Key Takeaways
- From 1 June 2021, Federal Decree-Law 26 of 2020 dropped the rule that UAE nationals must hold 51% of most mainland companies. Dubai confirmed that an Emirati partner is no longer mandatory.
- The government portal u.ae contradicts itself on local service agents. Its page of 16 July 2026 requires one for businesses owned completely by non-GCC residents, while its page of 6 April 2026 says the requirement was removed for most activities.
- Cabinet Resolution 55 of 2021 keeps seven groups of strategic-impact activities, among them banks, insurance, telecommunications and fisheries services, outside 100% foreign ownership. Commercial agencies are outside it as well.
- Companies must disclose their beneficial owners under Cabinet Decision 109 of 2023, and the companies law has no place for hidden nominee shareholdings.
- Nominee shareholders are one of the red flags in the Central Bank's customer due diligence guidance, in force from 7 November 2025.
Foreign founders setting up in Dubai are often told they need a local sponsor. The offer can come under that name, or as a service agent, or as a nominee, and those are different things. For most mainland activities the law hasn't required an Emirati partner since 2021. What matters now is what the arrangement actually does and who ends up in control.
Is a local sponsor in Dubai still needed?
For most mainland activities, no. Mainland means anywhere in the emirate outside a free zone, and foreign owners have been allowed to hold 100% of such companies since 1 June 2021 under Federal Decree-Law 26 of 2020. That June, the Dubai Media Office quoted Dubai's economic department, then called DED, on more than 1,000 commercial and industrial activities open to full foreign ownership. No extra fees, guarantees or capital applied. An Emirati partner, or a fixed share for one, was no longer mandatory.
There are exceptions. Cabinet Resolution 55 of 2021 lists seven groups of activities with strategic impact, according to the Ministry of Economy and Tourism. Among them are banks and insurance, telecommunications, Hajj and Umrah services and fisheries-related services. Here a foreign investor applies through the emirate's economic department. The department sends the complete application on to the regulator within 5 working days, and the regulator decides within 14 working days.
Commercial agencies, where a UAE agent distributes a foreign company's products, fall under the Commercial Agencies Law and stay outside the 100% rule. A licence that already has an Emirati partner keeps that set-up unless the partner leaves. If the partner does exit, the licence can convert to a one-person LLC (Dubai Media Office, 3 June 2021).
For more background, see the guide to foreign ownership and the Commercial Companies Law. Free zones work differently. A free zone is an area with its own authority that licenses companies under its own rules, and if your company is in one, the zone answers this question for you.
What a service agent does
A local service agent is a UAE national who handles government paperwork for a fee but owns no shares. That's how the term is used in the market. The agent signs a service contract with the company and deals with the authorities on its behalf, without holding equity or control. That's the difference from a nominee shareholder.
The Commercial Companies Law itself has no provision on service agents. The government portal u.ae does mention them. Its guide to starting a mainland business, dated 16 July 2026, says businesses owned completely by non-GCC residents need a local service agent from the UAE. GCC stands for the Gulf Cooperation Council, the group of Gulf states that includes the UAE. The agent is appointed under an agreement attested by a notary public or the court.
Another u.ae page, on foreign ownership and updated 6 April 2026, says something else. According to that page, the requirement for 51 per cent Emirati ownership or a local agent was removed for most activities, and branches no longer need an Emirati service agent. Because the two pages don't agree, get your licensing authority's answer in writing for your activity and legal form. Setup advisers say some professional and civil licences have come with an agent condition.
The answer can change with the activity code and the legal form, so there's no general rule that covers every licence. Put the questions below to the Department of Economy and Tourism (DET, formerly DED), which licenses mainland companies in Dubai, or to your zone. Quote your exact code. The replies tell you whether you need an agent at all and what an agent could do with your licence.
- Does this activity and legal form need a local service agent?
- What does the agent have to sign, and what may the agent not do?
- How much does the agent charge, and how does the contract end?
- Who keeps the original documents and the portal login?
The provider selling the arrangement may give you an answer too, and that can help. The authority's own reply is the one that settles it.
Nominee shareholders and the Central Bank guidance
A nominee shareholder is listed on the register while someone else really owns or controls the shares. UAE disclosure rules are written to close that gap. The companies law doesn't provide for hidden nominee shareholdings at all. On top of that, Cabinet Decision 109 of 2023 makes companies licensed on the mainland and in non-financial free zones disclose their beneficial owners.
