of Abu Dhabi (the “Law”).
- This is the first UAE mainland regulation containing a definition of a
Family-Owned Business and setting out specific family governance regulations. - Is deemed a ‘ Family-Owned Business’ any business originally owned by one family. It has characteristics and advantages that help that family to continue business and control the company, across all licensed activities and legal forms.
- Is considered a Family-Owned Business a company where:
- Ownership by members of one family of the entire capital.
- Ownership by members of one family of a company owned by several legal persons wholly owned
by members of this family. - Ownership by a single founder of the one-person company (OPC) who allocates all or some of its benefits to the benefit of his family members.
- Family-Owned Business allocates part of its profit for the benefit of the beneficiaries as decided by the founders.
- Ownership by the family of the majority of the company’s capital or the majority of votes [in the event that partners from outside the family are included]
- Family-Owned Business can be launched with an administrative office without assets. There is no limitation to the activities that can be conducted. Aside from a specific reference to the qualification in the Mem & Arts, no exceptional procedures are required to establish, or transform a company into, a Family-Owned Business.
- The purpose of the Family-Owned Business is to bring the family’s assets and business/es under the company’s umbrella or under a commercial structure controlled by a holding company. The Law aims to support family unit and undivision of management and ownership. The law does however not prevent probate: in the event of demise of one of the (individual) shareholders, succession proceedings in front of a local court will still be required.
- Limitation apply on mortgaging a Family-Owned Business’s assets or incurring any in kind burdens on them. Proceeds of the Family-Owned Business can, on the other hand, be pledged or mortgaged.
- Ownership into a Family-Owned Business is not restricted to Family members.
- The Family may sell up to 40% of its capital to non-family members or offer all or part of such portion in the financial market.
- It is possible to introduce different classes of shares, e.g. giving multiple voting shares for the main partners and preferred or redeemable shares for partners from outside the family (without voting rights). Up to 30% of a Family-Owned Business’ can be allocated to beneficiaries outside the family such as research institutions, academies institutions, senior employees or relatives not participating in the business.
- Management of a Family-Owned Business can be conducted by any professional deemed qualified by the partners. In case the Family-Owned Business relates to the activity of a (mainland-registered) holding company, the manager shall be appointed from amongst the contributors of assets.
The new Law is another positive development in the strategic family-business space. Its features will, no doubt, help Abu Dhabi operating families keep control while seeking new avenues to finance their growth, including IPOs.
While not preventing probate and succession proceedings in front of a local court in the event of demise of an individual shareholder, the law’s features can be combined – and are fully compatible – with those of other tools available
domestically – chiefly, foundations.
This opens interesting and robust avenues for creative families willing to optimise business continuity and intergenerational legacy planning.
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