Saudi Arabia Introduces New Ultimate Beneficial Ownership Rules

• Saudi Arabia introduced new Ultimate Beneficial Ownership Rules. Starting from 3 April 2025, most companies in Saudi Arabia must disclose their Ultimate Beneficial Owners (UBOs) to the Ministry of Commerce during incorporation, and keep their UBO records up to date.
• Companies are required to report any changes to their UBO information within 15 days, with penalties of up to SAR 500,000 for failure to comply.
• The UBO Rules do not apply to publicly listed companies, state-owned entities, or companies undergoing liquidation procedures.

By Giulia Interesse

Saudi Arabia is taking a significant step toward enhancing corporate transparency and aligning with international financial standards through the introduction of the Ultimate Beneficial Ownership (UBO) Rules. Issued by the Ministry of Commerce (MC) on 21 February 2025, these rules mandate that all companies operating in the Kingdom—except publicly listed entities—identify, disclose, and maintain up-to-date records of their ultimate beneficial owners.

Set to take effect on 3 April 2025, the UBO Rules aim to strengthen regulatory oversight, prevent financial crimes such as money laundering and tax evasion, and improve the integrity of the corporate sector. The MC will oversee compliance by requiring companies to register UBO information, update it as necessary, and submit annual confirmations. Non-compliance could result in substantial financial penalties.

As Saudi Arabia continues to position itself as a leading investment hub in the region, these regulations bring the Kingdom in line with global best practices, including recommendations from the Financial Action Task Force (FATF).

This article provides a detailed breakdown of the key requirements, compliance obligations, exemptions, and potential business implications of the UBO Rules for companies operating in Saudi Arabia.

Scope and objectives

The UBO Rules in Saudi Arabia are set to impact a wide range of companies within the Kingdom. While the rules apply to most businesses, certain entities are exempt, including publicly listed companies and state-owned entities, as well as companies undergoing liquidation in accordance with the Bankruptcy Law.

Additionally, the MC holds the authority to grant exemptions on a case-by-case basis, providing flexibility in the application of these rules.

The primary objective of these rules is to establish a centralized UBO register with the MC, creating a comprehensive record of the ultimate beneficial owners of companies operating in the Kingdom. This registry is a crucial step towards enhancing transparency in corporate ownership and strengthening the integrity of Saudi Arabia’s business environment. Moreover, the UBO Rules require companies to not only disclose their UBO data but to also maintain and update it regularly.

Through these measures, Saudi Arabia aims to align itself with international standards on financial transparency and anti-money laundering (AML) practices.

Key compliance requirements under the Ultimate Beneficial Ownership Rules in Saudi Arabia

The UBO Rules introduced in Saudi Arabia impose several key compliance obligations on companies to enhance transparency and align with international standards. Below is an outline of the primary requirements that businesses must adhere to:

• Disclosure at Incorporation: All companies (excluding publicly listed ones) must disclose the details of their ultimate beneficial owners at the time of incorporation. This information must include the identity of individuals meeting the UBO criteria, as outlined below.
• Annual Filings: Existing companies must file annual updates with the MC regarding their UBOs. These filings must be made on the anniversary of the company’s registration with the commercial register. This ensures that the UBO information is consistently accurate and up-to-date.
• Maintaining a UBO register: Companies are required to establish and maintain a UBO register within Saudi Arabia. This register should include detailed information on the UBOs, such as their names, ownership interests, and any other relevant identifiers (e.g., national ID or passport details).
• Timely updates: Any changes to the UBO information must be reported to the MC within 15 days of the change. Companies must ensure that their records are updated in a timely manner to avoid penalties.
• Annual confirmation: Companies must provide an annual confirmation to the Ministry of Commerce that their UBO information is accurate and current. This confirmation must be submitted before the anniversary of their registration date.

Definition of an ‘ultimate beneficial owner’

Under the newly introduced UBO Rules, an ultimate beneficial owner (UBO) is defined as any natural person who meets at least one of the following criteria:

• The individual owns, either directly or indirectly, at least 25 percent of the company’s share capital;
• The individual controls at least 25 percent of the voting rights in the company, either directly or indirectly;
• The individual has the power to appoint or remove the majority of the board of directors, the manager, or the chairman of the company; or
• The individual has significant influence over the operations and decision-making of the company.

In instances where no individual meets these criteria, senior executives such as the company’s manager, a board member, or the chairman will be considered the ultimate beneficial owners.

Exemptions

Certain entities are exempt from the UBO disclosure obligations under the new rules. These exemptions include:

• Publicly listed companies: Entities listed on the Saudi stock exchange are excluded from the requirement.
• State-owned entities: Companies that are wholly or partially owned by the state are not subject to the UBO rules.
• Companies undergoing liquidation: Entities currently in liquidation, as per the Bankruptcy Law, are exempt.
• Ministerial exemptions: Companies that receive a specific exemption from the MC will also be excluded.

If a company falls under one of these exemptions, it is required to provide evidence of its exempt status to the MC. 

Penalties for non-compliance

Failure to comply with the UBO Rules can result in significant penalties. Companies that fail to disclose or update their UBO information may face fines of up to SAR 500,000 (approximately US$133,000).

Additionally, businesses that fail to meet the requirements may come under increased regulatory scrutiny, which could lead to further investigations or penalties.

Business implications and next steps

For businesses based in Saudi Arabia, it is crucial to implement internal compliance mechanisms to ensure the timely and accurate reporting of UBO information. Companies will need to establish robust systems for maintaining their UBO registers, updating them annually, and notifying the MC of any changes within the required 15-day period.

For foreign investors and multinational companies operating in Saudi Arabia, it is important to review corporate structures to ensure compliance with the UBO Rules. Companies with complex ownership structures, including offshore entities or nominee arrangements, must take extra care to ensure that the true UBOs are identified and disclosed to avoid non-compliance.

Legal and compliance teams should closely monitor upcoming guidelines from the MCof Commerce for additional clarification on the implementation of the UBO Rules.

Understanding these guidelines will be crucial for companies as they prepare for the 3 April 2025 deadline.

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