In Dubai a nominee Emirati partner no longer voids the company, but real owners must prove the arrangement

In Dubai the company now survives a finding of sham

On 14 July 2025 the General Assembly of the Dubai Court of Cassation settled the question. Resolution No. 8 of 2025 holds that an LLC may not be annulled because an Emirati partner was nominal or because nationals do not hold 51 per cent, even where the memorandum predates the 2021 Companies Law. A judgment that the Emirati partnership is sham instead converts the company into an LLC of the remaining real partners, or a one-person LLC, with shares as the facts show, provided the elements of that company are met.

The resolution ends a split in the Dubai courts. Under the 1984 Companies Law and the 2015 law before its amendment, an LLC needed UAE nationals to hold at least 51 per cent of its capital, and a company lacking that element was void. The cases follow a familiar pattern: an Emirati registered as majority partner who put in no capital and was paid a fixed fee as licence sponsor. When such arrangements broke down, some judgments held the company void and ordered it liquidated. In one Dubai case the lower courts did exactly that to three companies whose foreign owners had been partners since 1974.

The Assembly relied on Article 71 of the 2021 law (Federal Decree-Law No. 32 of 2021, in force since 2 January 2022), which has no 51 per cent rule and lets a single person own an LLC, and on Article 359, which applies the law to existing companies and gave them a year to adjust. That deadline was no obstacle, it said, because a company cannot regularise a sham partnership until a court has found it. The line of judgments it adopted makes one exception: a contract already annulled by a final judgment before the 2021 law took effect. Only the federal Judicial Principles Unification Authority's principles bind all UAE courts (Federal Law No. 10 of 2019); a General Assembly resolution settles the Court of Cassation's position and guides the Dubai courts.

Proving who really owns the shares

The Assembly changed what follows a finding of sham; it did not make the finding easier. Sham means that the parties agreed an outward transaction hiding their real relationship, and the hidden agreement binds them; whether one exists is a question of fact for the trial court, as the Dubai Court of Cassation restated in Commercial Appeal No. 190 of 2025. Between partners, its settled rule is that nothing contradicting the memorandum may be proved except in writing, a public-policy rule applied even if no party raises it (Commercial Appeals Nos. 151 and 160 of 2025). Article 67(3) of the Evidence Law (Federal Decree-Law No. 35 of 2022) likewise bars witness evidence that contradicts a written document.

Appeal No. 190 shows how a claim fails. A foreign partner said that the Emirati-owned company recorded as his partner had been included only to meet the old rule and had paid nothing. But both partners had declared in the memorandum that the cash shares were fully paid into the company's bank account, and the audited accounts for 2018 to 2022 confirmed the payment. In Appeals Nos. 151 and 160 the Court upheld the appeal court's finding that a partner who never paid for his shares is not, for that reason, a sham partner: he owes the money to the company, and only the company can sue for it.

Claims get further where the evidence shows a paid sponsorship. In the 2023 federal case discussed below, the courts found on the evidence in the file that the Emirati partner was a licence sponsor paid a fixed sum, with no capital, no role and no share in profits or losses. In a September 2024 Dubai case, the foreign partners produced documents the Emirati partner had signed confirming that he had paid nothing and contributed no capital; he disputed them, and the case went back to the Court of Appeal.

The Abu Dhabi rulings we read hold firmly to the registered documents. In April 2024 the Abu Dhabi Court of Cassation relied on its earlier, final ruling that a 49 per cent manager could not prove, against a notarised amendment and the trade licence, that he was the real owner and the 51 per cent partner only a nominal sponsor. For a sole establishment, which has no legal personality of its own, the Court held in January 2024 that the licence holder owns the business unless it was transferred by notarised disposition and registration, and that a disputed private acknowledgement cannot displace the licence. The Dubai Assembly's resolution addresses LLCs, not establishments of this kind.

Why one arbitration clause did not keep the claim out of court

In September 2024 the Dubai Court of Cassation held that a clause sending partner disputes to arbitration did not stop the Dubai courts from deciding whether an Emirati partner's 51 per cent was sham. Article 4(2) of the Federal Arbitration Law (Federal Law No. 6 of 2018) forbids arbitration on matters that cannot be settled by compromise, and deciding the claim meant applying the former national-ownership rule, a rule of public policy.

The same judgment kept the case in Dubai although the companies' premises were all outside the emirate: the claim concerned the Emirati partner's own status as a partner, and he lived in Dubai. The ruling concerned the sham question only and says nothing about other partner disputes under the same clause.

