Family contract law UAE
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Family owned businesses (FOB) have been part of the Emirati economic landscape and the GCC for several decades accounting for over 80 per cent of the private sector and 80 per cent of the non-oil GDP in the Gulf region. However, traditionally, there have been significant issues when the founder and primary shareholder of the FOB dies leaving behind significant assets to be divided amongst his/her heirs. Disputes among family members over the division of the deceased’s assets often forces them into lengthy and costly court proceedings.

Dubai Law No. (9) of 2020 Regulating Family Ownership (the “Law”) came into force in August 2020 to provide a comprehensive legal framework for the regulation of FOBs and prevent disputes amongst family members. The Law has provided much needed clarity on both succession issues that arise with FOBs and much-needed relief in terms of how to allocate the assets of FOBs.

Family property is regulated by the family property contract (the “Contract”) defined in Article 4 of the Law as “[s]tocks and shares in commercial companies and civil companies and assets of sole establishments, except public joint stock companies” as well as “any real or personal property.”

Real and Personal Property are defined in Article 1133 of Federal Law No. 05 of 1985 (the “Civil Code”) as “[o]wnership rights is the power given to the owner to freely dispose, use and enjoy of his property. The owner of a thing has alone, the right to enjoy the property owned, its yields, fruits and products and to dispose of the property by all acts of disposition allowed by law.”

A contract is valid if it is between the same family members, there is a common interest, the shares of property are identifiable, it establishes ownership, it is not contrary to public order; and is notarized.

The term of the contract shall be chosen by the members but shall not exceed 15 years. The family property is managed by one or more managers appointed or a board of directors to supervise and govern the management of the family property. The law provides much needed relief for succession issues in family estates. By providing a clear contract that allocates shares to partners of the family after the death of a legal owner, it minimises disputes. It will be interesting to see how the law will be interpreted in practice and whether the remainder of the Emirates will follow suit.

Author, Mohamed Nour is a Corporate Associate at Hamdan AlShamsi Lawyers & Legal Consultants.

Co-author Ahmad Khalil is a Partner at Hamdan AlShamsi Lawyers & Legal Consultants.