Dubai Court of Cassation (General Assembly), Resolution No. 8 of 2025, 14 July 2025
Some Dubai judgments had held that proof that the real partners differed from those in the memorandum of association meant an LLC lacked its essential elements and was absolutely void, leading to dissolution and liquidation. The General Assembly held instead that, since Federal Decree-Law No. 32 of 2021 dropped the requirement for UAE nationals to hold at least 51 per cent and allowed one-person LLCs (Article 71), an LLC contract may not be annulled because a UAE national partner was nominal (صوري), even if made before that law. A finding of sham partnership instead converts the company into an LLC, or a one-person LLC, owned by the real partners, with shares as the facts show, provided the elements of that company are met.
At the request of the President of the Court of Cassation, the General Assembly considered how the permission to form one-person LLCs affects LLCs formed by two or more partners before that permission, where the court finds that the participation of one or more Emirati partners was sham.
One line of judgments held that if the partners prove facts contrary to the memorandum of association, the LLC lacks its essential elements and is absolutely void as a matter of public policy, which the court raises of its own motion; nullity attaches from the outset and a judgment merely declares it, with dissolution and liquidation following. Another line held that Federal Decree-Law No. 32 of 2021 on Commercial Companies removed the requirement that nationals hold at least 51 per cent of an LLC's capital, defining the LLC in Article 71 as having between two and fifty partners and allowing a single natural or legal person to form and own one; that Article 359 applies the new law to existing companies formed under Federal Law No. 8 of 1984, requiring them to regularise within a year; and that, the new law applying immediately, such contracts may not be annulled for sham or for lack of a 51 per cent national holding, even if made before it, unless a final judgment of nullity was given before it took effect.
The Assembly explained that regularisation gives legal status to situations that were originally irregular, correcting the course and avoiding the harm of past violations. The one-person LLC, regulated also by Article 3 of Cabinet Resolution No. 77 of 2022, is a new form meant to support entrepreneurs, attract foreign investment and improve ease of doing business, and must be applied in a way that preserves the stability of existing companies. The one-year period in Article 359 did not stand in the way, because a company could not apply to regularise until a judgment had found the partnership sham.
The Assembly adopted the second line: no annulment for sham or lack of national participation, even for pre-2021 contracts, and a finding of sham partnership converts the company into an LLC or one-person LLC of the remaining real partners, with shares as the facts show, if its elements are met.
Many Dubai mainland companies were set up with nominal Emirati partners under the former 51 per cent rule. Disputes between foreign owners and nominal local partners no longer put the company itself at risk of annulment and liquidation; the court instead recognises the real ownership. This removes a strong source of leverage in disputes over nominee arrangements and protects the continuity of operating businesses.
| Articles 71 and 359 of Federal Decree-Law No. 32 of 2021 on Commercial Companies — text of articles 71, 359 |
| Article 3 of Cabinet Resolution No. 77 of 2022 on Limited Liability Companies — text of article 3 |
| Federal Law No. 8 of 1984 on Commercial Companies (law under which the companies concerned were formed) Decided under this law; it has been replaced by Commercial Companies Law. |
“لا يجوز الحكم ببطلان عقود الشركات ذات المسؤولية المحدودة بسبب صوريتها وعدم مساهمة شريك أو أكثر من المواطنين بحصة لا تقل عن 51% من رأس مالها”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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