The UAE Ministry of Economy has launched a unified registry for family businesses, including four new cabinet resolutions that will enhance the governance of family firms and endorse the legislation governing the sector. 

 

The initiative is also aimed at ensuring family businesses’ sustainability and leadership in accordance with a clear vision to solidify the UAE's position as a leading destination for local, regional, and global family companies, a WAM report said.

 

Abdullah bin Touq Al Marri, Minister of Economy, emphasised the outstanding role of family businesses in promoting the growth and sustainability of economies around the world. According to estimates, family businesses account for 70% of the private sector companies globally, 60% of the total workforce and 70% of the global GDP. In the UAE, the sector contributes 40% of the national GDP, making up 90% of the total number of private companies in the country. This underscores its importance and key role in supporting the achievement of the national goal to double the country's GDP to AED3 trillion ($820 billion) by the next decade in accordance with the ‘We the UAE 2031’ vision.

 

Solid foundation

Al Marri said: "Thanks to the UAE’s wise leadership’s vision, a solid foundation has been laid to ensure the sustainability of family businesses and the growth of their businesses in the coming decades. The development of the family businesses sector in the UAE is being carried out in accordance with international best practices in this regard, through the promulgation of several legislation, proactive policies, initiatives and pioneering programmes, most notably the ‘Thabat’ programme. It is designed to ensure the sustainable growth of family enterprises in the country’s markets across successive generations and encourage them to expand into new economic sectors by taking advantage of all the opportunities and possibilities offered by the programme."

 

He added: "The UAE’s family businesses are one of the main drivers promoting the growth and sustainability of the national economy, thus supporting the country's transition towards a knowledge-based, innovative future economy. The launch of the unified registry for the sector is an important step forward in strengthening its governance and regulating registration procedures. This is necessary to build an integrated work system for family enterprises in the UAE in addition to the advanced legislation and technology infrastructure they currently benefit from. The introduction of the Family Charter is also key to the success and continuity of future generations of family companies, as it defines the rules of family ownership, goals and values, including mechanisms for assessing quotas and distribution of profits."

 

Abdullah Ahmed Al Saleh, Under-Secretary of the Ministry of Economy, said: "The UAE continues to develop sustainable economic policies for the development of the family businesses sector given its significance as a key driver of national economic growth, while also strengthening its competitiveness regionally and globally. We focus on two main pillars for the development of an integrated family business ecosystem in the country: the first is the legislative aspect and the development of robust legislation for family enterprises through the promulgation of proactive laws and leadership policies at the regional and global levels. The Federal Decree-Law No 37 of 2022 on Family Businesses is an example, which established a roadmap for the governance of family enterprises and the regulation of their ownership and operations in the country."

 

Expansion of family companies

He continued: "The second area of focus is the launch of several policies, initiatives and programmes to facilitate the expansion of family companies. ‘Thabat,’ a first-of-its-kind programme in the Middle East, was launched to bring about a qualitative shift in the country’s family businesses sector and encourage them to shift towards new economic sectors."

 

He added: “Over the past few days, we witnessed the largest gathering of first-generation family businesses under the umbrella of the programme, which aims to transform 200 family projects into fast-growing startups by 2030.”

 

Al Saleh added: “As part of the UAE's continuing efforts to enhance the governance of the family businesses sector and to elevate it to new, more competitive and diverse levels, we are launching the unified registry for family businesses today. This registry serves as a comprehensive and unified database containing all information related to family companies in the country, under the supervision of the Ministry of Economy.”

 

The Undersecretary explained that the launch of the registry falls in line with the Cabinet Resolution No 109 of 2023 on the registration of family businesses. It includes the registration of family businesses, the issuance and revocation of their leadership certificates, and continuous updates on the status of family businesses. This resolution specifies a set of controls and requirements related to the registration of the family business in the registry. For example, a family business should be one of the types of companies that are not exempted from the scope of the Family Business Law Decree, and the majority of its shares should be owned by individuals from a single family. The partners who own the majority of the shares of the family business decide to register it in the registry.

