In corporate ownership, the financial regulatory framework in Pakistan has become anchored on transparency. The Securities and Exchange Commission of Pakistan (SECP) has tightened its SECP UBO regulations under Section 123A of the Companies Act, 2017 and its rules to fight money laundering, tax evasion, and shell-entity structures. Knowing what is an Ultimate Beneficial Owner (UBO) and how to comply has become a compulsory move to all Pakistani companies, particularly as the regulator increases scrutiny due to IMF-related governance requirements.

What is Ultimate Beneficial Owner (UBO)?

An Ultimate Beneficial Owner (UBO) is a natural person who has the ultimate ownership or control of a company, directly or indirectly by a chain of companies or by contractual structure. The law in Pakistan tends to revolve around persons who:

• Directly or indirectly, own 25% or more of the shares or voting power in a firm.
• Has ultimate effective control over the management, decisions, finances or affairs of the company even when their shareholding is less than 25%.

Practically, this implies that a UBO might not be the nominal holder of a share but the actual decision-maker behind the veil of incorporation- a nominee or family-owned holding vehicle.

SECP UBO Regulations: Major Legal Foundation

SECP UBO regulations are based on:

• Section 123A of the Companies Act, 2017, that specifies a UBO and imposes on companies recording and disclosure requirements.
• The Companies (General Provisions and Forms) regulations, 2018, regulation 19A, which outlines the UBO requirements and the maintaining of registers and filing of returns to the SECP.

The provisions cover most companies incorporated in Pakistan, both private and public companies, and foreign companies operating in the country.

Who Should Report and Identify UBOs?

According to the SECP UBO regulations, all companies must:

• Determine all natural persons that satisfy the Ultimate Beneficial Owner (i.e., 25%+ ownership/control or effective control) requirements.
• Maintain a register of Ultimate Beneficial Owners (UBO register) at the registered office, of a type prescribed by SECP (usually register-R9).

When the ownership is indirect (the intermediaries comprising companies or trusts), the company should look through the structure and list the ultimate natural-person owners, not merely the intermediate legal persons. Unless someone exceeds the 25% or effective control threshold, the company will have to capture the information of the senior managing official (such as the CEO or managing director) as the UBO.

UBO Form and SECP Filing Requirement (SECP Requirements for UBO)

After filling the UBO register, the company should submit the corresponding UBO form SECP via the eZfile portal. The current enforcement campaigns have stressed on submission through Form-19 (or other prescribed forms) via SECP’s eZfile platform pursuant to the most recent SECP-wide UBO disclosure drive.

The major SECP requirements on filing UBO are:

• Precise disclosure of the full name,
• NIC /passport,
• nationality, residential address, date of birth and
• nature of control (e.g., shareholding percentage or control through other means) of each UBO.
• Immediate notifications in the event of a change in UBOs (new beneficiary, sale of shares, change of control, etc.), typically within a specified time frame following the occurrence.
• Maintaining supporting documentation (share registers, agreements, board resolutions, KYC/AML files) to support how each UBO was identified and why no-control situations revert to the senior-management-official default.

Non-abidance of these SECP regulations may initiate monetary fines and previous notices show that a director/officer may be fined up to PKR 1 million and the company up to PKR 10 million in non-compliance.

What Is the Importance of UBO Disclosure to Pakistan?

The SECP UBO regulations are not a mere paperwork. They support:

• The anti-money laundering (AML) and counter-terrorism financing (CFT) frameworks, to bring Pakistan on par with the Financial Action Task Force (FATF)-style standards.
• Tax transparency, as the Federal Board of Revenue (FBR) has also provided income-tax provisions to compel companies and associations of persons (AOPs) to provide UBO information to prevent income-concealing arrangements.
• Corporate-governance reforms such as the intended centralized UBO registry on which SECP will hold a national database accessible to the financial institutions to use as due-diligence information.

To businesses, it implies that the nominee or benami based shareholding arrangements are becoming very risky and may attract regulatory investigations, fines, or even trouble in banking and financing.

Guidelines in SECP UBO compliance

In order to meet the SECP UBO regulations, companies ought to:

Track the ownership

Create a precise cart of shareholders including any holding companies, trusts, or foreign entities and trace control to the ultimate natural persons.

Apply 25% control tests

In the case of every natural person, determine whether he/she owns 25% or above of shares/voting rights, or has an effective control by agreement, by voting right arrangements, or by de facto management power.

Prepare the UBO register (register-R9 or similar)

Keep the register in the form prescribed by SECP with each entry being supported by evidence (e.g., share certificates, board resolutions, and agreements).

Submit the UBO form before the deadline on eZfile

Complete the prescribed UBO form SECP (e.g., Form-19) and submit using the eZfile portal before the cut-off date, ensuring that all UBOs are properly identified and described. It should be noted that the UBO details (Form-19 or a similar UBO form SECP) are to be submitted within 120 days of the financial year end, which is also the same period the Annual General Meeting (AGM) is to be held.

Monitor and update

At least once a year or following any significant transaction (merger, sale of shares, change of board) check the UBO structure and update the register and SECP filings as necessary.

How Sidekick can assist

Sidekick is an expert accounting and advisory firm specializing in corporate compliance, tax and SECP-related issues. In companies that have to comply with the SECP UBO regulations, Sidekick may help with:

• UBO identification and mapping – identifying the complex ownership structures with the aim of accurately identifying natural-person UBOs based on the 25% and control test.
• UBO registers and forms preparation
• Assembling and updating the register of Ultimate Beneficial Owners and filling the corresponding UBO from SECP to submit eZfiles on time.
• Audits of compliance and gap analysis- audit of existing corporate records to determine their compliance with the requirements of the SECP with respect to UBO, Section 123A and AML/CFT.
• Training and policy-making – assisting companies in establishing internal UBO-due-diligence processes, KYC standards and board-level controls.

With the collaboration of an expert like Sidekick, organizations in Pakistan will be able to decrease the likelihood of fines, enhance transparency among authorities and financial institutions, and establish themselves as a law-abiding, governance-aware company within a more open financial environment.

Conclusion

SECP UBO regulations have become an inseparable and an enhanced aspect of corporate life in Pakistan. It is no longer a matter of choice as to who is an Ultimate Beneficial Owner, how to determine who they are, and how to comply with the UBO requirements and regulations. As the UBO registry is planned to be centralized, and the enforcement is going on, now is the time that companies should organize their UBO form SECP and other related records. Regardless of the size of your business (Pvt. Ltd. or listed group), it is quite sensible to use the services of a knowledgeable and skilled accounting and compliance support to keep pace with the regulatory requirements and help to make the business environment in Pakistan cleaner and more transparent.