New Ultimate Beneficial Ownership Rules in Saudi Arabia

The Saudi Minister of Commerce approved the new Ultimate Beneficial Ownership Rules (UBO Rules), which will come into effect on 3 April 2025. These rules are designed to align with the recommendations of the Financial Action Task Force (FATF) aimed at fostering a transparent business environment. Under the new regulations, all companies operating in Saudi Arabia—with some exemptions—are required to disclose and maintain accurate information about their ultimate beneficial owners (UBO) with the Ministry.

Background and international standards

According to the Ministry, the UBO Rules have been formulated in accordance with the FATF recommendations as well as international best practices. The FATF, established in 1989, is an intergovernmental organization dedicated to developing policies and promoting effective implementation of legal and regulatory measures worldwide to combat money laundering and terrorism financing. According to the International Monetary Fund (IMF), the estimated volume of money laundering ranges between 3 and 5% of the global gross domestic product, often facilitated through complex layers of shareholding involving shell companies and multiple chains of ownership. To combat money laundering the FATF empathize the importance of identifying the individuals ultimately controlling legal entities. To further foster transparency, the FATF updated its Recommendation No 24 in March 2023, setting higher standards by requiring countries to ensure competent authorities have access to adequate, accurate, and up-to-date information on UBOs.

FATF defines a UBO as ‘the natural person(s) who ultimately own or control a legal entity and/or the natural person on whose behalf a transaction is being conducted, including those persons who exercise ultimate effective control over a legal person or arrangement.’ While jurisdictions may vary in their interpretation, it is generally accepted that a UBO is a person who holds a stake or controls voting rights exceeding 25% in an undertaking.

UBO regulations in the region 

The FATF has 39 members, including two regional organizations: the European Union and Gulf Cooperation Council (GCC). The GCC members—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—have implemented UBO regulations to align with the FATF standards. Since joining FATF in 2019, GCC member states have progressively adopted UBO regulations to enhance transparency and accountability in corporate ownership. Qatar was the first to introduce its own UBO rules in January 2020, followed shortly by Bahrain in July 2020, and the UAE in August 2020. A while later, Oman and Kuwait each enacted their own legislation in January 2023. Despite being the only GCC member that is also an individual FATF full member, Saudi Arabia has been a holdout until they now issued the UBO Rules.

Definition of UBO under the New UBO Rules

The new Saudi UBO Rules define a UBO as any natural person who:

• directly or indirectly owns at least 25% of a company’s share capital;
• directly or indirectly controls at least 25% of the voting rights in a company;
• directly or indirectly is entitled to appoint or remove a majority of the members of a company’s board of directors, its manager, or president;
• has the ability to directly or indirectly influence decision-making or the business of a company; or
• acts as a representative of any legal person to which any of the above criteria apply.

If a UBO cannot be identified through these criteria, the company’s manager, members of its board of directors, or its president will be regarded as its UBO.

Disclosure obligations under the new UBO Rules

The new UBO Rules establish a UBO register within the Ministry. All companies subject the Saudi Companies Law, including foreign companies operating in the Kingdom through branches, must make regular filings identifying their UBOs each year 30 calendar days prior to the anniversary of their registration in the Saudi commercial register. Additionally, companies must notify the Ministry 15 calendar days of any change in their UBOs. The Ministry also has the authority to at their discretion request disclosure of UBO information from any company, to which the company must respond within 30 calendar days. Companies incorporated after the UBO Rules take effect will be required to provide UBO details to the Ministry as part of the formation process.

Listed companies, companies (directly or indirectly) wholly owned by the Saudi government or public authorities, and companies undergoing insolvency proceedings are exempted from the disclosure obligation. Moreover, the Ministry has discretion to grant exemptions on a case-by-case basis.

Consequences of non-compliance

Companies failing to comply with the UBO Rules may face fines of up to SAR 500,000 (approx. USD 133,000).

UBO Rules and competition law merger control

Competition authorities undertake to ensure healthy competition by (1) monitoring, investigating, and enforcing against anti-competitive behaviors such as the cartels and abuse of dominance, and (2) reviewing mergers and acquisitions to assess and control their impact on competition. In carrying out these functions, competition authorities define the relevant market to accurately determine the market share and market power of the parties involved. To accurately evaluate the scope of a transaction and determine a company’s true market share, competition authorities are not constrained by the legal structure or personality of a competitor. Instead, they assess entities from a broader perspective, identifying the person(s) ultimately controlling the parties or exercising material influence over their decision-making processes and thereby establishing the parties’ economic unit. Undertaking that are legally distinct may be considered a single economic entity from an antitrust standpoint if they are ultimately controlled by the same person or if one undertaking directly or indirectly controls the other.

The new UBO Rules aim to assist the Saudi General Authority for Competition (GAC) by providing reliable information on ultimate beneficial ownership. The new rules explicitly provide that UBO information submitted to the register will be treated as confidential but may be disclosed to all judicial, regulatory, and law enforcement authorities, including GAC.