A beneficial owner is the real person who, in the end, owns or controls the company, usually with 25% or more of the capital or the votes. The company files its beneficial owner register within 60 days of getting its licence. After any change, it updates the register within 15 days. A nominee board member must tell the company within 15 days of taking on or losing that status.
Fines are set by Cabinet Resolution 132 of 2023 (as of October 2026). A company that doesn't give the registrar its nominee director data pays AED 40,000 for a second breach and AED 80,000 for a third. Failing to disclose the ownership layers in a complex structure costs AED 50,000, and then AED 100,000. It's worth confirming with the licensing authority that this 2023 schedule still applies.
Banks follow the same logic. Customer due diligence is the process banks use to check who their customers are, and the Central Bank's guidance on it is listed as in force from 7 November 2025. The rulebook also shows an April 2026 update, which you should read alongside it. The guidance tells banks to verify each customer and its beneficial owners. A bank that can't complete those checks shouldn't open or keep the relationship. Nominee shareholders, opaque ownership and an unclear source of funds are all on its list of red flags.
You'll also see the word nominee in roles that are fully disclosed. JAFZA's Offshore Companies Regulations 2023 allow nominee directors (Regulation 33.3), and Cabinet Decision 109 treats a nominee board member as a status that has to be reported. When someone offers you a nominee, find out which of these meanings they have in mind.
Side letters, control and profit share
A side letter is a private agreement, kept outside the registered documents, that changes who controls the company or who gets its profit. The register then tells one story and the side letter tells another. Under the Commercial Companies Law, a transfer of LLC quotas (the LLC's shares) only counts against the company and third parties once it's entered in the commercial register (Article 79, 2021 text; check the current wording). The authority, the bank and everyone else go by the register.
For the foreign founder, two things follow. The local name-holder is the shareholder on record, and the founder's only protection is a private paper whose legal force a lawyer would have to assess. And the bank's records, which must name the beneficial owners, no longer match what is really going on. The beneficial owner rules, with the filing duties and fines described above, apply on top of that.
A lawyer should tell you how the agreement would be treated if control or a share of profit passes to the local party. You'll also want to know what the foreign owner could enforce, and against whom. A fixed service fee with no control and no profit share is in a different position from an arrangement that hands over either one.
Where a name-holder arrangement breaks down first
The pattern itself is simple. A local person's name is on the licence, while the foreign party funds the business, runs it and takes the profit. It tends to fail at the bank first, because the bank has to know the real owners. It also leaves the foreign owner exposed the moment the name-holder disagrees with anything. The guide to rejected business bank accounts shows how banks trace an ownership chain.
The UAE has commercial concealment legislation, which targets businesses run behind someone else's name. Whether your arrangement falls under it is for a lawyer to judge, and so is the risk it creates for the foreign owner and the local name-holder. Penalties depend on the wording of that legislation and on your facts. Get them from your own lawyer, not from a figure quoted by whoever is selling the structure.
Getting the agreement reviewed
Show a lawyer the whole picture before anything is signed, since one clause can look harmless on its own. Bring the draft agency, nominee or service agreement, any side letter, the memorandum of association, the activity code and an ownership chart that goes all the way down to individual people.
The lawyer's written advice should cover the points below. Taken together, they show how much control and money each party has and what's left when the arrangement ends.
- What each party can do alone.
- Who gets the profit.
- How the arrangement ends.
- What then happens to the shares and the licence.
- Which documents are filed with the authority.
For the clauses that belong in the registered document, see the guide to the memorandum and shareholder agreement.
You can also put the agent question to the licensing authority yourself, with no adviser involved. It's the authority that decides whether an agent is needed.
What a clean structure looks like
In a clean structure the foreign founder is registered as the shareholder, either alone in a single-owner LLC or next to named partners. The share register matches the beneficial owner register. The licence is in the company's name, and the company itself, not a provider, keeps the original documents and the portal login. The bank and the registrar see the same ownership chain.
Local people can still play legitimate roles, as long as those roles are disclosed. One might be the manager named in the memorandum. Another might be the UAE-resident individual authorised to give beneficial owner information to the registrar. A provider might also work for the company under a service contract. That contract sets out a scope, a fee and a term. It gives the provider no shares, no share of profit and no control beyond the written role.
Going it alone is reasonable when there's no local party involved. That means one foreign shareholder, an activity open to full foreign ownership, and confirmation from the authority that no agent condition applies. Anything more complicated deserves a lawyer's reading first. To see where each of these decisions comes up, read how to open a company in Dubai, step by step.
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