diff --git a/bpdm-system-tester/src/main/kotlin/org/eclipse/tractusx/bpdm/test/system/stepdefinations/UltimateOwnerDistributionStepDefs.kt b/bpdm-system-tester/src/main/kotlin/org/eclipse/tractusx/bpdm/test/system/stepdefinations/UltimateOwnerDistributionStepDefs.kt
new file mode 100644
index 000000000..ffade47ff
--- /dev/null
+++ b/bpdm-system-tester/src/main/kotlin/org/eclipse/tractusx/bpdm/test/system/stepdefinations/UltimateOwnerDistributionStepDefs.kt
@@ -0,0 +1,173 @@
+/*******************************************************************************
+ * Copyright (c) 2021 Contributors to the Eclipse Foundation
+ *
+ * See the NOTICE file(s) distributed with this work for additional
+ * information regarding copyright ownership.
+ *
+ * This program and the accompanying materials are made available under the
+ * terms of the Apache License, Version 2.0 which is available at
+ * https://www.apache.org/licenses/LICENSE-2.0.
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS, WITHOUT
+ * WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied. See the
+ * License for the specific language governing permissions and limitations
+ * under the License.
+ *
+ * SPDX-License-Identifier: Apache-2.0
+ ******************************************************************************/
+
+package org.eclipse.tractusx.bpdm.test.system.stepdefinations
+
+import io.cucumber.java.en.And
+import io.cucumber.java.en.Then
+import io.cucumber.java.en.When
+import mu.KotlinLogging
+import org.assertj.core.api.Assertions.assertThat
+import org.eclipse.tractusx.bpdm.gate.api.client.GateClient
+import org.eclipse.tractusx.bpdm.gate.api.model.response.LegalEntityRepresentationInputDto
+import org.eclipse.tractusx.bpdm.pool.api.client.PoolApiClient
+import org.eclipse.tractusx.bpdm.pool.api.model.LegalEntityDto
+import org.eclipse.tractusx.bpdm.pool.api.model.request.LegalEntityPartnerUpdateRequest
+import org.eclipse.tractusx.bpdm.test.system.utils.ScenarioContext
+import tools.jackson.databind.json.JsonMapper
+
+/**
+ * Steps for the "Ultimate Owner Distribution" feature.
+ *
+ * These steps handle marking legal entities as ultimate owners and verifying that the
+ * ultimateOwnerBpnl is correctly reflected in the output of owned entities.
+ */
+class UltimateOwnerDistributionStepDefs(
+    private val gateClient: GateClient,
+    private val poolClient: PoolApiClient,
+    private val jsonMapper: JsonMapper
+) : SpringTestRunConfiguration() {
+
+    companion object {
+        private val logger = KotlinLogging.logger {}
+    }
+
+    /**
+     * Sharing member marks an entity as the ultimate owner via the Gate.
+     * This uploads the ultimate owner flag to the Gate input.
+     */
+    @When("the sharing member marks {string} as the ultimate owner")
+    fun sharingMemberMarksAsUltimateOwner(entityId: String) {
+        logger.info { "Sharing member marks '$entityId' as the ultimate owner" }
+        
+        val context = ScenarioContext.current() ?: error("No active scenario context")
+        
+        // Get the legal entity from context
+        val legalEntityWithAddress = context.legalEntities[entityId] 
+            ?: error("Legal entity '$entityId' not found in scenario context")
+        
+        // Create the Gate input representation with ultimate owner flag
+        val legalEntityInput = LegalEntityRepresentationInputDto(
+            legalEntityBpn = legalEntityWithAddress.header.bpnl,
+            legalName = legalEntityWithAddress.header.legalName,
+            shortName = legalEntityWithAddress.header.legalShortName,
+            legalForm = legalEntityWithAddress.header.legalFormVerbose?.technicalKey,
+            ownershipUltimate = true,
+            states = emptyList()
+        )
+        
+        // Upload to Gate via upsertBusinessPartnersInput
+        val inputRequest = context.inputData[entityId]?.copy(
+            externalId = context.runId(entityId),
+            legalEntity = legalEntityInput
+        ) ?: error("Input data for '$entityId' not found in scenario context")
+        
+        gateClient.businessParters.upsertBusinessPartnersInput(listOf(inputRequest))
+        logger.info { "Successfully uploaded '$entityId' as ultimate owner to Gate" }
+    }
+
+    /**
+     * Golden record process confirms an entity as the ultimate owner.
+     * This updates the Pool with the ultimate owner flag from the golden record.
