New family business legislation is being implemented in the UAE.
A family company, according to the law, is a business formed in accordance with the Companies Law and listed in the Ministry of Economy’s special register of family businesses. Members of the same family own the majority of the company’s stock.
When family members no longer constitute the majority of a firm’s partners, the company ceases to be a family business and loses its legal advantages. With the exception of public joint stock companies and general partnerships, the legislation applies to all existing family businesses as well as any new businesses formed in the UAE. In this regard, the law does not create a new form for the family business because family businesses will continue to use the same formats that are currently in use in the UAE under the Commercial Companies Law or in the free zones under their respective legal frameworks.
The Highlights of the UAE’s New Family Business Law
According to the law, a family-owned business is one in which the majority of shares are held by members of a single family and was established in accordance with the country’s Commercial Companies Law. It must be listed in the unified family business registration, which is created in accordance with the rules of this legislation. The following are some of the most notable provisions of the decree-most law:
✔️ The Ministry of Economy will govern and monitor the establishment of a unified registry of family businesses.
✔️ The legislation applies to all family-owned businesses in the country, as well as the owners who own the majority of the company’s stock. All commercial enterprises, with the exception of public and solidarity firms, must follow the law.
✔️ The legislation regulates family business ownership by defining their capital, how the partner sells his share, and the procedure for waiving it. It also governs the right of redemption, the valuation of shares and their categories, and the acquisition of shares by the family business.
✔️ The maximum number of shareholders is lifted when the family business is organized as a limited liability company.
✔️ In each emirate, a “Family Business Dispute Resolution Committee” will be formed. It is because conflicts are a major cause of family businesses failing.
✔️ The law establishes a number of procedures for controlling the family business, whether by the director or the board of directors.
✔️ The legislation specifies that if a partner wishes to sell his or her interest in the family business, he or she must notify the other partners.
✔️ Unless otherwise provided in the articles of incorporation, the family company shall pay a portion of its yearly earnings to its partners based on each partner’s percentage ownership in the family business at the end of each fiscal year.
✔️ Removal of a company’s identity as a “family business” if non-family members own the majority of its shares and have the legal right to vote.
✔️ A family business does not end due to the death, imprisonment, bankruptcy, or insolvency of one of the partners, according to the law.
✔️ The heir has the option under the law to sell his share or remain as a partner in the family firm up to the amount of his inherited share.
✔️ Family business shares cannot be transferred unless certain legal requirements are met.
✔️ If one of the other partners in the family business declares bankruptcy, the other partner has first refusal to purchase their shares.
✔️ You might be interested in learning how to resolve family business disputes through mediation in the UAE.
The Family Business Law is part of the UAE’s comprehensive efforts to lay out a roadmap for the development and profitability of family businesses in the UAE, as well as to expand their operations in various economic and commercial spheres, particularly those related to the new economy. During the early stages of the legislation, the Ministry of Economy collaborated with relevant federal and municipal agencies, as well as family businesses in the UAE, resulting in harmony and consistency. For more information about the new family Business Law in the UAE and your certificate attestation, please don’t hesitate to contact your attestation service agencies in Dubai UAE.
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