Ultimate Beneficial Ownership (UBO) is a key element of corporate governance and financial transparency that Egyptian businesses must understand. As global regulations tighten, identifying and disclosing the true owners of a company is not just a legal requirement but also crucial for building trust and avoiding financial crimes like money laundering.

For Egyptian businesses, UBO compliance is essential for operating legally within the country and engaging in international trade.

This guide offers a clear, step-by-step approach to understanding UBO regulations, helping businesses navigate ownership disclosures and stay compliant with both local and international laws. By following this guide, companies can ensure transparency, maintain their reputation, and avoid legal and financial risks.

What is UBO?

Ultimate Beneficial Ownership (UBO) refers to the natural person or persons who ultimately own or control a company, legal entity, or arrangement. In simpler terms, a UBO is the individual who enjoys the benefits of ownership (e.g., profit, dividends, and control) even if the ownership is held indirectly through other legal entities or intermediaries.

Why is UBO Important for Egyptian Businesses?

UBO regulations are essential for Egyptian businesses for several reasons:

1. Regulatory Compliance

Businesses in Egypt must comply with local and international regulations requiring UBO disclosure, especially in sectors like banking, finance, and real estate. Non-compliance can lead to penalties and legal risks.

2. Preventing Financial Crimes

Identifying UBOs helps authorities prevent illicit activities such as money laundering, fraud, and tax evasion. Transparency in ownership reduces the risk of companies being used for illegal financial activities.

Benefits of UBO Disclosure for Egyptian Businesses

Building Trust and Transparency

Companies that disclose their UBOs are seen as more trustworthy by investors, financial institutions, and international partners. Transparency fosters stronger business relationships and credibility.

Attracting International Investment

Clear UBO disclosure is increasingly important for attracting foreign investments. International investors prefer businesses that comply with global anti-corruption and financial regulations.

Avoiding Reputational Risks

Maintaining an opaque ownership structure can harm a company’s reputation. Disclosing UBO information demonstrates responsible business practices and helps avoid legal and financial risks.

Who Needs to Declare UBO Information in Egypt?

All businesses operating in Egypt—whether Egyptian-owned or foreign entities—are required to disclose UBO information to the relevant authorities. This includes:

Corporations (S.A.E. and S.A.M.)
Limited Liability Companies (LLCs)
Partnerships and joint ventures
Foreign companies operating in Egypt

UBO disclosure is also required for entities applying for business licenses, engaging in financial transactions, or involved in government contracting.

What Information is Required for UBO Disclosure?

The UBO disclosure must include detailed information about the individuals who ultimately control or own a business. Common details required include:

Full Name of the UBO(s)
Nationality of the UBO(s)
Date of Birth
Address of the UBO(s)
Nationality
Ownership percentage or control percentage in the company
Nature of control (whether direct or indirect)

How to Identify the UBO of a Company in Egypt?

Identifying the Ultimate Beneficial Owner (UBO) can be complex, especially for companies with multiple layers of ownership. However, it’s crucial for regulatory compliance in Egypt. Here’s a simplified process:

1. Ownership Structure

Start by reviewing the company’s shareholding and voting rights. The UBO is often the individual or individuals who directly own or control 25% or more of the company’s shares. In cases with multiple shareholders, examine voting rights or control over decision-making to identify the UBO.

2. Intermediary Entities

If ownership is held through holding companies, trusts, or other intermediaries, trace the ownership back to the final natural person who controls or benefits from them. The UBO is the person who ultimately owns or controls these intermediary entities.

3. Shareholding Thresholds

Egyptian law requires businesses to identify UBOs who own or control 25% or more of the shares or voting rights. However, individuals with less than 25% ownership may still be UBOs if they have significant control over decisions, such as appointing executives or influencing major transactions.

4. Control Beyond Ownership

UBOs are also those who have significant control over the company, even if they don’t own 25% or more. This could include power to influence key business decisions or appoint management, regardless of their shareholding.

5. Review Governance Documents

Examine the company’s Articles of Association or shareholder agreements, as these may grant specific control rights to individuals, making them UBOs even without significant ownership.

What is the Difference Between a UBO and a Shareholder in Egypt?

In Egypt, understanding the difference between a UBO (Ultimate Beneficial Owner) and a shareholder is crucial for legal and regulatory compliance. While both may have a connection to a company’s ownership, they are distinct in terms of control, influence, and transparency.

Shareholder

A shareholder is any person or entity that legally owns shares in a company, giving them a stake in the company’s profits and, depending on their share percentage, the right to vote on key business decisions. Shareholders do not always exercise control over the company's day-to-day operations or strategic decisions, especially if their ownership stake is small.

UBO (Ultimate Beneficial Owner)

A UBO is the natural person (individual) who ultimately owns or controls a company, even if ownership is indirect (through holding companies, trusts, or other entities). The UBO is the person who ultimately benefits from the company’s profits, decisions, and actions, making them crucial for ensuring transparency and accountability.

