The new law which was issued by His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE and Ruler of Abu Dhabi will bring the existing legal procedures in the sector, in line with best international governance practices.
The new legislation will also further strengthen the sector’s contribution to the economy and facilitate the transition to successive generations. It is expected to boost the contributions made by family businesses to the diversification and growth of the economy.
HIGHLIGHTS OF THE NEW LAW
The new law allows family business owners to;
- Stop existing shareholders from selling of shares or dividends to individuals or companies outside the family, and
- To mandate the requirement for a prior approval from family partners before shareholders sell their respective equity stake to a non-family member.
Family business owners will now be allowed to issue family-owned shares with weighted voting rights and prevent the pledging of family-owned businesses as encumbered assets, to avoid expropriation.
EXEMPTION
Family-owned businesses where non-family members own more than 40 percent of shares are exempted from the purview of the new law.
APPLICATION OF THE LAW
Owners or co-founders of family-owned businesses will have to submit a request (opt-in) to the Abu Dhabi Department of Economic Development (ADDED) to bring their entities under the purview of the new law.
ADDED will issue the executive and administrative regulations of the new law from March 2022.
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.
Mr. Mohamed Ali Al Shorafa, Chairman of ADDED commented on the newly unveiled regulation.
The ADDED Chairman further elaborated that, “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.”