TRW & Co · Corporate law and governance
Nominee Directors and Shareholders in the UAE: Legal Risks
A nominee director UAE arrangement is lawful onshore, in free zones and in the DIFC and ADGM, but it must be disclosed. This guide explains the beneficial ownership duties, why nominees carry full director liability, which side agreements are needed, what the 2024 repeal of the anti-fronting law changed and how AML rules apply.
Key pointDisclosure is now the price of using a nominee: the nominee must tell the company who they act for within 15 days, and the person giving the instructions risks being treated as a manager in fact with liability of their own.
At a glance
Lawful but disclosed
Nominee directors and shareholders are permitted, but Cabinet Decision No. 109 of 2023 and the DIFC and ADGM regimes require their status and principal to be recorded.
Fifteen-day notifications
Onshore and in ADGM, a nominee director must tell the company of their status, the person they act for and later changes within 15 days.
Full director liability
Nominees owe the same duties as any director or manager under the Commercial Companies Law; acting on instructions is no defence.
Anti-fronting law repealed
Federal Law No. 17 of 2004 was repealed from 1 October 2024, but undisclosed nominee structures still breach beneficial ownership rules.
AML scrutiny applies
Corporate service providers arranging nominees are DNFBPs under Federal Decree-Law No. 10 of 2025 and must identify real owners and report suspicions.
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Nominee director UAE rules: the short answer
Appointing a nominee director UAE companies can lawfully use is possible onshore, in the free zones and in the DIFC and ADGM, but the arrangement can no longer be secret. Under Cabinet Decision No. 109 of 2023 for mainland and commercial free zone entities, and under the DIFC and ADGM beneficial ownership regimes, a nominee must disclose that status and the person for whom they act, and the company must record and file it. Nominee shareholders are looked through to the real owner.
The nominee also carries the full legal duties of a director or manager. Acting on someone else's instructions is not a defence to a breach of the Commercial Companies Law, an anti-money laundering failure or a claim in insolvency. And the person giving the instructions may be treated as a manager in fact, with liability of their own.
The old anti-fronting law that penalised local-sponsor nominee structures was repealed with effect from 1 October 2024, but that did not make undisclosed nominee arrangements safe. This guide explains when nominees are lawful, what must be disclosed, how liability works, which side agreements are needed and how anti-money laundering rules apply. TRW & Co advises investors, boards and nominees on the legal and regulatory side of these arrangements.
What nominee directors and shareholders are
A nominee director is a person appointed to a board, or as a manager of a limited liability company, who is accustomed or required to act on the instructions of someone else, typically the investor that put them there. A nominee shareholder holds shares in their own name for the benefit of another person. A corporate nominee is a company that plays either role, usually a service provider's subsidiary.
There are legitimate reasons for a nominee director UAE appointment. A foreign investor may need a UAE-resident signatory for day-to-day matters. A joint venture partner may appoint directors to represent its interests on a board. A fund may hold investments through a custodian. Holding structures often use professional directors to meet governance or tax residency expectations.
The problem arises when nominees are used to hide who owns or controls a business. Marketing that presents nominees as a route to "anonymity" no longer reflects the law: anonymity from the registrar is not available, and anonymity from banks is not realistic.
The legal framework: onshore, free zones, DIFC and ADGM
| Regime | Main instrument | Nominee directors | Nominee shareholders |
|---|---|---|---|
| Mainland and commercial free zones | Cabinet Decision No. 109 of 2023; penalties in Cabinet Resolution No. 132 of 2023 | Must notify the company of their status and the person they act for, and report changes and cessation within 15 days | Recorded with the person they act for; beneficial owner identified on a look-through basis |
| ADGM | Beneficial Ownership and Control Regulations 2022 | Company keeps a record of nominee directors, filed with the Registrar; nominee must inform the company within 15 days | Shares held as nominee treated as held by the person for whom the nominee acts |
| DIFC | DIFC Ultimate Beneficial Ownership Regulations | Company keeps a register of nominee directors and files details with the Registrar | Beneficial owners identified behind nominee holdings |
| Financial free zone and onshore regulated firms | Regulator fit-and-proper rules | Directors and controllers usually need regulatory approval in their own right | Controllers must be disclosed and approved |
Mainland and commercial free zones
Cabinet Decision No. 109 of 2023 on Regulating the Beneficial Owner Procedures requires in-scope entities to keep a Beneficial Owner's Record and a Register of Partners or Shareholders, file them with the registrar and update them within 15 days of becoming aware of a change.
