Nominee Shareholder Agreement Uae

Nominee Shareholder Agreement UAE: What You Need to Know

If you are planning to set up a business in the United Arab Emirates (UAE) as a foreign investor, then you might have come across the term “nominee shareholder agreement.” This type of agreement is common in the UAE and is often used to facilitate foreign ownership of businesses that are subject to certain restrictions under UAE law. In this article, we will discuss what a nominee shareholder agreement is and why it might be necessary for your business in the UAE.

What is a Nominee Shareholder Agreement?

A nominee shareholder agreement is a legal arrangement whereby a person (the “nominee”) holds shares in a company on behalf of another person (the “beneficial owner”). The nominee has legal ownership of the shares, but the beneficial owner is entitled to the economic benefits of those shares, such as dividends and the right to vote at shareholder meetings.

In the UAE, a nominee shareholder agreement is often used by foreign investors who are subject to restrictions on foreign ownership in certain sectors, such as banking and telecommunications. In these cases, the nominee shareholder agreement allows the foreign investor to have effective ownership and control of the company while complying with UAE law.

Why Might a Nominee Shareholder Agreement be Necessary?

There are a few reasons why a nominee shareholder agreement might be necessary for your business in the UAE:

1. Foreign Ownership Restrictions: As mentioned earlier, some sectors in the UAE have restrictions on foreign ownership, and a nominee shareholder agreement can help foreign investors to comply with these regulations.

2. Protection of Identity: A nominee shareholder agreement can also be used to protect the identity of the beneficial owner. This might be desirable for various reasons, such as privacy concerns or to avoid negative perceptions of foreign ownership.

3. Facilitation of Investment: A nominee shareholder agreement can facilitate investment by providing a legal framework for foreign investors to participate in the UAE market. This can be especially important for investors who want to take advantage of the UAE`s favorable business environment and strategic location.

What are the Key Elements of a Nominee Shareholder Agreement?

A nominee shareholder agreement typically includes the following key elements:

1. Nominee`s Duties and Responsibilities: The agreement should set out the duties and responsibilities of the nominee, including their obligations to act in the best interests of the beneficial owner.

2. Mechanisms for Control: The agreement should specify how the beneficial owner will exercise control over the company, such as by appointing directors or by giving instructions to the nominee.

3. Termination: The agreement should include termination provisions, such as the circumstances under which the agreement can be terminated and how the shares will be transferred back to the beneficial owner.

4. Confidentiality: The agreement should include confidentiality provisions to protect the identity of the beneficial owner.

Conclusion

In conclusion, a nominee shareholder agreement can be an important tool for foreign investors who want to set up a business in the UAE while complying with local regulations. Such an agreement can protect the identity of the beneficial owner, facilitate investment, and provide a legal framework for effective ownership and control of the company. If you are considering setting up a business in the UAE, it is important to seek legal advice to determine whether a nominee shareholder agreement is necessary for your specific circumstances.

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