UAE’s new family business law to come into effect in January

Legislation will have ‘huge’ effect on national economy, official says

Abdullah Al Saleh, Undersecretary of the Ministry of Economy, speaks at a media briefing on UAE's new family business law in Abu Dhabi on Monday. Photo: UAE Ministry of Economy
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The new family business law that aims to boost the contribution of family businesses to the country’s economy and attract more businesses to set up their operations in the Emirates will come into effect in January, the Ministry of Economy said.

“The impact of this law on the economic development will be huge since 90 per cent of private companies in the country are family businesses,” Abdullah Al Saleh, Undersecretary of the Ministry of Economy, said on Monday.

The law will “maintain the sustainability of companies for generations to come and will help in the smooth transition of the management of the company from one generation to another”, he said during a media briefing on UAE's new family business law in Abu Dhabi.

The Arab world’s second-largest economy will also be able to attract family businesses from around the world to establish their companies in the country and benefit from the new law, Mr Al Saleh added.

Family businesses play an important role in supporting the UAE economy and account for some of the biggest conglomerates in the nation.

These companies span key sectors including property, retail, trade, tourism, industry, technology, shipping and logistics.

United Arab Emirates, Abu Dhabi, Skyline with harbor in foreground (Getty Images) *** Local Caption ***  al03no-flag-main.jpg

The UAE this year launched a programme to double family-owned businesses' contribution to the nation's gross domestic product to $320 billion by 2032 by preparing them for the future economy.

Thabat Venture Builder, the first such initiative in the region, will support companies through a five-month programme where they will look at how ideas can be transformed into viable business projects by adopting emerging technology, the Ministry of Economy said at its launch in September.

The programme aims to transform 200 family business projects into major companies by 2030 with a market value exceeding Dh150 billion ($40.84 billion) and annual revenue of Dh18 billion.

The new law applies to all family-owned companies that exist in the country, and the owners who own the majority of the shares in the family business who decide to register it in the unified register as a family company in accordance with the provisions of the law, the ministry said.

The law also regulates the ownership of family businesses by defining their capital, how the partner disposes of his share, and the mechanism for waiving it, in addition to regulating the right of redemption and evaluation of shares and their categories, as well as the family company's purchase of its shares.

There are other provisions in the law, too, pertaining to solving disputes between family members, distribution of annual profit, insolvency and number of partners in the business, among others.

“The law forms part of the UAE’s comprehensive efforts to outline a roadmap for the growth and prosperity of family businesses in the country and strengthen their operations in various economic and commercial fields, especially in the sectors of the new economy,” Mr Al Saleh said.

Key highlights of the new family business law

♦ A family-owned business may take any form of company stipulated in the Commercial Companies Law, including a one-person company.

♦ The law establishes a set of mechanisms for managing the family business, whether by the director or the board of directors, with clarification on the most important terms of reference and obligations of the director and how to dismiss him.

♦ Formation of a committee in each emirate called the “Family Business Dispute Resolution Committee”, pursuant to a decision by the Minister of Justice or the head of the local judicial authority, as the case may be. This is due to the fact that disputes are one of the main reasons that lead to the termination of family businesses.

♦ The law clarifies that in the event of bankruptcy or insolvency of one of the partners in the family business, the procedures and controls in force in the insolvency and bankruptcy laws in force in the country must be followed.

♦ The law grants sufficient flexibility for the family business to have any number of partners.

♦ The law states that a family business does not cease to exist due to the death, interdiction, bankruptcy or insolvency of one of the partners.

♦ Shares in the family business may not be assigned except in accordance with the conditions stipulated in the law.

♦ A partner in the family business has the priority right to buy the shares of the other partners, in the event of the bankruptcy of one of the fellow partners.

Updated: November 28, 2022, 4:19 PM
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