the company’s operations or decisions.
• Represents a legal entity that meets any of the above criteria.

If no individual fits these criteria, the company’s manager, chairman, or board member will be designated as the UBO.

Who Must Comply?

The UBO Rules apply to all companies registered in Saudi Arabia, except:

• Publicly listed joint-stock companies.
• Companies wholly owned by the state or state-controlled entities.
• Companies undergoing liquidation under bankruptcy law.
• Companies specifically exempted by ministerial decision.

Key Requirements and Obligations

The UBO Rules introduce several critical obligations for companies:

• Disclosure at Incorporation: Companies must disclose UBO details during the registration process.
• Annual Filings: Existing companies must submit an annual confirmation of UBO details within 30 days before their registration anniversary.
• Maintaining a UBO Register: Companies must maintain a dedicated UBO register containing the UBO’s full name, national ID or passport number, residential address, contact information, and the criteria qualifying them as a UBO. This register must be kept within Saudi Arabia.
• Updating Information: Any changes to UBO details must be reported to the Ministry within 15 days.
• Regulatory Requests: The Ministry has the authority to request supporting documents related to UBO information at any time.

Penalties for Non-Compliance

Failure to comply with the new UBO Rules may result in penalties of up to SAR 500,000 (approximately USD 133,000). Companies that fail to register, update, or maintain accurate UBO records could face enforcement actions, potentially affecting their business operations.

Previous Regulatory Framework

Prior to the new rules, companies in Saudi Arabia were required to maintain ownership records but lacked a centralized, structured process for UBO disclosure. The Aamaly portal provided public access to companies’ constitutional documents, revealing direct shareholders but not the true ultimate owners in complex corporate structures. The new rules close this gap by ensuring visibility of actual beneficial owners, even when ownership is layered through trusts, offshore holdings, or nominee structures.

Aligning with International Standards

The Kingdom’s new UBO regulations align with international best practices, including Financial Action Task Force (FATF) recommendations. This demonstrates Saudi Arabia’s commitment to improving corporate governance, combating financial crimes, and fostering a more transparent business environment.

Saudi Arabia’s new UBO Rules represent a major shift towards corporate transparency and accountability. Businesses operating in the Kingdom must prepare for compliance by establishing proper UBO identification, maintaining accurate records, and ensuring timely reporting. Companies are encouraged to seek legal advice to ensure they meet the new requirements and avoid potential penalties.

The content of this article is intended to provide a general overview of the new UBO Rules. Businesses should consult legal experts for tailored advice on their specific circumstances.

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