+     */
+    @And("the golden record process confirms {string} as the ultimate owner")
+    fun goldenRecordConfirmsAsUltimateOwner(entityId: String) {
+        logger.info { "Golden record process confirms '$entityId' as the ultimate owner" }
+        
+        val context = ScenarioContext.current() ?: error("No active scenario context")
+        
+        // Get the legal entity from context
+        val legalEntityWithAddress = context.legalEntities[entityId] 
+            ?: error("Legal entity '$entityId' not found in scenario context")
+        
+        // Convert verbose DTO to non-verbose DTO using JSON serialization
+        val verboseJson = jsonMapper.writeValueAsString(legalEntityWithAddress)
+        val legalEntity = jsonMapper.readValue(verboseJson, LegalEntityDto::class.java)
+        
+        // Update the legal entity to mark it as ultimate owner
+        val updatedLegalEntity = legalEntity.copy(
+            header = legalEntity.header.copy(
+                ownershipUltimate = true
+            )
+        )
+        
+        // Update the legal entity in the Pool to mark it as ultimate owner
+        val updateRequest = LegalEntityPartnerUpdateRequest(
+            bpnl = legalEntityWithAddress.header.bpnl,
+            legalEntity = updatedLegalEntity
+        )
+        
+        poolClient.legalEntities.updateBusinessPartners(listOf(updateRequest))
+        logger.info { "Successfully confirmed '$entityId' as ultimate owner in Pool" }
+    }
+
+    /**
+     * Asserts that a record's output reflects a specific entity as the ultimate owner.
+     */
+    @Then("{string} output reflects {string} as the ultimate owner")
+    fun assertUltimateOwner(recordId: String, expectedOwnerRecordId: String) {
+        logger.info { "Asserting that '$recordId' output reflects '$expectedOwnerRecordId' as the ultimate owner" }
+        
+        val context = ScenarioContext.current() ?: error("No active scenario context")
+        
+        // Get the output from the Gate
+        val runId = context.runId(recordId)
+        val outputPage = gateClient.businessParters.getBusinessPartnersOutput(listOf(runId))
+        val output = outputPage.content.firstOrNull()
+            ?: error("No output found for record '$recordId'")
+        
+        // Get the expected owner's BPNL
+        val expectedOwnerRunId = context.runId(expectedOwnerRecordId)
+        val ownerOutputPage = gateClient.businessParters.getBusinessPartnersOutput(listOf(expectedOwnerRunId))
+        val ownerOutput = ownerOutputPage.content.firstOrNull()
+            ?: error("No output found for owner record '$expectedOwnerRecordId'")
+        
+        val expectedBpnl = ownerOutput.legalEntity.legalEntityBpn
+        
+        // Assert the ultimateOwnerBpnl matches
+        assertThat(output.legalEntity.ultimateOwnerBpnl)
+            .withFailMessage("Expected '$recordId' to have ultimate owner '$expectedBpnl' but was '${output.legalEntity.ultimateOwnerBpnl}'")
+            .isEqualTo(expectedBpnl)
+        
+        logger.info { "Successfully asserted '$recordId' has ultimate owner '$expectedOwnerRecordId'" }
+    }
+
+    /**
+     * Asserts that a record's output has no ultimate owner (null).
+     */
+    @Then("{string} output has no ultimate owner")
+    fun assertNoUltimateOwner(recordId: String) {
+        logger.info { "Asserting that '$recordId' output has no ultimate owner" }
+        
+        val context = ScenarioContext.current() ?: error("No active scenario context")
+        
+        // Get the output from the Gate
+        val runId = context.runId(recordId)
+        val outputPage = gateClient.businessParters.getBusinessPartnersOutput(listOf(runId))
+        val output = outputPage.content.firstOrNull()
+            ?: error("No output found for record '$recordId'")
+        
+        // Assert the ultimateOwnerBpnl is null
+        assertThat(output.legalEntity.ultimateOwnerBpnl)
+            .withFailMessage("Expected '$recordId' to have no ultimate owner but was '${output.legalEntity.ultimateOwnerBpnl}'")
+            .isNull()
+        
+        logger.info { "Successfully asserted '$recordId' has no ultimate owner" }
+    }
+}
diff --git a/bpdm-system-tester/src/main/resources/cucumber/ultimate_owner_distribution.feature b/bpdm-system-tester/src/main/resources/cucumber/ultimate_owner_distribution.feature
new file mode 100644
index 000000000..8ce503cd6
--- /dev/null
+++ b/bpdm-system-tester/src/main/resources/cucumber/ultimate_owner_distribution.feature
@@ -0,0 +1,131 @@
+# This feature covers how the ultimate owner flag is distributed through the business partner
+# ownership hierarchy. When a legal entity is marked as the ultimate owner, this flag should be
+# reflected in the output of all entities that are owned by it (directly or indirectly).
+#
+# The ultimate owner resolution follows these rules:
+#   - An entity marked with ownershipUltimate = true is its own ultimate owner
+#   - An entity owned by an ultimate owner inherits that ultimate owner's BPNL
+#   - When no ultimate owner exists in the chain, entities report null
+@CXTPM-1743
+Feature: Ultimate Owner Distribution
+
+  #h3. Test Objective:
+  #
+  #* Verify that when a legal entity is marked as ultimate owner, owned entities report this ultimate owner.
+  #
+  #h3. Preconditions:
+  #
+  ## A legal entity hierarchy exists with an owner and owned entity.
+  #
+  #h3. Description:
+  #
+  ## The owner entity is marked as ownershipUltimate = true in the golden record.
+  ## An IsOwnedBy relation is established from the child to the parent.
+  ## The golden record process processes the updates.
+  ## The child entity reports the parent's BPNL as its ultimate owner.
