The UAE’s family business law appears to be nudging family-owned businesses to plan for their long-term viability. It introduces formally the concept of a ‘family charter’ to infuse and sustain the principles and values important to its founders.
Some of the more contentious aspects of any family run business - such as setting out the qualifications of future members of the business and the sale of shares to non-family members - are also addressed.
In furtherance of its objective of supporting family-owned businesses, the law mandates each emirate establish of a Family Companies Disputes Settlement Committee. This will be a separate judicial body and must issue its judgment within three months of referral, unless the disputing parties request an extension.
Its judgements can be appealed before the Court of Appeal in the relevant emirate. Nonetheless, if business owners so desire, they can still choose to proceed to the local courts or to arbitration instead of the committee.
While it has yet to be established, such a committee is not without precedent. The Dubai Rental Disputes Center started as a specialised committee and has grown to be one of the most efficient legal forums for the resolution of disputes. The same has been replicated in numerous other Emirates. Similarly, we expect the Family Disputes Settlement Committee will also build the necessary jurisprudence and expertise to resolve disputes efficiently.
The committee, however, is a last resort. Ideally, the family charter itself should be the starting point for their resolution. It should establish the organising principles for the business as it relates to family members, and the expectations of the business founders who normally are the family’s patriarchs and matriarchs.
Indeed, there are special provisions in the law that allow a family board to try to resolve the disputes internally. Accordingly, the family charter should set out the necessary rules of governance to allow family members to resolve disputes among themselves.
Otherwise, the Family Companies Disputes Settlement Committee will serve as a safety net for an efficient outcome as per the law.