A beneficial owner is a natural person who ultimately owns or controls 25 per cent or more of the capital or voting rights, or who controls the entity by other means, such as the right to appoint or remove most directors. Nominee board members must notify the company of their status and of the person they represent, and report changes and cessation. Our guide to UBO rules in the UAE explains the registers in detail.
ADGM
ADGM's Beneficial Ownership and Control Regulations 2022 define a nominee director as one required to follow the directions of another person. The company must take reasonable steps to identify the person behind each nominee director, keep a record of nominee directors with that person's particulars and file it with the Registrar. The nominee must tell the company within 15 days of becoming a nominee and of later changes. Shares held as nominee are treated as held by the person for whom the nominee acts. The Registration Authority explains the regime on its beneficial ownership page.
DIFC
The DIFC's Ultimate Beneficial Ownership Regulations similarly require entities to identify their beneficial owners and to keep and file details of nominee directors with the Registrar of Companies, with fines for failure. Check the current requirements on the DIFC registry before appointing.
Anti-fronting: what the 2024 repeal changed
Before foreign ownership was liberalised in 2021, many mainland businesses were held 51 per cent by an Emirati nominee, with a side agreement, power of attorney or share pledge returning control and profits to the foreign investor. Federal Law No. 17 of 2004 on combating commercial concealment penalised these arrangements. It was repealed by Federal Decree-Law No. 26 of 2024 with effect from 1 October 2024.
The repeal removed one specific offence. It did not validate undisclosed nominee structures:
- Legal title. The registered shareholder is the legal owner as far as authorities, banks and third parties are concerned. A side agreement contradicting the memorandum of association can be difficult to enforce.
- Beneficial ownership law. Failing to disclose the real owner breaches Cabinet Decision No. 109 of 2023 and attracts penalties.
- Restricted activities. Some activities still carry foreign ownership limits. A nominee used to get around them remains exposed to licensing action.
- Death and disputes. If a nominee dies, registered shares can pass into their estate. If the relationship breaks down, the investor must prove its position.
For most legacy structures, the right answer is to restructure into direct ownership with accurate filings. Our article on local service agents and exiting sponsor arrangements explains the process.
Nominee liability and the risk for the person behind them
A nominee director UAE appointment carries the same legal duties as any other appointment. The Commercial Companies Law, Federal Decree-Law No. 32 of 2021 as amended by Federal Decree-Law No. 20 of 2025 (in force since late 2025), makes managers and board members liable to the company, the shareholders and third parties for fraud, misuse of authority, breaches of the law or constitution and serious management errors. The fact that the nominee was following instructions does not reduce those duties.
Other regimes add exposure:
- Insolvency. Under Federal Decree-Law No. 51 of 2023, the court can order board members, managers and those in actual control to contribute to a failed company's debts where their mistakes contributed to the loss. The person who really runs the business can be caught as a manager in fact.
- Tax. Directors sign or approve returns and declarations. False information can carry penalties under the Tax Procedures Law and, in serious cases, criminal exposure.
- AML and sanctions. Directors are responsible for the company's compliance with anti-money laundering and targeted financial sanctions rules where it is a reporting entity.
- Labour. Under the 2026 Wage Protection System resolution, serious non-payment of wages can lead to measures against the person in charge of the establishment.
Our page on directors' duties and liability sets out the full picture.
A nominee who "signs what they are sent" is the worst of both worlds: the nominee carries the legal liability without the information to manage it, and the investor risks being treated as a manager in fact. A properly structured appointment gives the nominee real information rights and a documented decision process.
The side agreements a nominee arrangement needs
A lawful nominee director UAE arrangement should be documented openly, consistent with the registers, and should protect both sides.