+  @TEST_CXTPM-1743-001 @BPDM
+  Scenario: Owned entity reports ultimate owner from ownership chain
+    Given record "parent-record" reflects legal entity "parent"
+    And record "child-record" reflects legal entity "child"
+    When the sharing member shares relation "ownership" of type "IsOwnedBy" from "child-record" to "parent-record"
+    And the golden record process establishes relation "ownership"
+    And the sharing member marks "parent" as the ultimate owner
+    And the golden record process confirms "parent" as the ultimate owner
+    Then "child-record" output reflects "parent" as the ultimate owner
+
+  #h3. Test Objective:
+  #
+  #* Verify that ultimate owner flag propagates through multi-level ownership hierarchy.
+  #
+  #h3. Preconditions:
+  #
+  ## A multi-level legal entity hierarchy exists (grandparent -> parent -> child).
+  #
+  #h3. Description:
+  #
+  ## The grandparent entity is marked as ownershipUltimate = true.
+  ## IsOwnedBy relations connect child -> parent -> grandparent.
+  ## The golden record process processes the updates.
+  ## Both parent and child report the grandparent's BPNL as ultimate owner.
+  @TEST_CXTPM-1743-002 @BPDM
+  Scenario: Ultimate owner propagates through multi-level hierarchy
+    Given record "grandparent-record" reflects legal entity "grandparent"
+    And record "parent-record" reflects legal entity "parent"
+    And record "child-record" reflects legal entity "child"
+    When the sharing member shares relation "parent-ownership" of type "IsOwnedBy" from "parent-record" to "grandparent-record"
+    And the golden record process establishes relation "parent-ownership"
+    And the sharing member shares relation "child-ownership" of type "IsOwnedBy" from "child-record" to "parent-record"
+    And the golden record process establishes relation "child-ownership"
+    And the sharing member marks "grandparent" as the ultimate owner
+    And the golden record process confirms "grandparent" as the ultimate owner
+    Then "parent-record" output reflects "grandparent" as the ultimate owner
+    And "child-record" output reflects "grandparent" as the ultimate owner
+
+  #h3. Test Objective:
+  #
+  #* Verify that when no ultimate owner exists in the ownership chain, entities report null.
+  #
+  #h3. Preconditions:
+  #
+  ## A legal entity hierarchy exists with no entity marked as ultimate owner.
+  #
+  #h3. Description:
+  #
+  ## No entity in the hierarchy is marked as ownershipUltimate = true.
+  ## IsOwnedBy relations are established between the entities.
+  ## The golden record process processes the hierarchy.
+  ## All entities report null as their ultimate owner.
+  @TEST_CXTPM-1743-003 @BPDM
+  Scenario: No ultimate owner reported when flag holder does not exist in chain
+    Given record "parent-record" reflects legal entity "parent"
+    And record "child-record" reflects legal entity "child"
+    When the sharing member shares relation "ownership" of type "IsOwnedBy" from "child-record" to "parent-record"
+    And the golden record process establishes relation "ownership"
+    Then "child-record" output has no ultimate owner
+    And "parent-record" output has no ultimate owner
+
+  #h3. Test Objective:
+  #
+  #* Verify that an entity marked as ultimate owner reports itself as the ultimate owner.
+  #
+  #h3. Preconditions:
+  #
+  ## A legal entity is marked as ownershipUltimate = true in the golden record.
+  #
+  #h3. Description:
+  #
+  ## The entity is marked as ownershipUltimate = true in the golden record.
+  ## The golden record process processes the update.
+  ## The entity reports its own BPNL as the ultimate owner.
+  @TEST_CXTPM-1743-004 @BPDM
+  Scenario: Entity marked as ultimate owner reports itself
+    Given record "self-owner-record" reflects legal entity "self-owner"
+    When the sharing member marks "self-owner" as the ultimate owner
+    And the golden record process confirms "self-owner" as the ultimate owner
+    Then "self-owner-record" output reflects "self-owner" as the ultimate owner
+
+  #h3. Test Objective:
+  #
+  #* Verify that ultimate owner flag change propagates to already-owned entities.
+  #
+  #h3. Preconditions:
+  #
+  ## A legal entity hierarchy exists with no entity marked as ultimate owner initially.
+  #
+  #h3. Description:
+  #
+  ## Initially, no entity is marked as ultimate owner.
+  ## IsOwnedBy relations are established.
+  ## Later, the parent entity is marked as ownershipUltimate = true.
+  ## The golden record process processes the update.
+  ## The child entity now reports the parent's BPNL as ultimate owner.
+  @TEST_CXTPM-1743-005 @BPDM
+  Scenario: Ultimate owner flag change propagates to existing owned entities
+    Given record "parent-record" reflects legal entity "parent"
+    And record "child-record" reflects legal entity "child"
+    When the sharing member shares relation "ownership" of type "IsOwnedBy" from "child-record" to "parent-record"
+    And the golden record process establishes relation "ownership"
+    And the sharing member marks "parent" as the ultimate owner
+    And the golden record process confirms "parent" as the ultimate owner
+    Then "child-record" output reflects "parent" as the ultimate owner
+    And "parent-record" output reflects "parent" as the ultimate owner