Ultimate Beneficial Ownership
We intend to shed some light on the new ultimate beneficial ownership disclosure requirement of the Ministry of Industry, Commerce and Tourism (“MOICT”).
An amendment has been made to the CR Law (as defined below) pursuant to the Law Decree under No. 52 of 2018 (the “Amendment”).
The Amendment, amongst other things, has granted the MOICT the legal basis to demand from companies (legal persons) registered in Bahrain to declare their “ultimate beneficial owner”.
The Amendment has been issued on 28 November 2018 and its provisions came into effect on 30 November 2018.
The Amendment is applicable to all type of legal persons registered in the commercial registry of Bahrain pursuant to the Commercial Registry Law No. 27 of 2015 (the “CR Law”).
The Amendment has introduced a new Article 18bis to the CR Law. Such Article has given the right to the Minister of the MOICT to issue regulations in connection with the principles, standards and rules concerning the identification of the “ultimate beneficial owner” of legal persons registered in Bahrain, except for those legal persons that are licensed by the Central Bank of Bahrain (“CBB”), which are governed by the regulations issued by the CBB.
The Amendment did not provide for a definition of the term “ultimate beneficial owner”. However, we believe that the MOICT will follow the guidelines issued by the Financial Action Task Force (FATF), an inter-governmental body established in 1989 by the G7 Summit in Paris. The FATF glossary stipulates that the “ultimate beneficial owner” refers to the natural person(s) who ultimately owns or controls a customer [a legal person] and/or the natural person on whose behalf a transaction is being conducted. As per the guidelines of FATF, the “ultimate beneficial owner” definition should focus on the natural person (i.e. not legal person) who actually own or take control of the capital or assets of the legal person.
We believe that the MOICT in its regulations will apply the above guideline of FATF to define the “ultimate beneficial owner”.
That said, the CBB has adopted in its Rulebook a similar definition of the term “beneficial owner” or "ultimate beneficial ownership" of that of FATF. Further, the CBB in its Disclosure Standards1 stipulates that the term "beneficial owner" of securities refers to any person who, even if not the recorded owner of the securities, has or shares the underlying benefits of ownership. These benefits include the power to direct the voting or the disposition of the securities, or to receive the economic benefit of ownership of the securities.
The Amendment has further obliged a merchant, who is any legal or natural person registered to undertake business in Bahrain, to provide to the MOICT the details of the “ultimate beneficial owner” when submitting an application for a new commercial registration or an application for renewing an existing commercial registration.
We shall provide with more details on the ultimate beneficial ownership matter once the MOICT issues its regulations in connection therewith.
1Regulation ODG/407/03 of the CBB.