- Confirm the purpose and legality. Record why a nominee is used, check that the activity has no foreign ownership restrictions being circumvented and confirm the regulator's position for regulated businesses.
- Carry out due diligence both ways. The nominee or service provider must identify and verify the investor and the source of funds; the investor should check the nominee's background, other appointments and capacity.
- Sign a nominee services agreement. Cover the scope of authority, decisions that need the investor's written instruction, matters the nominee may refuse (anything unlawful), information rights, fees, conflicts and termination.
- Agree protections. For nominee shareholders, a declaration of trust or similar instrument, where enforceable, and a pre-signed transfer mechanism; for directors, a resignation letter held in escrow and an indemnity from the investor, subject to the limits of what the law allows to be indemnified.
- File the disclosures. Complete the nominee disclosures, beneficial owner record and shareholder register, and file them with the registrar within the deadlines.
- Govern the relationship. Hold minuted board meetings, give the nominee the papers needed to make informed decisions and review the arrangement annually.
- Plan the exit. Provide for the nominee's replacement, transfer of shares, release of liability for the period after exit, and update of all filings within 15 days.
Side agreements cannot override mandatory law. An indemnity will not protect a nominee from fines or criminal liability for their own wrongdoing, and a clause requiring a nominee to follow unlawful instructions is unenforceable. Where several investors appoint nominees to a board, align the arrangements with the shareholders' agreement.
AML and banking risks
Nominee arrangements are a recognised money-laundering risk, and the UAE's anti-money laundering framework, now Federal Decree-Law No. 10 of 2025 and its executive regulation, treats corporate service providers as designated non-financial businesses and professions. Providers that act as or arrange nominee directors or shareholders must identify the real owners, scrutinise the arrangement, keep records and report suspicious transactions to the Financial Intelligence Unit. Our page on AML compliance explains these duties.
Banks apply the same scrutiny to every nominee director UAE structure they see. Expect account-opening teams to ask who the beneficial owner is, why a nominee is used and who gives instructions. Inconsistent answers between the bank's file and the registers are a frequent cause of account closures. Disclosed, well-documented arrangements with a clear business reason are usually accepted; secret ones rarely survive a periodic review.
Illustrative scenario: regularising a legacy nominee structure
Illustrative only; the parties are generic. A foreign family owns a Dubai mainland trading company through a 51 per cent nominee shareholder appointed in 2015, with a side agreement and a power of attorney. The nominee is also a manager. The company's bank asks for updated beneficial ownership information.
The family confirms that the trading activity is now open to full foreign ownership. It agrees with the nominee a transfer of the shares to the family's holding company, a release of the side agreement and a resignation as manager, with an appropriate settlement. A professional manager resident in the UAE is appointed, with a services agreement, information rights and a clear delegation of authority. The registers and beneficial owner record are updated and filed, and the bank receives a consistent set of documents. The family takes tax advice on the transfer before signing.
Risks and common mistakes
Most problems with a nominee director UAE structure come from treating it as a formality rather than a real appointment with real duties.
Using a nominee to hide ownership
Undisclosed nominee structures breach the beneficial ownership rules, mislead banks and, depending on the purpose, can amount to more serious offences. The registers are shared with competent authorities, and inconsistencies are increasingly detected through bank reviews, audits and tax filings. If privacy is the goal, discuss lawful options such as holding structures, foundations or trusts, which offer confidentiality from the public but not from the authorities.
Nominee directors who never see the books
A nominee with no access to accounts, bank statements or contracts cannot discharge the duties the law places on them and has no defence if something goes wrong. Investors also lose protection: a court may conclude that the investor was the real manager. Give nominees regular management information and minute their decisions.
Missing the 15-day update window
Changes in the person for whom a nominee acts, a nominee's resignation or a share transfer must be reflected in the registers and filings within short deadlines. Missed updates are among the most common beneficial ownership penalties. Build notification duties into the nominee agreement and the shareholders' agreement so the company learns of changes promptly.
Relying on an unenforceable side letter
A side letter that contradicts the memorandum of association, or that exists to circumvent a foreign ownership restriction, may not be enforced by a UAE court. Investors who rely on such documents can lose their investment if the nominee dies or disputes the arrangement. Regularise the structure rather than relying on paper that a court may ignore.
