Here’s What’s New
- New UBO rules in Saudi Arabia were implemented on April 3, 2025, requiring most companies to report their UBO under the new criteria.
- Companies must disclose UBOs during the incorporation process and within one year of registration.
- Noncompliance can result in fines up to USD 133,000 and can result in suspension of activities and revocation of business licenses.
Strengthening Corporate Transparency
On April 3, 2025, Saudi Arabia introduced the newly implemented Ultimate Beneficial Ownership (UBO) rules. These rules aim to improve and enforce national regulations related to financial transparency and anti-money laundering (AML) compliance in coordination with international standards and best practices.
The Ministry of Commerce issued Decision No. 235, which introduced the updated framework redefining the criteria for what constitutes a UBO, also updating compliance requirements and fines for businesses registered in Saudi Arabia.
With Vision 2030 giving investors more confidence in the Saudi market, updated regulations such as these reflect positively on the government’s efforts for a more investor-friendly environment backed by just financial governance, transparency, and competition.
Ultimate Beneficial Ownership Rules in Saudi Arabia Prior to New Regulations
Before the new regulations were implemented, private companies were not required to centrally disclose UBOs; disclosure of such information was primarily enforced through AML rules, and did not cover non-financial businesses. Data related to ownership could be accessed via the Amaly portal (an online service that enables customers to connect their in-house HR management system with the GOSI system), but it did not reveal Ultimate Beneficial Owners, registered documents showed only direct shareholders. This made identifying true ownership of complex business structures more difficult, structures such as offshore entities were subsequently more complicated to regulate.
Who Is Considered a UBO Under the New Criteria
The new definitions of an Ultimate Beneficial Owner as per the regulations are as follows:
- A natural person who directly or indirectly owns 25 % of the company’s shared capital.
- A natural person who directly or indirectly controls 25 % of the company’s voting rights.
- A natural person who controls directly or indirectly the appointment or removal of the majority of the board members, the company manager, or president.
- A natural person who controls/influences directly or indirectly the company’s operations or decisions.
- A natural person who is a legal representative of the company that meets any of the above criteria.
In the case that none of the above criteria are relevant, then the UBO will be considered to be the company’s manager, board member, chairman or president.
This improvement in regulation and definition will better understand ownership structures of companies, allowing Saudi Arabia to better regulate in alignment with the Financial Action Task Force (FATF) standards and strengthening both AML and counterterrorism financing mechanisms.
Scope of the Regulations
The new UBO regulations will be enforced on all registered entities in Saudi Arabia, including LLCs and foreign-owned businesses. Companies exempted from these regulations include publicly listed joint-stock companies, state-owned companies or their legal entities, and finally, companies currently undergoing bankruptcy.
Mandatory Compliance and Reporting
For new businesses looking to set up in Saudi Arabia, under the new regulations will be required to disclose UBO details with the Ministry of Commerce during the incorporation process and within one year of registration. Furthermore, registered entities will be required to store an internal register of UBOs that includes personal information such as:
- Full name
- National ID or Passport details
- Residential address
- Contact information
- Reasoning for UBO designation
Updates to this information must be notified to the ministry within 15 days, this information must also be submitted annually to the ministry, which has a centralized UBO register. This information is not publicly accessible but can be shared within the relevant authorities for internal regulatory purposes. Furthermore, the ministry has the authority to request any supporting documents from the entity related to the UBO.
Penalties and Consequences for Non-Compliance
Noncompliance with the UBO rules and regulations, can lead to significant financial and operational risks. Failure to comply with registering, updating, or maintaining UBO records could result in financial penalties of up to USD 133,000 and additionally, could lead to suspension of business activities, and in more serious cases, can lead to the revocation of licenses.
UBO Rules for Companies Already Operating in Saudi Arabia
Registered entities currently operating in Saudi Arabia and not exempt from the UBO regulations, should prioritize conducting an internal evaluation and identify who qualifies as a UBO under the new criteria. Businesses should also update and regulate internal systems for reporting, as a core component of their corporate governance framework.
A Modernized Regulatory Transition
The main aim of the updated UBO rules is crucial in Saudi Arabia’s strategy to improve investor confidence and modernize its commercial regulations. Through the enforcement of a secure, transparent, and just investment climate by international standards, the Kingdom aims to protect its financial system and improve its appeal as a safe haven for foreign investors under its 2030 Vision. Companies should not consider UBO compliance as a regulatory formality but as a main component of their corporate governance system.
Companies can benefit from seeking consultancy and guidance from local experts such as AstoLabs to ensure compliance with the new regulations and not hinder their current business operations.