Ultimate Beneficial Ownership Compliance Services

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Ultimate Beneficial Ownership Compliance Services in Pakistan

In need of the fight against corruption and money laundering, financial transparency has now become a priority worldwide, with Pakistan being no exception. Transparency and accountability can help companies understand who are they actually doing business with and combat:

  • Money laundering
  • Fraud and
  • Financing of terrorism

As part of Anti-Money Laundering (AML) efforts, identification of ultimate beneficial owner (UBO) has now become more than necessary.

In this aspect and in order to improve ownership transparency and control structure of corporate industry, amendments in the rules and regulations were introduced by the Securities and Exchange Commission of Pakistan (SECP)) under section 123A of the Companies Act, 2017, requiring every company, from 26th August 2020 to file a declaration of its ultimate beneficial owners.

The basic aim of these amendments was to prevent the company’s misuse from terrorist financing and money laundering. WE at Push Digits Global can assist you in this regard and answer all the frequently asked questions. We will not only make the filing easy, but will also help to reduce the cost of the whole procedure. With us, compliance with laws and regulations will be the most comfortable activity to do.

Push Digits Global is a leading Anti-Money Laundering and UBO compliance consultant working in all the continents of the world with regional offices in all the first-world countries. Our consultants not only prepare the required documents for submission to SECP, but also consistently maintain your company’s UBO register and fulfil all the regulatory, disclosures, and compliance requirements in Pakistan.

Let us together go step by step in understanding what exactly is meant by the ultimate beneficial ownership and the requirements that can help you avoid non-compliance penalties.

Ultimate Beneficial Ownership Definition for Different Legal Persons

Definition Under Companies Act, 2017: A natural person ultimately controlling or owning a company (directly or indirectly) through exercising control or holding twenty five percentage of voting power or shares.

Definition Under Limited Liability Partnership Act, 2017: A natural person who owns or controls a limited liability partnership, effectively and ultimately through sharing at least one fourth (1/4th) of net losses and profits or direct/indirect rights.

Ultimate Beneficial Owner – Explanation

By definition, an ‘ultimate beneficial owner’ is any person who either:

  • Possess a significant stake in a company and/or
  • On whose behalf or instructions the business is being conducted

A UBO is a natural person who directly or indirectly is the ultimate owner or controller of a company. 

Ultimate Beneficial Owner – Identification Criteria

An ultimate beneficial owner is anyone who:

  • Owns at least twenty-five percent (25%) of the share of a company
  • Holds at least twenty-five percent (25%) of voting rights
  • Has the authority to exercise effective control

Difference Between Ultimate Beneficial Owner Vs Beneficial Owner

Beneficial owner is anyone who has a stake in the company whereas Ultimate Beneficial Owners are persons who have the ability to directly or indirectly control a company and exercise powers over the flow of the entire organization. Apart from the twenty five percentage holding criteria, in general, Ultimate Beneficial Owners are considered to be the true owners of the company.

Who Requires UBO Information?

Ultimate beneficial ownership information is important to prevent:

  • Corruption
  • Tax evasion
  • Money laundering
  • Terrorist activities
  • Terrorist financing and
  • Illicit behaviour

Public trust in companies is dependent upon transparency and accurate disclosure of a company’s control structure and beneficial ownership.

UBO Information is required by the following authorities and professional firms:

  • The UBO information assists in adequate procedures of customer verification by different financial institutions, for example, audit firms in Pakistan
  • It further helps companies to identify and understand who actually owns them
  • Authorities having recognizable legal interest in companies also need the UBO information for suspected illicit activities’ investigation
  • Law enforcement authorities also require the UBO information to combat crimes, such as, money laundering
  • Tax authorities fight tax evasions with accurate UBO information
  • At times, courts may also need such information for prosecution and litigation purposes

Hence the accurate UBO information maintenance is essential for the society as a whole. Push Digits Global is working side by side with it’s huge client base to ensure compliance with these regulations and bring harmony to the economy.  

Legal Entity’s Responsibilities

To support in the identification of beneficial owner, SECP has a number of forms designed, and has made the filing of these forms mandatory for all companies. Following is the list of forms provided by SECP:

i) Form 40 – only for Public Companies

  • This form is a public notice issued by the company to the holder of bearer nature securities
  • It requires every person holding a bearer security to surrender such securities at the company’s registered office address, within three months of notice issued by the SECP

ii) Form 41 – only for Public Companies

  • This is a register that contains particulars of bearer securities surrendered and particulars of holders of bearer securities.

iii) Form 42 – only for Public Companies

  • It is a notice sent to all members of the company
  • It requires the members to provide particulars of ultimate beneficial owners of the company
  • Every member who is not an ultimate beneficial owner of the company and holds at least 25% of voting rights or shares in the company, is required to submit a declaration providing particulars and information of the ultimate beneficial owner(s) as per the rules

iv) Form 43

  • This is a declaration submitted by every member (natural/legal) to the company in respect of the following particulars:
  1. Acquisition date of interest/control/shares
  2. Percentage of holding
  3. Where member is a legal person; particulars of the ultimate beneficial owner

v) Form 44

  • Form relating to declaration by the company’s member in case of change in ultimate beneficial owner or their particulars

vi) Form 45

  • This is the compliance declaration form to the provisions of the Company’s Act, 2017
  • It is required to be filed with the SECP and ensures the following:
  1. As per Form 42, the company has issued notices
  2. As per Form 43, relevant declarations from the members have been received
  3. Accurate particulars of ultimate beneficial owner has been received by the company under Form 43 and have been noted by the company
  4. The company’s board of Directors have authorized their Chief Executive Officer for providing the information required under the Regulations

Every LLP and every company shall provide the concerned authorities with the required information through its authorized:

  • Chief executive officer
  • Designated partner
  • One of its directors/officers

Date and Filing of Documents

Identification of ultimate beneficial ownership is not an easy task especially in cases of multi layered ownership structured entities. In order to ensure there is no concealment in relation to the disclosure of the UBO, Law has made it compulsory for both the company as well as the ultimate beneficial owner to file documents in relating to the ownership of the company.

