‘’Any moment of crisis can either unite the family or can tear them apart.’ The quote itself explains the perils of a family business. Most of the UAE markets are dominated by family businesses. Any person doing any kind of business in the UAE will be well known by the family names who control the UAE market. Since the family businesses in the UAE have become the power system across a different range of industries, including real estate, construction, hospitality, retail, automotive, etc., financial market analysts believe that the progression of family businesses dominates wealth which is worthy of billions of dollars and employs more than thousands of people in the UAE and its other region. This not only will stimulate the initial local public markets but also give more significant depths to the domestic markets and produce more wealth.
However, when throwing light to the Law background, historically, there was no regulatory legal framework to tailor up the family businesses. The family businesses often have a good number of shareholders having different interests. Thus, risks of unorganized & confused structures usually end up in family disputes over ownership, succession, management, and right to income which could panic the third-party investors from investing in the family businesses. Understanding the necessity of a legal framework, keeping in mind of long term develop oriented and sustainable business which could bring more transparency, governance in the system and increase investor’s confidence in investment, The Dubai Ruler His Highness Sheik Mohammed bin Rashid Al Maktoum, Vice President and the Prime Minister of UAE, issued Dubai Law Number 9 of 2020 (the Law) regulating family ownership on 13 August 2020 chartered under a Special Judicial committee.
The Law was explicitly made in light of the significant offerings contributed by the family enterprises in the UAE, which magnified the Emirate’s economic structure and social cohesion. Under this Law, it enables the family members (pertinent to the fourth degree of successors) to enter into a legally binding and notarized contract. Family members with a common interest can opt to enter into such notarized family ownership contracts. All the Family members will hold collective ownership and administration over the family-owned properties except the public stocks. The purpose of the Law is to grant a comprehensible Legal Framework for all such family businesses to accelerate the protection, development & effectual progress of the assets and other properties of the family and their members.
The Law elaborates each member’s share, distribution of wealth, proprietorship of the ownership, and the government’s role in corresponding to the new statute. Throwing light on the rule of Law number (9) of 2020:
Previously, there was no other compressive Legal framework to address the issues corresponding to the family disputes arising from the ownership, right, and distribution over the family properties. These often-repeated conflicts often negatively affect the family enterprises’ financial growth, resulting in the predicted downward spiral. Hence, the Law’s establishment could bring out positive implications in the economic stability and social harmony in the family business.
The comprehensive legal framework regulating family business could ensure Progression, smooth transition, and family asset development to successive generations. Continuity maintained helps to amplify its role to achieve economic and social growth in Emirate, which also protects the wealth and modulates inter-family relationships. Social harmony will be held, resulting in eluding disputes between the family members, which unify them into substantial and solid partners competing in all economic activities, motivating them to serve the society in terms of education, culture, and health. The framework is hospitable for the family who is anxious to safeguard their assets for their future successive generations and also enhances transparency & stability between family members and their businesses.
Preparing of relevant management and real estate logbook should be duly executed since the mere existence of this Law is to recognize such eminent issues of governance and succession that take part in the future triumph of the Family Businesses and Dubai.