The Family Business Law or Federal Decree-Law No. 37 of 2022, is an active agent of change in the legal landscape that governs family businesses in the United Arab Emirates (UAE).

The law includes broad frameworks to promote family businesses with respect to growth, governance, and longevity-permanence; the family businesses remain a mainstay of the UAE’s economy.

The law also attempts to tackle perennial challenges directly, offering family businesses clear legal frameworks and useful tools. Consequently, the family business law enhances the family business’s ability to be resilient and relevant in an economy that is continually evolving.

Highlights of the Federal Decree-Law

Family Constitutions and Governance Bodies

The law of family enterprise offers families the opportunity to create customized Family Constitutions that govern internal matters, governance, and decision-making processes.

These documents provide clarity on the rules of leadership, shareholder rights, and dispute resolution. Additionally, families can create governance structures such as:

• Family Assemblies, which involve its members in strategic discussions.
• Family Councils, which promote strategic decision-making.
• Family Offices, which maintain financial and operational tasks.

Innovative Shareholding Options

The Decree-Law, as a component of the United Arab Emirates’ family owned business laws, improves flexibility related to shareholding structures and provides support for families in the following ways: 

 1- In creating different classes of shares with different rights. 

 2- In allowing a share buy-back of up to 30% of the company’s shares, permitting family members to exit.

3- In forming safeguards to stop the shares from being sold outside the family, to ensure that it will remain a family legacy.

Dispute Resolution Mechanisms

Family business law has recognized the significance of effective dispute resolution and provides additional choices to families, for example:

• Arbitration.
• Special Committees in every Emirate.
• Courts in the financial free zone.

Thus, families can select the dispute resolution option that works best for them and maintain harmony and business continuity.

Alignment with Personal Status Laws

The UAE’s family owned business laws, part of the Decree-Law, make it explicit that the laws themselves, or any applicable laws in Free Zones, will not trespass on the UAE Personal Status Law.

Thus, it allays a significant succession planning concern for families who want to be assured that such legislation won’t be unlawful when determining the applicable inheritance scheme.

Removal of Shareholder Restrictions

The family business law repeals past limitations on how many shareholders a Family Company can have. This change fosters inclusivity and supports maximum family participation in ownership.

Incentives and Concessions

Under the Family Companies, you may be able to access incentives and concessions issued at the discretion of the UAE Cabinet. While the details remain unclear, these incentives and concessions may increase the competitiveness and ability to operate of Family Businesses.

Scope of the Family Business Law Decree-Law

The Decree-Law pertains to Family Companies where natural persons from the same family control the majority of the capital, and, for that purpose, the company must register in the unified Register of Family Companies as created by the Law.

Stated in its own terms, the scope of the Decree-Law applies to most company types delineated in the Federal Commercial Companies Law, except public joint stock companies, general partnerships, and companies in Free Zones. 

Family businesses play an important role in the economy of the UAE, especially in the areas of trade, real estate, and retail, and yet they often face issues associated with generational tension, governance deficiencies, or the lack of a more formal succession plan.

These are the exact issues Federal Decree-Law No. 37 of 2022 focuses on, promoting the development of family business succession planning Dubai that wish to advance their economic contribution and want to continue operating successfully in an increasingly competitive environment.

In addition, the law will advance succession planning of family business in Dubai, creating a regulatory structure around the family company’s economic activity, enabling the family to deal successfully with modern business needs while at the same time securing the family’s economic legacy.

Additional Factors to Note

Integration with the UAE’s Economic Vision

It has a direct correlation to the UAE’s overall economic objectives of diversification and sustainability. The law encourages family businesses to flourish and, in doing so, drives innovation and job creation, which is aligned with the UAE’s aspiration of being a global economic center.

Role of Women in Family Businesses

The decree offers pathways to increase the inclusion of women in family business roles. By formalizing governance and succession, it also provides a progression model for women to take on leadership roles, reflecting the UAE’s commitment to gender equality.

Tax and Regulatory Implications

Even with the law providing many advantages, family businesses should still pay attention to the consequences of the law regarding taxation, inheritance laws, and financial reporting. Therefore, professional legal and financial advice will help families manage these elements of complexity.

Conclusion

UAE provides family businesses with the opportunity to enhance their structures and governance through improved governance practices, succession planning, and constructive processes for resolving disputes.

By working with one of the best family business lawyers in Dubai, such as Khairallah Law Firm, families can prepare Family Constitutions, provide a governance structure, and create flexible shareholding provisions to safeguard their legacy.

For family business succession planning Dubai, the law supports the transition to future generations, encourages women in leadership positions in family businesses, and supports the UAE’s economic aims for growth, innovation, and sustainability.

At the end of the day, the law will help family businesses to remain resilient, competitive, and sustainable through changing economic circumstances.