Following are the responsibilities of the company and its members in relation to the UBO compliance. A lot of companies find compliance with these requirements a tedious and tough task. If you also find this task as difficult as our other clients do, contact Push Digits Chartered Accountants to handle anything and everything regarding UBO compliance of your company.

Company’s Responsibility: Obtain and identify particulars of its ultimate beneficial owner through notices issued to the company’s members.

a) Member’s Responsibility:

Within fourteen days (14) of receiving the notice submit a declaration to the company indicating the name, address, and other specified particulars.

b) New Member Responsibility:

After his name has been entered in the register of members, within fourteen days (14), submit to the company the above stated declaration.

c) In case of subsequent changes:

In case of changes in the particulars or ownership status of the ultimate beneficial owner, a declaration, within fourteen days (14) is required to be submitted to the company by the said person indicating the nature of subsequent changes and other specified particulars.  

Illustrative Example of UBO

The following example will illustrate how a person can be an ultimate beneficial owner of a company.

XYZ Company

70% owned by

A Limited

45% owned by

Mr. B

XYZ Company is owned by A Limited to the extent of 70% and A limited is owned by a natural person B to the extent of 45%. Here, Mr. B becomes the ultimate beneficial owner as B indirectly holds 31.5% in XYZ Limited.

Register of Ultimate Beneficial Owner

As per Form-45, every company and every LLP is required to maintain a UBO register of its ultimate beneficial owners. The basic requirements are as under:

  • UBO register shall be maintained within fifteen (15) days from the declaration receipt from its members
  • A declaration of compliance shall be submitted with every annual UBO return to the registrar
  • For listed companies, a copy of form-45 shall also be forwarded to the Commission

Push Digits Global has years of experience in maintaining UBO registers for a massive quantity of organisations. If you want to be hassle free and prefer to focus on your business rather than being worried to comply with such tedious compliance issues, let us manage the end to end UBO process for your organization, as we do for our other clients in Pakistan.

Non-Compliance Penalties

Non-compliance with laws and regulations will not only drastically destroy your company’s image, but also cost your organization massive amount of penalties. Contravention of Section 123A of the Company’s Act, 2017 shall result in the following penalties:

  • Director, Officer of the Company, or any other person – fine may extend to rupee One Million ( 1 Million),
  • Company – fine may extend to rupee Ten Million (10 Million).

We at Push Digits can help you avoid such penalties by rendering our UBO Consulting Services at a negligible cost.

How Can Push Digits Global Assist You?

We have executed huge amount of Anti-Money Laundering and UBO compliance assignments in different parts of the world, such as, UAE, Singapore, USA, UK etc. UBO in Pakistan is no different than other parts of the world. The good news for you is that we have UBO consulting experience in almost all the continents of the world which means you can rely on our consultants to handle Anti-Money Laundering and UBO compliance of your business. Our finance and law experts will not only explain you the detailed requirements of Ultimate Beneficial Ownership sections but will also help you to comply with the same and save yourself from unwanted penalties.

No need to worry about the hustle to get the requirements done. We will do all the work for you so you can focus on your core business. We will also be of assistance in the ongoing compliance activities so that not only your present but also the future is secured.

So ring us up and get the compliance done in no time!

Frequently Asked Questions

Do all the companies have to submit information about UBO to the registrar?

Yes. As per the newly introduced laws and regulations, every registered LLP and every incorporated company have to file with the registrar a compliance declaration regarding the accurate information about its ultimate beneficial owners.

Listed companies are further required to file this declaration with the Commission also. A foreign company, at the time of registration of documents is also required to file a declaration regarding the necessary UBO information.

Why is it important for a company to maintain the information about Ultimate Beneficial Ownership?

The basic purpose of this requirement is to keep record of the true owners of the company who can ultimately only be natural persons.

Corporate veil is used to conceal real controlling owners of companies behind legal persons in order to proceed with tax evasions and money laundering schemes. To promote transparency and establish true ownership status, UBO requirements have been made mandatory in Pakistan.

Is the information of Ultimate Beneficial Ownership required to be submitted periodically or regularly?

Absolutely not. The law only requires compliance declaration submission to the SECP regarding maintaining, obtaining, and updating the relevant information. Although, any other authority, agency or the registrar have the empowerment to request from companies or LLP any such information at any time.

How can the requirements of Ultimate beneficial Owner be met in case of government being a member or shareholder of the Company?

In such cases, in the register of Ultimate Beneficial Owner of a company, for the government as a member, senior management official(s) nominated shall deemed to be the UBO to the extent of government investment in the said company.

What is the difference between legal ownership and beneficial ownership?

Formal or official owner of the company is known as the legal owner. The legal owner holds the legal title of the asset and may be either a legal person or a natural person.

Beneficial owner is a natural person that has the right to enjoy the property and take benefit from it such as right to any income etc.

How is a natural person different from a legal person?

Natural person is an individual or a human being who shall be considered as the ultimate beneficial owner empowered to exercise controlling rights and ownership. Whereas, a legal person is a legal entity established under relevant laws and regulations and have the power to have permanent customer relationships. Keep in mind that every legal person is ultimately owned by a natural person.