New Family Business Ownership Governance Law in UAE

The UAE has come up with a new governance law that aims to boost the family-owned business legislative ecosystem in the country. The new economic model, which is far more flexible and sustainable and in accordance with global governance procedures, will not just be a boon to family owned business, but also to the economy of UAE.

The new law, issued by His Highness Sheikh Khalifa bin Zayed Al Nahyan, gives power to family owned businesses to;

• prevent the sale of shares/ dividends to individuals or companies outside the family
• take approval from family partners prior to a shareholder selling their respective equity stake to someone outside the family

Apart from this, the owners of family-owned businesses are also empowered to issue family-owned shares with weighted voting rights and prevent the pledging of family-owned businesses as encumbered assets, to avoid expropriation. Cases wherein non-family members own more than 40 per cent of shares, the new law won’t be applicable.

The owners or co-founders of family-owned business can make use of this law by submitting a request to the Abu Dhabi Department of Economic Development (ADDED). The executive and administrative regulations of the new law will be issued from March 2022.

Commenting on the new law, Mohamed Ali Al Shorafa, Chairman of ADDED, said, “This law is a major pillar in enhancing the vital role played by these businesses in driving economic development. It also provides a legislative framework to ensure the growth and sustainability of family-owned companies in line with the evolving business sector, since it allows ownership by non-family members up to 40 per cent of the capital. This will support the expansion and development of family-owned businesses.”

He added, “Family-owned businesses in Abu Dhabi continue to contribute to economic diversification and the knowledge-based economy, equipped with decades-long experience in the market, strong resilience, and experience in partnering with government entities, as well as investing in sectors targeted by strategic initiatives launched by the emirate of Abu Dhabi.”

Apart from boosting the economy of the country, the new law will aid towards economic diversification as well.

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