Ultimate Beneficial Ownership of foreign entities: Foreign firms must submit declarations of compliance

ISLAMABAD: The foreign companies shall submit declarations of compliance to the registrar Securities and Exchange Commission of Pakistan (SECP) about the information of Ultimate Beneficial Ownership of the foreign entities.

In this regard, the SECP has issued guidelines for legal entities to comply with the Ultimate Beneficial Ownership (UBO) regime, pursuant to the applicable laws of Pakistan.

Under these guidelines, the foreign company is required to obtain, maintain and duly update the records of the UBO in the foreign company, according to the SECP.

According to the SECP, the SECP has promulgated the Foreign Companies Regulation, 2018, in exercise of the powers conferred by sub-section (1) of section 512 of the Companies Act, 2017. The FC Regulations 2018 describes step-wise procedure to establish a place of business by a foreign company in Pakistan.

The SECP has made certain amendments in the FC Regulations 201813 in exercise of the powers conferred by sub-section (1) of section 512 of the Companies Act, 2017 (XIX of 2017) in order to require reporting of particulars about ultimate beneficial owners of such companies. Regulation 2(1)(ix) of FC Regulations 2018 defines the term “ultimate beneficial owner”.

The “ultimate beneficial owner” means a natural person who ultimately owns or controls a foreign company, whether directly or indirectly, through at least 25 percent of shares or voting rights or by exercising effective control in that company through other means.

“Control through other means” may be exercised through a chain of ownership or through close relatives or associates having significant influence or control over the finances or decisions of the foreign company.

Regulation 6A (Maintenance of records of ultimate beneficial owners of foreign company) requires obtaining of additional particulars of UBO(s) from members of foreign companies holding at least 25 percent of the shares, voting rights or controlling interest in the foreign company on behalf of some other person. The foreign company is required to obtain, maintain and duly update the records of UBOs in the foreign company.

The foreign company needs to observe the following procedure in order to comply with the requirement of regulation 6A of the FC Regulations 2018.

The foreign company shall the members holding at least twenty-five percent of the shares, voting rights or controlling interest in the foreign company on behalf of some other person. (Regulation 6A of FC Regulations 2018).

The foreign company shall submit declaration of compliance to the Registrar that necessary information about the ultimate beneficial owners of the foreign company has been obtained and is available on record, through electronic submission or physical submission on amended forms, the SECP added.

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