In the UAE, foreign nationals seeking to establish businesses often encounter the challenge of complying with the local ownership requirements. UAE laws mandate that foreign nationals can own only 49% of a mainland limited liability company, with the remaining 51% held by a UAE national. This is where a nominee agreement comes into play.
A nominee agreement is a unique legal arrangement whereby a UAE national agrees to hold 51% of the company shares on behalf of a foreign national. Importantly, while the UAE national, or nominee, legally owns the shares, the foreign national retains benefits and control over the company. This system allows for ease of business operations without interference from the local partner.
Under the nominee agreement, the nominee, often referred to as a local sponsor, simply holds the shares in title but does not participate in the company’s operations or benefits. They receive a fixed fee annually from the foreign national, ensuring a clear and straightforward financial relationship. On the other hand, the principal, usually the foreign national, maintains beneficial interest and practical control over the business operations.
The necessity of entering into a nominee agreement is underscored by UAE’s Commercial Companies Law. Unless a business activity is exempt, foreign nationals must comply with the law requiring 51% local ownership. Through these agreements, foreign nationals can define their rights over management, dividends, and share transfers, safeguarding their interests during the business lifecycle.
Key terms of a nominee agreement include identifying the parties involved, commencement dates, beneficial interests, fees, and the rights and obligations of each party. These terms ensure clarity in roles and responsibilities, fostering a trustworthy business environment. Importantly, a nominee agreement often includes a power of attorney, further empowering the foreign national in managing the company.
Thus, in a business environment as dynamic and regulated as the UAE’s, nominee agreements stand as essential instruments. They streamline operations, reduce legal risks, and maintain compliance with local laws. These agreements reflect the adaptability required in the global market, offering foreign business owners a secure framework for their ventures.
Navigating the complexities of UAE business law can be challenging, but nominee agreements provide a viable solution for foreign nationals aiming to establish a presence in the market. By clearly delineating roles and legal rights, these agreements foster a cooperative business environment, ensuring both compliance and operational efficiency.
Source: Legalinz
