Legislation Overview
- Full Title: Federal Decree by Law Concerning Family Businesses - Law Type: Federal Decree-Law - Issued Date: 03 Oct 2022 - Effective Date: 10 Jan 2023 - Sector: Economy and Business - Number of Articles: 59 - Current Status: Active
Summary
This Federal Decree-Law aims to establish a comprehensive legal framework to regulate the ownership and governance of family businesses in the United Arab Emirates. It provides mechanisms to support the continuity of family businesses, facilitate their transfer between generations, and enhance their contribution to the UAE economy. The law sets out definitions, registration requirements, ownership rules, management obligations, and dispute resolution procedures for family businesses in the UAE. (Federal Decree by Law Concerning Family Businesses, 2022, Arts. 1-59)
What is the scope and purpose of this law?
The law applies to any family business existing in the UAE at the time it comes into force, as well as any family businesses established after its commencement. Family businesses can take any form of company stipulated in the Commercial Companies Law, except for joint-stock companies and partnerships. The law excludes certain free zone companies to the extent that its provisions conflict with the applicable free zone laws and regulations. (Federal Decree by Law Concerning Family Businesses, 2022, Art. 3) The key objectives of this law are to: (1) develop a legal framework to regulate family business ownership and governance; (2) support the continuity of family businesses and enhance their role in economic growth; (3) provide mechanisms for dispute settlement related to family businesses; and (4) boost the contribution of family businesses to the UAE economy. (Federal Decree by Law Concerning Family Businesses, 2022, Art. 2)
What are the key definitions?
The law provides definitions for several key terms, including: - "State": United Arab Emirates (Federal Decree by Law Concerning Family Businesses, 2022, Art. 1) - "Ministry": Ministry of Economy (Federal Decree by Law Concerning Family Businesses, 2022, Art. 1) - "Minister": Minister of Economy (Federal Decree by Law Concerning Family Businesses, 2022, Art. 1) - "Companies Law": Federal Decree-Law No. 32 of 2021 on Commercial Companies (Federal Decree by Law Concerning Family Businesses, 2022, Art. 1) - "Family Business": A company established under the Companies Law, with most of its shares owned by a single family, and registered as a family business (Federal Decree by Law Concerning Family Businesses, 2022, Art. 1) - "Articles of Association": The authenticated articles of association of the family business (Federal Decree by Law Concerning Family Businesses, 2022, Art. 1) - "Family Charter": A written document regulating the governance of family affairs related to the family business (Federal Decree by Law Concerning Family Businesses, 2022, Art. 1) - "Register": The unified register of family businesses (Federal Decree by Law Concerning Family Businesses, 2022, Art. 1)
What are the main obligations and requirements?
The key obligations and requirements under this law include: - Family businesses must be registered in the Family Business Register maintained by the Ministry in coordination with the competent authority (Federal Decree by Law Concerning Family Businesses, 2022, Art. 4) - The family business's articles of association must comply with the provisions of this law and the Commercial Companies Law (Federal Decree by Law Concerning Family Businesses, 2022, Art. 5) - The family may have a Family Charter that regulates family ownership, goals, profit distribution, and other family-related matters (Federal Decree by Law Concerning Family Businesses, 2022, Art. 6) - Family business shares can only be assigned under the conditions specified in the law, with pre-emptive rights for other family members (Federal Decree by Law Concerning Family Businesses, 2022, Art. 8) - Family business directors must comply with their competences and obligations as outlined in the law (Federal Decree by Law Concerning Family Businesses, 2022, Arts. 15-17)
What are the rights and protections?
The key rights and protections granted by this law include: - Family businesses can be owned by any number of partners, as an exception to the Commercial Companies Law (Federal Decree by Law Concerning Family Businesses, 2022, Art. 7) - Family members have pre-emptive rights to purchase the shares of a partner who wishes to dispose of their share (Federal Decree by Law Concerning Family Businesses, 2022, Art. 8) - Partners have the right to request the recovery of a share owned by a third party outside the family (Federal Decree by Law Concerning Family Businesses, 2022, Art. 8) - Partners have the right to priority purchase of a bankrupt or insolvent partner's share (Federal Decree by Law Concerning Family Businesses, 2022, Art. 10)
What are the penalties for non-compliance?
This legislation does not include specific provisions on penalties for non-compliance.
How does this law interact with other UAE legislation?
The law references and interacts with several other UAE federal laws, including: - Federal Law No. 1 of 1972 on the Competences of Ministries and the Capacities of Ministers (Federal Decree by Law Concerning Family Businesses, 2022, Preamble) - Federal Law No. 5 of 1985 on the Civil Transactions Law (Federal Decree by Law Concerning Family Businesses, 2022, Preamble) - Federal Law No. 32 of 2021 on Commercial Companies (Federal Decree by Law Concerning Family Businesses, 2022, Arts. 1, 3, 5, 26) - Federal Decree-Law No. 9 of 2016 on Bankruptcy (Federal Decree by Law Concerning Family Businesses, 2022, Art. 10) - Federal Decree-Law No. 19 of 2019 on Insolvency (Federal Decree by Law Concerning Family Businesses, 2022, Art. 10)
When did this law come into effect and what are the transitional provisions?
This Federal Decree-Law came into effect on 10 January 2023. (Federal Decree by Law Concerning Family Businesses, 2022, Art. 28) The legislation does not include any specific transitional provisions.
Source Documents
This article analyses Federal Decree by Law Concerning Family Businesses for legal research and educational purposes. For the purpose of interpretation and application, reference must be made to the original Arabic text. In case of conflict, the Arabic text prevails. This does not constitute legal advice.