The UAE is one of the world’s most famous and successful commercial hubs, attracting investors from around the world. Running successful family businesses in the UAE requires you to stay updated regarding new laws and policies. To ensure that the UAE stays relevant and credible, the Emirati government sometimes comes up with taxation reforms and changes. Entrepreneurs need to keep themselves abreast of such modifications and make appropriate reforms to their framework to ensure compliance. 

Sometimes, businesses will have to rely on consultancy companies to help them maintain compliance and look after their financials. KGRN is one of UAE’s most successful and credible Business, Tax and CA Consultancy firms. In this article, we will take a look at a new Dubai Law that has come into effect that has an impact on family businesses.

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New Law For Family Businesses

The UAE government has passed and put into effect a new law that provides clarity regarding the legal framework that helps with the regulation of family-owned businesses. This law aims to facilitate the smooth transfer of ownership between successive generations as per inheritance laws in Dubai.

The law was put into effect by none other than His Highness Sheikh Mohammed bin Rashid Al Maktoum, who serves as both the Prime Minister and Vice-President of the UAE. As the ruler of Dubai, he issued the new law that will help large families protect their wealth, and ensure smooth inheritance. It will also play a massive role in enhancing the contribution of such family-owned businesses to the economic development of Dubai.

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Relief for Family Businesses

As per a statement by the Dubai Media Office, the new rule will help bolster the contribution that such businesses make to the social and economic fabric of Dubai. By making it easier for such companies to carry on and protect their wealth, the country is assured better economic feasibility and stability. The new law, which will be called Law No:9 of Dubai 2020 will come into effect from the day it is published in the Official Gazette in Dubai. The ruling concerns itself with all the terms and policies of family ownership contracts, inheritance laws, obligations of the management, and the power of the business manager.

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Changes Brought Into Effect

As per the decree, a family ownership contract can now be extended to be valid for up to a maximum of fifteen years. Furthermore, the validity of this contract can also be renewed for another fifteen years if all the concerned parties agree. The law also helps regulate the clauses and articles of such agreements. Also, it concerns itself with the organisational structure of such businesses, its management, Board of Members and the responsibilities of such Board Members. In essence, this law provides the framework for everything regarding the establishment, inheritance and operation of family-owned businesses. 

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Law No (9) Applicability and Scope

The law will be optionally applicable to both new and existing family ownerships. This also includes proprietorship companies and corporate equity securities and management firms. However, as per a report by the Dubai Media Office, public joint-stock companies and family-ownership within such companies will not be eligible to follow these rules. Furthermore, movable and immovable properties and assets also do not come under the purview of this new law.

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Family Ownership Contract 

According to the new law, if a family ownership contract has to become legally valid, all the members of the agreement must be family members. Also, the agreement must clearly define the rules, responsibilities, duties, shares and assets of each member. Along with this, it must also mention the legal rights, assets and liabilities that fall within the purview of the ownership contract.

As per the new law, family ownership can be any of the following legal entities;

  1. Movable assets
  2. Immovable property
  3. Copyright 
  4. Trademark and IP rights
  5. Industrial rights for patents
  6. Rights for industrial designs and models 
  7. Other rights subject to family ownership contracts

Furthermore, a family property contract is a document or agreement between the family members conducting a business. This new definition through the law makes the overall definition of such contracts more clear and concise. Such an agreement helps in defining family ownership, splitting common property between the members and also determines how the property listed will be managed. 

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Eligibility of Family Ownership Contract

To be considered legally valid according to Law No 9, a family ownership contract must meet the following eligibility criteria;

  • All parties of the contract must be family members
  • All the parties must have a single common interest, goal or shared business plan
  • The agreement must define the share of each partner involved.
  • Parties involved must own all the funds and assets represented in the contract.

The law also stipulates that the management of such assets and properties must be handled by an appointed manager. To appoint such a manager, the parties must have a majority of at least two-thirds of the family ownership. The manager can be one or more individuals who are partners in the contract. Furthermore, by passing this new law, the Emirati government has annulled any previous law contradicting this one.

If you need any help with registering your family-owned business, or navigating through the overtly complex financial world of the UAE, feel free to contact us at KGRN. We have decades’ worth of experience in the field of accounting and finance. Hence, we can provide guidance on any matter related to economics in the UAE.

For enquires call @ +971 45 570 204 / Email Us :

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