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Sheikh Khalifa issues new family business ownership governance law in Abu Dhabi

The new law empowers business owners to prevent selling of shares outside the family



The provisions of the 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.
Image Credit: WAM

Dubai: In his capacity as Ruler of Abu Dhabi, the President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, has issued a new family business ownership governance law that further strengthens the sector’s contribution to the economy and facilitates the transition to successive generations.

The new law empowers owners of family business to prevent selling of shares or dividends to individuals or companies outside the family, and to require prior approval from family partners before a shareholder sells their respective equity stake to a non-family member.

Owners of family businesses can also issue family-owned shares with weighted voting rights and prevent the pledging of family-owned businesses as encumbered assets, to avoid expropriation.

The provisions of the 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.

The law is not applicable to family-owned businesses where non-family members own more than 40 per cent of shares.

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Commenting on the new law, ADDED chairman Mohamed Ali Al Shorafa said: “This law is a major pillar in enhancing the vital role played by these businesses in driving economic development. 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.”

The new law empowers owners to:
1. Prevent selling of shares or dividends to individuals or companies outside the family
2. Require prior approval from family members before a shareholder sells their respective equity stake to a non-family member
3. Issue family-owned shares with weighted voting rights
4. Prevent pledging of family-owned assets as encumbered assets, to avoid expropriation
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