Nominee vs. Trust Agreements in the UAE: Which One Do You Really Need?

Introduction – Nominee Agreements vs. Trust Agreements in the UAE

Nominee and trust agreements in the UAE are often confused, as illustrated by the case that prompted this publication.

When structuring ownership of assets—whether real estate, company shares, or other wealth-generating interests—clients in the UAE frequently ask a key question: Should I use a nominee agreement or a trust agreement? Although both mechanisms allow for the separation of legal and beneficial ownership, they operate within very different legal frameworks and serve distinct long-term objectives.

This article explains how nominee agreements and trust agreements function, their respective advantages and limitations, and the factors to consider when choosing the most appropriate structure for asset protection, succession planning, or business structuring in the UAE.

What Is a Nominee Agreement?

A nominee agreement is a private contractual arrangement under which one party (the nominee) agrees to hold a specific asset—such as company shares or real estate—on behalf of another party, the beneficial owner. The nominee appears as the legal owner in official registers, but is contractually bound to act in accordance with the instructions of the beneficial owner, who retains economic control.

Nominee agreements have historically been common in the UAE, particularly in corporate shareholding structures. Prior to the liberalisation of foreign ownership rules, expatriates frequently used nominee arrangements to appoint Emirati nationals as registered shareholders of mainland companies while retaining beneficial ownership.

Today, nominee agreements may still be used in certain investment or business structures where confidentiality is required, conflicts of interest need to be managed, or foreign ownership restrictions continue to apply in sensitive sectors.

What Is a Trust Agreement?

A trust agreement is a legal structure governed by trust law. Under a trust, the settlor transfers assets to a trustee, who holds and manages those assets for the benefit of one or more beneficiaries. While the trustee becomes the legal owner of the assets, they are bound by fiduciary duties and must act in accordance with the trust deed and in the best interests of the beneficiaries.

Trusts are particularly suited to long-term wealth preservation, succession planning, and family governance. They may be used to protect assets from business risks, provide for minors or vulnerable beneficiaries, and control how wealth is distributed across generations.

Although trusts are not recognised under UAE federal (onshore) law, both the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) offer well-established trust regimes based on common law principles. Trusts established in these jurisdictions benefit from internationally recognised legal frameworks and specialist courts.

Key Differences Between Nominee and Trust Agreements

While both nominee and trust arrangements involve one party holding assets for another, their legal nature and level of protection differ significantly.

A nominee agreement is fundamentally contractual. It relies on the terms agreed between the parties and does not automatically impose fiduciary duties unless expressly provided for. As a result, nominee arrangements may be vulnerable in cases of dispute, breach of trust, or bad faith—particularly if the documentation is weak or incomplete.

A trust agreement, by contrast, creates a legally recognised fiduciary relationship. Trustees are subject to statutory duties of loyalty, care, and transparency, offering significantly stronger protection to beneficiaries. Trusts also provide continuity beyond the death or incapacity of the settlor, making them especially effective for inheritance and intergenerational planning.

Enforcement is another critical distinction. Nominee agreements—especially onshore—may be more difficult to enforce if challenged. Trusts established under DIFC or ADGM law benefit from clear statutory backing and specialist courts, providing greater legal certainty.

Which Option Is Right for You?

The choice between a nominee agreement and a trust agreement depends on your objectives, the nature of the assets involved, and your tolerance for legal and commercial risk.

Nominee agreements may be appropriate for short- to medium-term arrangements where confidentiality or regulatory compliance is required. They are generally simpler and less costly to implement but offer limited protection in the event of disputes or changing circumstances.

Trust agreements, while more complex and typically more expensive, provide a robust legal framework for long-term planning. They are particularly suitable for families with international ties, significant assets, or complex succession needs.

Considerations in the UAE Context

It is important to note that trusts are not recognised under onshore UAE law. Clients wishing to establish a trust structure must therefore use DIFC or ADGM jurisdictions, each of which has its own trust legislation and courts. These frameworks are especially attractive to international clients familiar with common law concepts.

Nominee arrangements, while still used onshore, should be approached with caution. Poor drafting, lack of supporting resolutions or powers of attorney, and failure to properly register the ultimate beneficial owner (UBO) can expose the beneficial owner to significant legal and financial risks.

Inheritance considerations are also relevant. UAE succession rules differ for Muslims and non-Muslims. For non-Muslims, a trust can provide a more predictable and tailored inheritance solution, particularly in cross-border family situations or where unequal distributions are intended.

Conclusion

Although nominee agreements and trust agreements both allow for the separation of legal and beneficial ownership, they serve very different purposes. Nominee agreements are best suited to straightforward, short-term arrangements requiring discretion or formal compliance, whereas trust agreements offer a sophisticated and secure solution for long-term asset protection and succession planning.

We hope this publication is helpful and remain available for any questions of general application.

For further reading, explore our publications on doing business in Dubai and the UAE, our video resources, or browse all our publications and video insights by Maria Rubert.

The information on this page is general in nature and does not constitute legal advice. This article provides an introductory overview of the key differences between nominee agreements and trust agreements in the UAE.