His Highness Sheikh Mohammed Bin Rashid Al Maktoum recently issued Law No. (9) which regulates Dubai-based family-owned businesses. This will benefit many existing businesses and also benefit those who want to launch a new business setup in Dubai. Law No. (9) seeks to:
- enhance family-owned business contributions for economic and social development
- foster family-owned business expansion and growth
- protect the wealth of families that own businesses in the UAE
Furthermore, this law applies to current and new family-owned businesses including proprietorships and corporate equity securities. Public joint stock companies that are family-owned as well as movable and immovable properties are not regulated by this new law. While this is a progressive approach to the protection of a family’s wealth, it also provides an option for families doing business in UAE to customize the terms within their Family Property Contract. As per the new law, the validity of the ownership contract is extendable for 15 years and can be renewed periodically after that.
This new law was implemented after many family-owned Dubai businesses petitioned the UAE government to adopt economic measures to prevent the impact of the pandemic on their businesses.
Stipulations of the Family Ownership Contract
All parties of the Family Ownership Contract must be immediate family members and have a common goal and single interest in order for it to be legally binding. Additionally, each member’s share must be clearly defined in the contract. Plus, the parties must have all legal rights to the assets and revenues that are found within the scope of the contract. A notary public must attest to the rules and regulations concerning Dubai notaries public as stipulated under Law No. (4) of 2013.
Validity and Renewal Issues
According to Law No. (9) 2020, the validity of the contract can be extended up to 15 years. Renewal for a similar term is possible provided all parties involved in the Family Ownership Contract agree to do so. In addition to regulating the articles of the contract, Law No. (9) also regulates the following:
- authorities and responsibilities of the board and management
- business’s management and structure
- formation of the board of directors or owners
- management’s limitations and powers
The authorities and responsibilities of government entities regarding the formation of a family-owned business is also defined under this new law. Any other legislation that challenges or contradicts the articles of the contract will be annulled.
Finally, should any dispute arise between the members of the Family Property Contract, it shall be settled by a judicial committee made up of family management, financial, and legal experts. This will ensure the confidentiality and privacy of these matters and will help to resolve the dispute in an efficient and timely manner. Last but not least, the law will be valid as of its publishing date in the Official Gazette.
