The Ruler of Abu Dhabi, His Highness Sheikh Khalifa bin Zayed Al Nahyan has issued a revised law governing family businesses that will further strengthen the sector’s contribution to the economy and facilitate the transition to subsequent generations.
In line with best international governance practices, the new law aims to further enhance the family-owned business legal ecosystem by adopting a more flexible and sustainable economic model. The law also aims to foster the diversification and growth of the economy through family businesses.
- The new family business ownership governance law empowers owners to prevent the sale of shares or dividends to individuals or companies outside the family, as well as requiring prior approval from family partners for the sale of ownership stakes to non-family members.
- A family-owned business can also issue shares with weighted voting rights and prevent its assets from being encumbered, thereby preventing expropriation.
- The current law does not apply to family-owned businesses where non-family members own over 40 percent of the shares.
Owners or co-founders of family-owned businesses can opt into this law after submitting a request to the Abu Dhabi Department of Economic Development (ADDED), which will issue the executive and administrative regulations of the new law in March 2022.
Commenting on the new law, Mohamed Ali Al Shorafa, Chairman of the Abu Dhabi Department of Economic Development, said: “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”.
He added: “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”.