 

Five-step registration

The registration process for a family business in the unified registry involves five steps:

 

*The majority shareholders of the family-owned company apply for registration in the official registry through the relevant authority in each emirate.

*The relevant authority in the emirate, which also covers free zones, verifies that the family company meets all the specified regulations and requirements.

*The relevant authority is in charge of connecting and sharing the mentioned data with the family-owned company, and any changes or updates made to it are communicated to the Ministry of Economy.

*The Department of the Unified Registry at the Ministry, after receiving the required data and documents, is responsible for managing the registration of the family company, and a certificate is issued thereof.

*If there is no digital connection for data sharing between the Ministry and the relevant authority, the data must be shared using any other coordinated method between the two parties within three working days.

 

Deregistering

The resolution also stipulates the procedures and conditions for deregistering a family company from the Unified Registry upon its request. Partners owning at least three-quarters of the family company's capital can request the Ministry of Economy or the relevant authority to deregister the company. Upon receiving the request, the competent authority shares it with the Ministry of Economy. Subsequently, the Ministry cancels the family company's registration certificate and informs the competent authority of the cancellation.

 

As per the cabinet decision, there are two scenarios that call for the deregistration of a family company: either at the request of an interested party or by a decision from the competent authority. This can happen due to a drop in the family members' share ownership to a point below the majority or the specified percentage in the family company's founding contract, or if the family company is found to have submitted inaccurate information or documents that could lead to its deregistration as a family business. Those concerned have the right to object to deregistration by submitting a grievance to the Ministry within 15 working days.

 

Furthermore, Al Saleh highlighted three new resolutions issued by the Ministry of Economy to support the creation of a sustainable environment that ensures the growth and global leadership of family businesses. These include Cabinet Decision No 106 of 2023 on the registration of the family charter, which mandates online registration of the charter on the Ministry's website. The charter establishes specific rules on ownership, objectives, family values, as well as mechanisms for evaluating shares and methods of dividends.

 

Set of mechanisms

Al Saleh explained that Cabinet Decision No 107 of 2021 regarding the family companies purchasing their shares complies with the provisions of Article No 11 of the Family Businesses Law, as it stipulates a set of mechanisms to implement the purchase process, as follows:

 

*The family company's general assembly has approved the purchase process and authorised the board of directors or the family company manager, as necessary, to proceed with the purchase request.

*Then, the family company applies to the relevant authority to seek approval for the purchase, providing a commitment from the company to adhere to the obligations set by the authority. Additionally, it needs to obtain consent from the relevant government bodies if the company's activities fall under their jurisdiction, along with any other documents requested by the authority.

*The family company applying for the purchase is committed to executing the purchasing process within the period specified by the competent authority in approving the purchase request.

*After that, the relevant authority will make its decision to approve or reject the request within 15 business days from the date of the request, provided that all the required data and documents are met.

The Cabinet Decision No 108 of 2023 on the conditions and terms related to the multiple categories of shares of family companies establishes controls for the issuance of multiple categories of shares by the family company, which include the articles of association or the bylaws of the family company, depending on the circumstances, specifying the rights and privileges allocated to each category of shares, and that the shares should be of one category if all the rights and privileges allocated to them are equal.

 

Modification and revocation

According to this resolution, the family company has the right to modify or revoke share categories or their associated rights. It can also establish rules and conditions for making such changes in the founding contract or the bylaws, as necessary. Furthermore, the resolution specifies that if the rules and conditions for modifying or revoking share categories or their associated rights are not defined in the founding contract or the bylaws, a resolution to make changes must be approved by a 75% or more majority vote of the partners with voting rights, as outlined in the founding contract or the bylaws.

 

Al Saleh said that these new resolutions will offer greater flexibility and facilitation for the operations of family businesses in the UAE, supporting the expansion of their operations across various sectors. National efforts to enhance the UAE’s attractiveness for family businesses, aligning with the objectives of the next fifty years, will continue.--TradeArabia News Service