Saudi Arabia: Disclosure of the true beneficiary is mandatory in economic zones

In an important regulatory step aimed at enhancing transparency and facilitating business practices, the Economic Cities and Special Zones Authority in the Kingdom of Saudi Arabia has introduced the “Companies Registry Rules in Special Economic Zones” project, which makes the disclosure of the “beneficial owner” a prerequisite for conducting commercial and investment activities within these vital zones.

Context of the decision and its strategic objectives

This approach is an integral part of the objectives of Saudi Vision 2030 , which aims to diversify the national economy and establish the Kingdom as a leading global investment destination. The recently launched special economic zones are a cornerstone of this vision, offering regulatory and financial incentives to attract major international and local companies. To ensure the success of these zones, the Kingdom is working to build a robust and reliable legislative environment that aligns with international best practices.

Focusing on identifying and disclosing the Ultimate Beneficial Owner (UBO) places Saudi Arabia among the countries committed to the recommendations of the Financial Action Task Force (FATF), the leading international organization in combating money laundering and terrorist financing. This measure aims to prevent the use of commercial entities as fronts for illicit financial activities, thereby enhancing the integrity of the Saudi financial system and increasing the confidence of international investors.

The importance of disclosing the beneficial owner and its expected impact

Requiring companies to disclose the identities of those who effectively own or control them represents a significant shift in corporate governance. This move is expected to have multiple positive impacts:

• At the local level: Enhancing transparency in the business environment, reducing corruption and financial crimes, and providing accurate data to regulatory and supervisory bodies.
• At the regional level: Consolidating the Kingdom’s position as a safe and reliable financial and commercial center in the Middle East, giving it a competitive advantage in attracting capital.
• At the international level: Increasing the attractiveness of Saudi economic zones for foreign direct investment (FDI), as global companies prefer to operate in environments characterized by regulatory clarity and compliance with international standards.

Key features of the new rules

The proposed rules establish a comprehensive framework for registration and disclosure processes, and include clear obligations for all entities operating in special economic zones. Among the most prominent of these obligations are:

1. Mandatory disclosure and required data

The regulations require every entity to submit accurate and up-to-date information about the beneficial owner to the regulatory authority. This information must be included as a fundamental requirement in any application to establish a new company. Existing companies must also comply with these requirements and submit the beneficial owner's information before their commercial registration renewal date.

2. A special register for the beneficial owner

The rules require each establishment to prepare and maintain a special record, paper or electronic, that includes sufficient and accurate data about each actual beneficiary, with the necessity of updating it periodically when any change occurs, and making it available to the authority upon request.

3. Registration and Renewal Procedures

The regulations stipulate that registration in the Companies Register is valid for a period ranging from two to five years, in accordance with the license granted by the relevant authority. The investor is also required to renew the commercial registration certificate within 30 working days before its expiry to ensure the continuity of the business.

4. Disqualification and penalties

The rules regulate voluntary delisting when an investor ceases operations, and mandatory delisting in specific cases such as a final court ruling or the completion of liquidation proceedings. The rules also include mechanisms for addressing violations and imposing penalties to ensure full compliance.

In general, this project reflects the Kingdom’s firm commitment to developing its investment environment and creating a business climate characterized by transparency and fairness, which contributes to achieving sustainable economic growth and making special economic zones key drivers of the national economy.