In the United Arab Emirates (UAE), nearly 90% of all private companies are family businesses functioning across various sectors, including real estate, tourism, technology, logistics services, and retail trade. These businesses play a major role in the country’s economic development. The government showed its commitment to developing and sustaining family businesses by passing the Federal Law No. 37 of 2022 on Family Businesses (the “New Law”).
The New Law aims to regulate the ownership and governance of these family businesses to ensure their long-term expansion and growth. Family business, per the New Law, is an entity registered in the unified register of family businesses where most of the shares are held by persons from the same family.
The New Law creates a unified register of family businesses under the supervision of the Ministry of Economy. The law applies to all family-owned companies in the country. It ensures flexibility in their functioning, allowing such businesses to take any form of company (except for Public Joint Stock Company or a General Partnership) stipulated in the Commercial Companies Law. A family business is also allowed to have any number of partners.
The New Law provides a convenient feature of issuing two different classes of shares where shares could either be voting and profit-bearing or non-voting profit-bearing.
The New Law has also dealt with the disposal and transfer of shares. Any partner willing to dispose of his shares must present it to other partners in the company as the New Law provides a partner in the family business priority right to buy the shares of the other partners. Transfer of shares to an outsider would require the approval of majority of shareholders of the family business. Even in case of bankruptcy of a partner, other partners must have a pre-emptive right to purchase the shares.
The New Law establishes a ‘Family Business Dispute Resolution Committee’ in each emirate to tackle disputes in the business. The committees in each emirate will provide a forum for members of such companies to settle their disputes by a specialist judge along with two experts within three months, ensuring speed, confidentiality, and efficiency.
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