Key Differences

Control vs. Ownership: A shareholder has a legal ownership stake in the company, but the UBO may not necessarily be a shareholder. The UBO is the individual who ultimately controls or benefits from the company’s activities, regardless of their direct shareholding.
Disclosure: Shareholders are typically recorded in the company’s registry and may not be a hidden part of the ownership structure. In contrast, UBOs are often hidden behind layers of ownership (e.g., holding companies or trusts) and require special identification processes to ensure transparency.
Regulatory Importance: The distinction is crucial in Egypt, where regulations require businesses to disclose their UBOs to combat financial crimes such as money laundering and terrorism financing. Shareholder disclosure alone does not provide full transparency into who is truly controlling the company.

What Are the Legal Requirements for UBO Disclosure in Egypt?

In Egypt, businesses are required to disclose information about their UBOs to comply with anti-money laundering (AML) and Know Your Customer (KYC) regulations. The legal requirements include:

Information to be Disclosed

Businesses must provide the full name, nationality, date of birth, residential address, and percentage of ownership or control for each UBO. This also includes details about the nature of control (e.g., direct or indirect ownership, voting rights, or management control).

Who Must Be Informed

UBO information must be submitted to regulatory authorities like the General Authority for Investment and Free Zones (GAFI), Financial Regulatory Authority (FRA), or the Central Bank of Egypt (CBE), depending on the type of business and industry. For example, financial institutions and regulated entities must report UBOs to the FRA and the CBE, while other businesses may submit UBO information to GAFI.

Submission Process

Businesses are required to submit their UBO information as part of their company registration or license renewal process. The UBO data must be regularly updated to reflect any changes in ownership or control.

How Does Egypt Enforce UBO Compliance?

Egypt’s regulatory framework enforces UBO transparency through several laws and regulations, including:

The Anti-Money Laundering (AML) Law: This law mandates businesses to report UBO information to authorities, including Egypt's Financial Regulatory Authority (FRA).
The Egyptian Investment Law: Companies must disclose their UBO to government bodies to comply with transparency standards for foreign investors.
Central Bank of Egypt (CBE) Regulations: Financial institutions, such as banks and insurance companies, are required to identify UBOs of their clients as part of KYC (Know Your Customer) procedures.

What Is the Role of GAFI in UBO Disclosure?

The General Authority for Investment and Free Zones (GAFI) plays a central role in the regulation of UBO disclosure in Egypt. GAFI is responsible for overseeing company registration and ensuring compliance with Egyptian corporate governance laws, including UBO requirements. Here’s how GAFI is involved:

Company Registration: When registering a new company in Egypt, businesses must disclose their UBO information to GAFI as part of the registration process.
License Renewal: During the renewal of business licenses, businesses must update and confirm the accuracy of their UBO data with GAFI.
Ensuring Compliance: GAFI monitors UBO disclosure to ensure compliance with Egypt’s anti-money laundering laws and other financial regulations. Businesses failing to meet UBO transparency requirements may face penalties, including fines or suspension of their registration.
Collaboration with Other Authorities: GAFI collaborates with other regulatory bodies such as the Central Bank of Egypt (CBE) and the Financial Regulatory Authority (FRA) to ensure the proper implementation of UBO regulations across various sectors.

Conclusion

For Egyptian businesses, understanding and complying with UBO regulations is critical for both legal and operational success. It is essential to stay up-to-date with the latest regulations and ensure transparency in business ownership to avoid legal complications and gain trust from investors and regulators alike.

If you're unsure about your UBO obligations, consulting with a lawyer or regulatory expert is always a prudent step.

FAQs

Q: Can a company have multiple UBOs in Egypt?

A: Yes, a company can have multiple UBOs. This happens when several individuals or entities meet the criteria, such as owning 25% or more of the shares or having significant control over decision-making and profits.

Q: Can I appoint someone else to disclose my company’s UBO information in Egypt?

A: Yes, you can appoint an authorized representative, but the responsibility for compliance remains with the company’s owners or directors.

Q: What is the threshold for identifying a UBO in Egypt?

A: In Egypt, a UBO is an individual who directly or indirectly owns or controls 25% or more of the shares or voting rights in a company. Even individuals with less than 25% ownership may be considered UBOs if they have significant control over the company.

Q: How often should I update my UBO information in Egypt?

A: UBO information in Egypt should be updated regularly, especially in the following cases:

When Ownership Changes: Update immediately if a shareholder acquires or sells 25% or more of the company’s shares.
After Changes in Control: Update if there are changes in decision-making, such as shifts in voting rights or executive appointments.
Annual Review: While not mandatory, it's a good practice to review UBO data during annual filings or business license renewals with GAFI.
Regulatory Requests: Ensure prompt updates if requested by regulatory authorities.

Q: Is UBO information publicly accessible in Egypt?

A: UBO information is not publicly accessible in Egypt. However, businesses must disclose UBO details to authorities like GAFI for compliance with anti-money laundering regulations.

Dun & Bradstreet (D&B) can assist by providing business reports that include ownership and control information, based on available regulatory filings. While UBO details aren't publicly available, D&B helps businesses access verified data for due diligence and compliance.

Guide to Ultimate Beneficial Ownership (UBO) for Egyptian Businesses