In short:

The UAE Onshore Trust:

  • offers characteristics to ensure the unity and continuity of family businesses;
  • enables corporate solutions that overcome the legal limitations of existing corporate vehicles; and
  • provides an efficient method for creating investment vehicles.

UAE onshore businesses, especially family businesses, should consider the benefits of this new vehicle.

United Arab Emirates Trust Law

The UAE recently enacted a law regulating trusts; Federal Decree Law no. 19 of 2020 relating to Trust (Trusts Act). Trust law governs the formation, purpose, operation and dissolution of trusts. The law also defines the rights and obligations of the settlor or settlor, beneficiary, trust protector and trustee.

Trust is defined as an allotment of property pursuant to a trust deed to be administered for the benefit of a beneficiary or for the purpose of achieving a charitable or private purpose.

The trust is governed by a trust deed (deed). This instrument is dictated by the settlor and defines the terms and conditions of the trust.

Relying parties

Component is the person who creates the trust and distributes the assets of the trust.

Curator is the person who administers the trust, in accordance with the terms of the trust document, for the benefit of one or more beneficiaries.

Beneficiary is the person who holds a personal interest in the trust.

Protective is the person who protects the rights of the beneficiary and ensures the proper execution of the terms of the trust deed in order to achieve the purpose of the trust.

UAE Trust vs English Trust

It should be noted two fundamental differences between a UAE onshore trust and a common law trust, for example an English law trust.

  1. A UAE onshore trust has a separate legal personality, while an English law trust is not a separate entity.

  2. Under English law, the legal interest in the property of the trust is held by the trustee, while UAE trust law provides that the trust itself, as a separate legal person, holds the trust property.

A powerful tool for protecting and controlling family assets

Until recently, the only land vehicle available to control family assets, following the death of the head of the family, was a commercial company, and, in particular, a limited liability company.

The commercial company is not designed for this purpose. A company is defined under the Companies Act of the UAE as a business enterprise established by one or more persons in which the founders, who become shareholders of the company, contribute labour, funds or property and share the company profits. Shareholders control everything about the company. They have the inalienable right to modify the articles of association and to dissolve the company.

Whatever clauses are included in the statutes of a company to preserve the unity and continuity of a family business, the patriarch cannot prevent the heirs from modifying the clauses or ending the life of the company.

The Trust Act solves this problem. From now on, the patriarch, as settlor, can create a trust and transfer the family patrimony to this trust. The trust will be governed by the trust deed which is drawn up by the settlor. The heirs become beneficiaries of the trust. Beneficiaries cannot vary the terms of the trust deed or dissolve the trust, except in exceptional circumstances and with the approval of the competent court.

Investment vehicle – trust or limited liability company

A trust structure can overcome some of the inherent limitations of a limited liability company.

Management and operation

Beneficiaries of a trust have limited rights with respect to the operation of the trust, unlike shareholders of a limited liability company who are granted exclusive statutory rights to manage the company.

Beneficiaries cannot remove the trustee, while shareholders can control and remove the management of the company.


Beneficiaries cannot dissolve the trust, while shareholders can liquidate and dissolve the company whenever they wish, even before its term expires.


The Trustee may be granted the right to determine the extent of proceeds distributed and the discretion to decide the amount of proceeds to be received by each beneficiary. Whereas the distribution of dividends of a company is determined by the shareholders and each shareholder receives the share allocated under the articles of association of the company.


Creditors of a beneficiary cannot seize and seize the beneficial interest of the beneficiary of a trust. Creditors’ rights are limited to seizure of the proceeds of the trust allocated to the beneficiary. Whereas the creditors of a shareholder can seize and sell the shares held by this shareholder in a company in order to discharge debts.

An effective way to create an investment fund

Investment funds are heavily regulated by the UAE Securities and Commodities Authority (SCA). Under SCA regulations, setting up an investment fund often takes time and requires considerable financial and technical resources.

Trust law allows the creation of an investment fund by simply registering a trust deed and transferring assets to the trust. The investment fund can then receive contributions from investors.


The UAE trust is a vehicle for controlling and protecting family businesses that should be considered. Trust law provides new investment tools that address certain limitations of existing investment vehicles. The Trusts Act introduces relatively simple and less expensive methods of creating investment vehicles


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