• news-banner

    Expert Insights

UAE Family Businesses Law 

In an article for LexisNexis Middle East, Piers Master, Partner, William Reichert, Partner and Charlotte Jackson, Associate analyse the much-anticipated Federal Decree-Law No. 37/2022 on Family Businesses issued on 10 October 2022, which will come into effect three months after its publication in the Official Gazette.

Analysis

Federal Decree-Law No. 37/2022 seeks to continue the UAE’s efforts to support the sustainability, growth and development of family businesses and add regulation to ensure their societal contribution can continue.

It is the first Federal law to provide regulation of family businesses, and as such provides family businesses in the UAE with a way to structure and plan their wealth management, while providing a long-awaited opportunity to hold family business within succession planning structures.

Importantly, Federal Decree-Law No. 37/2022 applies in all freezones, including the Dubai International Financial Centre and Abu Dhabi Global Market, but remains subject to the relevant companies’ laws in force therein (to the extent that such matters are not set out in Federal Decree-Law No. 37/2022). This is of key importance given that Federal Decree-Law No. 37/2022 expressly confirms that the transfer and ownership of shares under Federal Decree-Law No. 37/2022 will not be in violation of Federal Law No. 28/2005 on Personal Status, giving families the opportunity to arrange their assets outside of the rules and restrictions of Federal Law No. 28/2005.

To qualify as a “family business” an entity can be owned by any number of partners, but must be:

  • incorporated in accordance with the relevant companies’ law, but not as a public joint stock company or general partnership);
  • the majority of the shares in such entity must, at all times, be owned by persons belonging to a single family; and
  • such entity must be registered in the unified register of family businesses (such register to be established by Federal Decree-Law No. 37/2022).

Article 12 of Federal Decree-Law No. 37/2022 provides family businesses the right to issue different classes of shares, including

  • voting and profit bearing shares, and
  • non-voting, profit bearing shares and other shares that differ in value, voting power, profits and priority.

The entity’s articles of association can determine the rights attaching to the different classes of shares and any conditions of transferring voting shares to non-voting shares and vice versa (subject to further regulations to be issued in due course).

Federal Decree-Law No. 37/2022 contains a statutory pre-emption right on transfer, save where the transfer is to such family member’s spouse or first-degree relatives. Any transfer to a third party must be approved by person representing at least 75% of the share capital.

At such time that a single family member holds 90% or more of the shares, the remaining shareholders will have the right to sell their shares to them at a price agreed between them or determined by a Committee established in accordance with Article 9 (2) of Federal Decree-Law No. 37/2022.

Article 11 of Federal Decree-Law No. 37/2022 now specifically allows for buy-back of shares by the company, up to a maximum cap of 30% of its shares, for the purpose of

  • reducing its capital, or
  • the purchase or redemption of a shareholder’s shares in the event that such shareholder desires to sell, or in the event of their bankruptcy/insolvency (but where there are no buyers for such shares).

Family businesses are given the flexibility to manage their affairs within the business, including giving directors the right to distribute profit, and deciding how to organise the entity’s governance and committees. The family can also choose how to deal with the settlement of disputes, such as reconciliation through a committee formed by the family.

Whilst this has not yet been tested, Federal Decree-Law No. 37/2022 has afforded family businesses a framework within which they can structure the management of their assets and entities, whilst remaining true to the nature of family businesses and their nuances compared to other business structures.

This article was first published by LexisNexis Middle East in November 2022. To download a copy of the full article, please click here: LexisNexis Middle East - UAE Family Businesses Law.

Our thinking

  • IBA Annual Conference 2025

    Simon Ridpath

    Events

  • Dalal Alhouti and Robin Hayden write for The Oath on enhancing arbitration with AI

    Dalal Alhouti

    In the Press

  • Triple Play "Bid Fever": UK Tech's ability to scale and go global

    Mark Howard

    Quick Reads

  • Mike Barrington and Mary Perham write for Tax Adviser on what the proposed changes to business property relief mean for investors and entrepreneurs, and for their businesses

    Mike Barrington

    In the Press

  • Bloomberg quotes Catrin Harrison on the recent exodus of non-doms from the UK

    Catrin Harrison

    In the Press

  • Cross-border clarity: the rise of the international prenup

    Matt Foster

    Quick Reads

  • Navigating International M&A Disputes: Insights and Strategies for 2025

    Stephen Burns

    Quick Reads

  • MoneyWeek quotes Mary Perham on whether business property relief can be claimed on a furnished holiday let

    Mary Perham

    In the Press

  • Ahmad Anani, Jihane Rizk and Sevcan Aydemir write for Wealth Briefing on the rise of private equity in Middle East family businesses

    Ahmad Anani

    In the Press

  • Sowing doubt: slashing green farm funding is a risk we can't afford

    Maddie Dunn

    Quick Reads

  • The Value of the Rule of Law and Access to Justice - will London be the Family Law Arbitration Capital of the World?

    Miranda Fisher

    Quick Reads

  • Tamasin Perkins writes for IFA Magazine on what financial advisers need to know about The Law Commission’s recent report: Modernising Wills Law

    Tamasin Perkins

    In the Press

  • The Telegraph quotes Julia Cox on the use of Family Investment Companies for inheritance planning

    Julia Cox

    In the Press

  • London International Disputes Week: Navigating International M&A Disputes: Insights and Strategies for 2025

    Stephen Burns

    Events

  • Please, sir, I want some more… consideration for your MSV survey

    Samuel Lear

    Quick Reads

  • Umbrella Clauses in Investment Treaty Arbitration

    Peter Brabant

    Insights

  • Arbitration of Trust Disputes

    Thomas R. Snider

    Insights

  • Law Middle East profiles Nicola Jackson, Corporate Restructuring and Insolvency Partner based in our Dubai office

    Nicola Jackson

    In the Press

  • Nick Hurley and Rachel Hearn write for ELA Briefing on a landmark decision in the case of Mahmood v Standard Chartered Bank

    Nick Hurley

    In the Press

  • Mahmood v Standard Chartered Bank: a landmark decision in discrimination and victimisation

    Nick Hurley

    Insights

Back to top