What to do next: a nominee director UAE checklist
- Record the legitimate reason for using a nominee and check for ownership restrictions.
- Complete two-way due diligence and keep the records.
- Sign a nominee services agreement, resignation and transfer documents and an appropriate indemnity.
- File nominee disclosures and beneficial owner records with the right registrar.
- Give the nominee real information rights and hold minuted meetings.
- Review legacy structures and plan their regularisation.
For advice on structuring, documenting or unwinding a nominee director UAE arrangement, contact TRW & Co at info@trw.co or +971 58 942 1012 in Dubai. Our beneficial ownership and registers page covers the filing obligations.
Frequently asked questions
01Are nominee directors legal in the UAE?
Yes. There is no general prohibition on nominee directors or managers onshore, in free zones or in the DIFC and ADGM. What has changed is transparency. Cabinet Decision No. 109 of 2023 requires nominee board members of mainland and commercial free zone entities to notify the company of their status and the person they act for, and the DIFC and ADGM beneficial ownership regimes require records of nominee directors to be kept and filed. Regulated firms also need approvals for directors in their own right.
02Is a nominee director personally liable in the UAE?
Yes. A nominee director or manager owes the same duties as any other under the Commercial Companies Law and can be liable to the company, shareholders and third parties for fraud, misuse of authority, breaches of the law or constitution and serious management errors. In insolvency, the court can order directors, managers and those in actual control to contribute to the company's debts. Following an investor's instructions is not a defence, and an indemnity cannot cover fines or criminal liability.
03Can I keep my ownership private by using a nominee shareholder?
Not from the authorities. Beneficial ownership rules look through nominee shareholders to the natural persons who ultimately own or control 25 per cent or more, or who control the company by other means, and the records are filed with the registrar and available to competent authorities. Banks will also ask. Some confidentiality from the public is possible through lawful holding structures, foundations or trusts, but secret nominee arrangements expose both the nominee and the investor to penalties and disputes.
04What happened to the UAE anti-fronting law?
Federal Law No. 17 of 2004 on combating commercial concealment was repealed by Federal Decree-Law No. 26 of 2024 with effect from 1 October 2024. The repeal removed a specific offence aimed at local-sponsor nominee arrangements, but it did not make those arrangements safe. Undisclosed nominee holdings still breach beneficial ownership rules, side agreements may be unenforceable, and nominees used to bypass remaining foreign ownership restrictions expose the business to licensing action. Most legacy structures should be regularised.
05What documents should a nominee arrangement have?
Typically a nominee services agreement setting out authority, instructions, refusals, information rights, fees and termination; for shareholdings, a declaration of trust or equivalent where enforceable and a share transfer mechanism; for directors, an undated or escrowed resignation and an indemnity within legal limits; and the filed nominee disclosures and beneficial owner records. The documents must be consistent with the registers and the constitution. TRW & Co drafts and reviews these legal documents and the related filings.
06Do nominee arrangements affect tax residency or substance?
They can. Tax authorities and treaty partners look at where a company is actually managed and controlled. If UAE-resident nominee directors simply sign decisions made abroad, a company may struggle to obtain a tax residency certificate or treaty benefits, and a foreign company could be treated as resident where its real management sits. Make sure nominee directors take real decisions in the UAE, with board papers and minutes that show it, and take tax advice on the structure.
Sources and official materials
- Cabinet Decision No. 109 of 2023 on Regulating the Beneficial Owner Procedures — Mainland and commercial free zone UBO and nominee rules
- ADGM Beneficial Ownership and Control Regulations 2022 — Record of nominee directors and look-through rules
- ADGM: Beneficial Ownership and Control — Registration Authority guidance
- Federal Decree-Law No. 32 of 2021 on Commercial Companies — Managers' and directors' liability
- Federal Decree-Law No. 10 of 2025 on AML — AML duties of corporate service providers
- UAE Financial Intelligence Unit — Suspicious transaction reporting
- Dubai International Financial Centre — DIFC registry and UBO regulations
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
