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Nominee Shareholder Claim Fails: UAE Court Demands Written Proof
Introduction: The Owner on Paper Wins
For years, many onshore businesses in the UAE were set up with a UAE national holding the majority of shares on paper while expatriate founders ran the business and, in their own minds, owned it. When the relationship breaks down, the question becomes brutally simple: who owns the company, the person named in the memorandum of association or the people who say they built it?
On 8 October 2026 the Abu Dhabi Court of Cassation gave a clear answer in joined Commercial Cassation Appeals 926 and 946 of 2026. Between partners, a claim that the memorandum hides the real ownership can be proved only in writing. The Court held that the individuals had not established the alleged sham arrangement through written evidence or produced the concealed agreement. The same judgment also turned away the company's own claim for more than AED 3.5 million, because the company failed to prove that the individuals had misappropriated the money.
What the Court Decided: Both Sides Lost
The company was a one-person limited liability company licensed in Abu Dhabi. It was incorporated in April 2018 with a UAE national holding 51% and another partner holding 49%, who was also the manager with full powers, including over the bank accounts. The memorandum was amended several times between 2018 and 2025, with shares and management changing hands. The last amendment, in March 2025, left the national owning 100%.
The company then sued two individuals who had been partners and authorised signatories. It said they had moved AED 4,904,189 out of the company, of which AED 3,508,858 had no supporting document, and claimed that sum with 12% interest, AED 300,000 in damages and AED 40,000 in fees from earlier criminal proceedings. The two individuals had been convicted of embezzlement, but that conviction was later cancelled on appeal and they were acquitted, because the dispute was really about who owned the company and belonged in the civil courts.
The individuals counterclaimed. They said the national was only a nominal sponsor who never paid his share of the capital and received AED 5,000 a month for lending his name. They asked the court to declare them the owners, transfer the company into their names, and award them AED 4.7 million and a further AED 5 million in damages.
A three-member panel of accounting experts gave the counterclaim some colour. It found that the national acted as sponsor for several companies, that the premises were used mainly to issue and renew licences, that the company had no accounting system of any kind, and that its assets were simple hand tools. The first instance court in June 2026 and the appeal court in July 2026 still rejected both claims. The Court of Cassation rejected both appeals. Each appellant bore the fees and costs of its own appeal, lawyers' fees were set off, and both security deposits were forfeited. The full Arabic text of the judgment is attached below.
What the Law Says: Writing Against Writing
The Court started from the concept of simulation. A simulated contract is an outward arrangement that the parties never intended, used to hide their true relationship. Between them, the hidden agreement governs. The burden of proving simulation lies on the party who alleges it, and whether the evidence is enough is a matter for the trial court.
The decisive rule came from Article 14(1) of the Commercial Companies Law, as the Court cited it: in the relationship between partners, one partner may not prove that the memorandum is simulated against another partner except in writing. The Court held that the counterclaimants had not established the alleged sham arrangement through written evidence and had not produced the concealed agreement said to reflect the parties' true intention. The memorandum and its successive amendments recorded the ownership changes, culminating in the national's sole ownership in March 2025. On that record, the memorandum was the real contract.
Where the Expert Report Stopped
The counterclaimants leaned heavily on the expert panel, which had described the national's ownership as merely formal. The Court put that opinion in its place. An expert report is one element of evidence that the trial court weighs freely. Whether a person owns a company is a legal question for the court, not for an accountant, and here the experts' view was contradicted by the memorandum and its successive amendments.
The experts' findings also undercut the counterclaim for money. The individuals said the national had taken the company's assets and goodwill. The panel found there was nothing of substance to take, and no proof that he had taken any funds. Without proof of loss, the damages claim fell with the ownership claim.
Why the Company's Money Claim Failed Too
The company's appeal fared no better, and the reasons deserve attention. The experts did find AED 3,508,858 in financial movements without an adequate accounting explanation. But the company failed to prove that the individuals had misappropriated that money, and its inadequate accounting records prevented any detailed tracing of expenditure. Unexplained is not the same as embezzled.
The company also relied on the criminal convictions. The Court noted that those convictions had been cancelled and replaced by an acquittal, so the company was relying on judgments that no longer existed. It added that in civil evidence the judge plays a passive role: the claimant must bring the proof, and the court will not build the case for it. The company's argument that the individuals had admitted being owners, and so admitted taking the money as owners, did not rescue a claim that lacked evidence of the taking itself.
There is an interesting contrast with our recent piece on a criminal acquittal that sank an AED 31m cheque claim. There, a final criminal judgment bound the civil court. Here, the criminal route simply fell away, and the civil claim failed because the remaining evidence, including the expert report, did not establish misappropriation.
Practical Significance: What the Ruling Signals
The first signal is for founders who still sit behind a nominee or sponsor arrangement. The registered shareholding is the starting point and, without written evidence of a different arrangement between the partners, it is likely to be the end point too. In this case the Court held that the alleged sham arrangement had not been established through written evidence.
The second is for companies pursuing former managers. A company that cannot show its own books will struggle to prove that money was misappropriated, even where large sums left the account without paperwork. The absence of records hurt the claimant, not the people it accused.
The third concerns structure. Many onshore activities have been open to full foreign ownership since 2021, yet older structures remain in place. Courts look hard at who stands behind a company, as we saw when a group chairman was held personally liable for an investment manager's debts, but between partners the paperwork still speaks first. An open question is what form of writing will be enough. The judgment does not determine what particular forms of written evidence would suffice, or how a court would treat emails or partial written admissions.
How Juris Maestro Can Help
Juris Maestro advises founders, partners and companies on ownership structures, including reviewing memoranda of association, side agreements and share transfer documents, and explaining the options for moving to direct ownership. We draft partner agreements, share transfer and exit terms, demand notices and settlement documents, and explain the timetable and evidence each route under UAE law is likely to need.
If you're unsure, let's talk. Before it turns into a case.
info@jurismaestro.com | +971 56 116 3390 | www.jurismaestro.com
This article interprets a court judgment for general information only. It is not legal advice.
