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The UAE’s new Family Business Law is part of a comprehensive effort in the country to outline a roadmap for the development and prosperity of family businesses in the country.
UAE Undersecretary Abdullah Bin Ahmed Al Saleh said there was no other legislation to regulate the operations of family businesses such as the UAE, which would strengthen the country as a regional and global family business The status of the primary and preferred destination for investments and projects. The Ministry of Economy at a press conference.
The Family Business Law is an important milestone in the development of legislation regulating the ownership and governance of family businesses in the UAE.
legal framework
When it comes into force in January 2023, it will provide the legal framework needed to ensure the growth of family businesses, help them diversify their activities and promote their intergenerational continuity and longevity, he said.
He noted that the UAE – due to the vision and directives of its wise leadership – places great emphasis on the family business sector and recognizes the importance of this vital economic model in sustainable development.
“The family business sector is the main driver of economic growth in most countries and they play a fundamental role in establishing new businesses, attracting investment and creating jobs across sectors,” he added.
pioneering move
He continued: “The last phase saw several pioneering initiatives to grow the family business sector, most notably the FB-X family business platform and the ‘Thabat’ programme. These were specifically designed to support family business investments , helping to diversify their activities and establish pioneering projects in the new economy, and to strengthen their partnerships and opportunities at home and abroad.”
The ambitious goals of Thabat’s plan include turning 200 family businesses into large companies with a market capitalization of more than AED150 billion (US$40.84 billion) and annual revenues of more than AED18 billion by 2030.
Regarding the importance of the economic role of family businesses, Saleh pointed out that family businesses account for 70% of the world’s private companies, 60% of the global workforce, and 70% of global GDP. In the UAE, 90% of private companies are family businesses, and their investments involve real estate, retail trade, tourism, industry, technology, shipping and logistics services and other fields.
younger
He continued: “Family businesses in the GCC countries are relatively young, between the ages of 40 and 60, with annual revenues approaching $100 billion, and 50% of these companies are owned by five or fewer shareholders.”
The Deputy Minister explained that the promulgation of the law is a positive and outstanding step by the UAE at the regional and global level, as it is groundbreaking and outstanding legislation in this field.
Al Saleh further said that the formulation phase of the law has seen the synergy and integration of national efforts as the Ministry of Economy collaborates with relevant federal and local authorities and coordinates with family businesses in the country during this phase.
flexible approach
These joint efforts helped shape the legal terms through a proactive and flexible approach that anticipated future directions. These efforts rely on comparative studies that focus on the family business sector in developed countries at Arab and global levels to ensure that a progressive and Comprehensive legislation and growth.
Regarding the specifics of the law, he explained that it defines a family business as a company established under the provisions of the country’s Commercial Companies Act, the majority of its shares being owned by persons belonging to a family. It must be registered with the Unified Family Business Register established under the provisions of this Act. The most prominent provisions of the Act are as follows:
• Establishment of a unified register of family businesses under the supervision and follow-up of the Ministry of Economy to organize the operations of family businesses in the country and enjoy all the advantages and flexibility provided by the law.
• The law applies to all existing family businesses in the country, as well as to owners of a majority of shares in a family business who decide to register as a family business on the Unified Register under the Family Business Regulations. law. The law also applies to all commercial companies except public companies and solidarity companies.
• A family business can take any form of company under the Business Companies Act, including a one-person company.
• Establish a family charter for the family business, which stipulates the family’s ownership rules, goals and values, as well as the share evaluation mechanism and profit distribution method.
• The law regulates family business ownership by defining the capital of the family business, how the partners dispose of their shares and the mechanism for giving up their shares, and also provides for redemption and appraisal rights of shares and their classes, and the purchase of their shares by family business companies .
• Removal of the upper limit on the number of shareholders of a family business in the form of a limited liability company.
• Establishment of a committee called the Family Business Dispute Resolution Committee in each emirate by decision of the Minister of Justice or the head of the local judicial authority, as the case may be. This is because disputes are one of the top reasons for the termination of family businesses. Therefore, the formation of committees helps resolve family business disputes and have them resolved by experts (judges or arbitrators) while ensuring speed, confidentiality and efficiency in dispute resolution.
• The law establishes a mechanism for a director or board of directors to manage a family business, and clarifies the most important duties and responsibilities of a director and how to dismiss him.
• With regard to the shares of the partners, the law clearly stipulates that any partner wishing to dispose of his shares in the family business must present them to the remaining family partners, except for him.
• The law clearly states that if one of the partners in a family business becomes bankrupt or insolvent, the procedures and controls in the country’s current insolvency and bankruptcy laws must be followed.
• The law gives family businesses enough flexibility to have any number of partners.
• Unless otherwise provided in the articles of incorporation, a family business must distribute a portion of its annual profits to its partners at the end of each financial year, in proportion to each partner’s shareholding in the family business.
• Cancellation of a company’s “family business” status if persons outside the family own a majority of the company’s shares and have voting rights as required by law. In this case, the family business shall be deleted from the Unified Register upon request of any interested party or decision of the competent authority.
• The law states that a family business cannot be terminated by the death, suspension, bankruptcy or insolvency of one of the partners.
• The law grants heirs the right to remain in the family business as partners, as much as their inherited share, or to dispose of their share.
• Shares in the family business may not be transferred unless the conditions stipulated by law are met.
• If one of the partners goes bankrupt, the partners in the family business have the first right to purchase the shares of the other partners.
Concluding the briefing, Al Saleh emphasized that the country will continue its efforts to develop the family business system in the next phase through comprehensive and qualitative initiatives and policies to strengthen the UAE business environment as the most attractive and family-friendly business environment from around the world of the enterprise– trade arab news agency
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