Ruler of Abu Dhabi, President Sheikh Khalifa bin Zayed Al Nahyan issued a new family business ownership governance law that aims to further enhance the family-owned business legislative ecosystem.
The law adopts a more flexible and sustainable economic model, in line with best international governance practices.
It strengthens the sector's contribution to the economy, facilitates the transition to successive generations, and seeks to boost family businesses' contribution to the diversification and growth of the economy.
The new law empowers owners of the family business to: prevent the selling of shares or dividends to individuals or companies outside the family and 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 firms as encumbered assets to avoid expropriation.
The current law does not apply to family-owned businesses where non-family members own more than 40 percent of shares.
The provisions of this 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.
Chairman of ADDED Mohamed al-Shorafa, said that this law is a significant 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 percent of the capital.
"This will support the expansion and development of family-owned businesses,” he said.
"Family-owned businesses in Abu Dhabi continue to contribute to economic diversification and the knowledge-based economy, equipped with decades-long experience in the market, strong resilience, and experience in partnering with government entities," WAM quoted Shorafa.
Meanwhile, ADDED canceled over 20,000 requirements to set up businesses in Abu Dhabi as part of the ongoing massive procedural overhaul.
The move effectively aligns the emirate's regulatory environment with economic growth priorities and span various sectors such as healthcare, transportation, food, agriculture, public health, and environment.