The federal courts, and a point still open

The Federal Supreme Court, which sits above the federal courts (Abu Dhabi, Dubai and Ras Al Khaimah have their own courts of cassation), reached a similar result in May 2023. After finding the 51 per cent partnership a sham, the lower courts held the company void and rejected the founder's heirs' claims to all the shares. The Federal Supreme Court upheld the sham finding but quashed the judgment for applying the repealed 2015 law: the claims had to be examined under the 2021 law, already in force, which allows foreign ownership of up to 100 per cent within controls set by the Cabinet and local authorities. The heirs had relied on the emirate's investment guide, which listed the company's activity, blacksmithing, as open to full foreign ownership. The Court did not spell out a conversion mechanism, as the Dubai Assembly later did.

On proof, one question remains open. The 2022 Evidence Law allows witness evidence where a written instrument is challenged as containing something prohibited by law or contrary to public order (Article 68(4)), and a cover partnership existed to get round the nationality rule. Whether a foreign partner can therefore prove it without documents in Dubai is not settled by the rulings we read: Appeals Nos. 151 and 160, which insisted on writing, concerned a free-zone company with no nationality issue, and Appeal No. 190 left the point undecided. In a 2016 labour case under the old Evidence Law, the Ras Al Khaimah Court of Cassation accepted that a sham used to get round the law may be proved by any means, but quashed a witness-based finding that the worker was really a partner and the licence holder a mere sponsor, because that finding ignored the licence holder's own statement that the shop was his alone.

What the 2021 law did not change

Full foreign ownership is the default, not a universal rule. Article 10 of the Companies Law lets the Cabinet define activities with a strategic impact and the controls for licensing them, and lets each emirate's competent authority set a ratio of UAE nationals in the capital or on the board of the companies it licenses. Cabinet Resolution No. 55 of 2021 lists the strategic activities: security, defence and military activities; banks, exchange houses, finance companies and insurance; money printing; telecommunications; Hajj and Umrah services; Quran memorisation centres; and services related to fisheries, which require 100 per cent national participation. For the other listed activities, the sector regulator fixes national participation when it approves the licence.

This is where the Assembly's condition, that the elements of the converted company be met, may matter. None of the rulings we read deals with a company whose activity still requires an Emirati holding, and we would not assume that a sham finding turns such a company into a wholly foreign-owned one.

Article 17 matters when an arrangement is unwound and shares are reallocated. A partner's contribution must be cash or appraised property; work counts only from a jointly liable partner, and reputation or influence never. In May 2025 the Dubai Court of Cassation applied that rule to void a 40 per cent LLC share that the documents described as a contribution of work.

A disclosed nominee is a different arrangement

The court cases concern an Emirati recorded as majority partner to satisfy a nationality rule, while the side arrangement behind his share stayed off the record. Cabinet Resolution No. 109 of 2023 requires today's nominee holdings to be disclosed. The real beneficiary is the natural person who ultimately owns or controls 25 per cent or more (Article 5). A company whose partners hold as trustee or nominee must record that in its partners register, with the details of the persons each one represents (Article 10), and must update its beneficial-owner register within 15 days of learning of a change (Article 8). No change of ownership may be registered without a statement on whether the beneficial owner changes. The resolution does not apply in the financial free zones.

The company and the registrar therefore know who stands behind a disclosed nominee. None of the judgments we read concerns a nominee recorded in this way; each turned on an arrangement kept off the record. The resolution is a disclosure rule: nothing in it makes a nominee's holding count towards a national-participation requirement that still applies to an activity.

What owners of legacy 51/49 structures check

We start with the documents: anything the Emirati partner signed confirming that he paid nothing and received a fee, the records of those payments, and bank evidence of who funded the capital. We then compare them with the memorandum and the audited accounts. If those declare his share paid, that is the evidence that defeated the claim in Appeal No. 190, and it has to be dealt with directly.

Next come the form and the activity: whether the business is an LLC or a sole establishment, and whether its activity is on the Cabinet's strategic list or subject to an emirate rule on national participation. The partners register, which the managers must keep accurate and file with the authorities every January (Article 74), and the beneficial-owner register are checked against what the owners say the real position is.

Then the route. Where the Emirati partner cooperates, a share transfer and amended memorandum are the direct path: the amendment must be in Arabic and attested by the competent authority, or it is void (Article 14), and it takes effect on registration in the commercial register (Article 15). Where he does not, the route is a court claim (in the 2024 Dubai case an arbitration clause did not bar one), and it turns on evidence and takes time.

Where this leaves owners

In Dubai the General Assembly has removed the threat of annulment and liquidation, and the Federal Supreme Court points the same way. What remains is an argument about evidence. Owners who kept the side letters and payment records stand far better than those whose arrangement lived only in conversation.

This article describes UAE court rulings and legislation as of 1 November 2026. It is general information, not legal advice. Polaris is not a law firm; in disputes we work alongside licensed UAE advocates.