In brief
On 13 August 2020, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Ruler of Dubai, Vice President and Prime Minister of the UAE, issued Law No. (9) of 2020 regulating family-owned businesses in the Emirate of Dubai (the “Law”). In view of the significant contribution made by family enterprise to the economic and social fabric of the Emirate, the Law is intended to provide a clear legal framework for family ownership and facilitate protection, growth and effective transition of family-owned businesses and other assets. The Law will be valid from the date of its publication in the Official Gazette and repeals any other legislation contradictory to its provisions. Together with many other changes, now is an ideal time to review the overall ownership and governance of family owned businesses.
In detail
Under the new Law, family members jointly owning assets can opt to enter into a legally binding and notarised family ownership contract (“Family Property Contract”), which will provide for the collective ownership and administration of family-owned property for the benefit of the family members and their successors. The Law will enable families to ensure continuity of ownership for the family in the event of a transfer of the assets, e.g. in the case of a demise of one of the family members, bankruptcy, etc. The Family Property Contract can cover the new and existing common ownership of most forms of movable and immovable property (except public joint stock companies) and is valid for a renewable period of up to 15 years. The contract must clearly specify each family member’s share and, collectively, the family members must own all legal rights to the assets concerned. The terms of the Family Property Contract are flexible and can be tailored in accordance with the family members’ preferences to set out certain provisions such as rights to benefit from the income and capital as well as the management and administration of the jointly owned assets, which are the subject of the contract. The contract will be administered by an appointed manager (or managers) and the Law sets out the provisions relating to their appointment, dismissal and oversight by a board of directors. The Family Property Contract must be duly attested by the notary public according to the rules and regulations set out in Law No. (4) of 2013 concerning Notaries Public in the Emirate of Dubai. A special judicial committee, comprised of legal and financial experts with experience of dealing with family matters, will be responsible for settlement of any disputes arising in relation to a Family Property Contract. The Law will be valid from the date of its publication in the Official Gazette and repeals any other legislation contradictory to its provisions.
The takeaway
The introduction of the Law represents another important step by the Emirate of Dubai, aimed at protecting family wealth and ensuring the continuity of family-owned businesses, which are a cornerstone of the local economy.
Now is an ideal time for families and family offices responsible for new or existing family enterprises to review the current ownership structure for their family-owned business or other interests in the UAE and consider whether the Family Property Contract and, more widely,other ownership and governance mechanisms could be suitable for them in meeting their family’s objectives.
