UAE issues new family business ownership governance law – News

The new law aims to stimulate the contribution of family businesses to the growth of the economy.



The new family law was signed into law by President His Highness Sheikh Khalifa bin Zayed Al Nahyan. File photo

By web office

Published: Tue, Jan 25, 2022, 5:14 PM

Last update: Tue, Jan 25, 2022, 7:32 PM

As Ruler of Abu Dhabi, President His Highness Sheikh Khalifa bin Zayed Al Nahyan has signed into law a new Family Business Ownership Governance Law which further enhances the sector’s contribution to the economy and facilitates the transition between successive generations.

The new law aims to further strengthen the legislative ecosystem for family businesses by adopting a more flexible and sustainable business model, in line with international best practices in governance. The law also aims to strengthen the contribution of family businesses to the diversification and growth of the economy.

The new Family Business Ownership Governance Act allows family business owners to: prevent the sale of shares or dividends to individuals or companies outside the family, and require prior approval family partners before a shareholder sells their respective stake to a non-family member.

Owners of family businesses can also issue family shares with weighted voting rights and prevent the pledging of family businesses as encumbered assets, in order to avoid expropriation.

The current law does not apply to family businesses in which non-family members hold more than 40% of the shares.

The provisions of this law are applied to family businesses on a voluntary basis for owners or co-founders by submitting an application to the Abu Dhabi Department of Economic Development (ADDED), which will issue the executive and administrative regulations of the new law of March 2022.

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

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

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