Sheikh Khalifa bin Zayed Al Nahyan, the UAE President and Ruler of Abu Dhabi, has issued a new family business ownership governance law that aims to boost the sector’s contribution to the economy, according to a statement published by the Abu Dhabi media office on Tuesday evening.
The new law aims to further enhance the family-owned business legislative ecosystem by adopting a more flexible and sustainable economic model, in line with best international governance practices. The law also aims to increase family businesses’ contribution to growth and economic diversification, the statement said.
The new family business ownership governance law empowers owners of family businesses to:
1) Prevent selling of shares or dividends to individuals or companies outside the family.
2) Require prior approval from family partners before a shareholder sells their respective equity stake to a non-family member.
3) Issue family-owned shares with weighted voting rights.
4) Prevent the pledging of family-owned businesses as encumbered assets, to avoid expropriation.
According to the statement, the current law is not applicable to family-owned businesses, where non-family members own more than 40 per cent of shares.
"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," Mohamed Ali Al Shorafa, Chairman of the Abu Dhabi Department of Economic Development, said.
The provisions of this law are applied to family-owned businesses on an opt-in basis for owners or co-founders by submitting a request to the Abu Dhabi Department of Economic Development (ADDED), which will issue the executive and administrative regulations of the new law from March 2022.
(Writing by Seban Scaria; editing by Daniel Luiz)
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