Ruling affirms trust-based ownership structures and limits local sponsors’ dividend claims
A UAE court has ruled that a nominal local sponsor listed as a shareholder on corporate records cannot claim dividends or ownership rights in a company when a valid trust agreement establishes a different beneficial owner.
The case involved a dispute between a leading transport and logistics company and its local sponsor over dividend entitlements.
At the centre of the dispute was whether the local sponsor, whose name appeared on the company’s trade licence and incorporation documents, could assert ownership and profit rights despite a duly executed internal trust agreement confirming that the shares were held in trust for the foreign investor.
In its judgment, the court dismissed the sponsor’s claim, ruling that the mere appearance of a name on company records does not grant beneficial ownership unless specifically provided under the governing agreement. The decision reaffirmed that trust-based shareholding arrangements accurately reflect the parties’ intentions and protect the rights of the true investor.
In the case spearheaded by UAE-based legal consultancy Kaden Boriss, the firm submitted a robust body of evidence, comprising the trust agreement, shareholding documentation, and financial statements, clearly demonstrating that the local sponsor’s role was strictly nominal.
Legal experts view the ruling as a key affirmation of the enforceability of trust-based shareholding structures in the UAE, reinforcing the importance of clear documentation in sponsor arrangements.
Kaden Boriss said the outcome underscores its commitment to safeguarding clients’ ownership and financial interests through strategic legal representation and adherence to established commercial principles.
