UAE revamps bankruptcy rules amid family business reform

The new law set in place also aims to attract more businesses to set up their operations in the UAE, and will create a huge impact on the economic development, UAE undersecretary of the ministry of economy Abdullah Al Saleh explained on Monday.

The new law is set in place to “maintain the sustainability of companies for generations to come and will help in the smooth transition of the management of the company from one generation to another,” Al Saleh said during a media briefing in Abu Dhabi.

He added that businesses looking to establish their companies in the nation will also benefit from the new law.

Under the new law, here is what family businesses can expect:

• A family-owned company can take any operations under the Commercial Companies Law, including a one-person company. Most of its shares must be owned by people belonging to one family, and must be registered in the unified family business registry.
• The law establishes a set of mechanisms for managing the family business, whether by the director or the board of directors, clarifying that if any of the involved partners desire to dispose of their share in the family business, he/she must present it to the remaining partners.
• Formation of a committee in each emirate titled “Family Business Dispute Resolution Committee”, as disputes are the main cause of termination of family businesses.
• Under the law, in case of bankruptcy or insolvency of one of the partners in the family business, the procedures and controls must be followed according to the country’s insolvency and bankruptcy laws.
• A partner in a family-owned business has the right to buy shares of other partners in case another partner faces bankruptcy.
• A family business will not cease to exist in case of death, interdiction, bankruptcy or insolvency of one of the partners.
• Family businesses have sufficient flexibility to have any number of partners.
• Shares in the family business may not be assigned except in accordance with the law’s conditions.
• Family businesses must distribute a portion of their yearly profits at the end of each fiscal year to its partners, as per each partner’s share proportion.
• The family business status will cease to exist if those outside the family own majority shares in the company, and have the right to vote in accordance with the law.

Family businesses in the UAE account for some of the biggest corporations in the country especially as they run operations in major sectors such technology, industry, properly, retail, and logistics among others.

“The law forms part of the UAE’s comprehensive efforts to outline a roadmap for the growth and prosperity of family businesses in the country and strengthen their operations in various economic and commercial fields, especially in the sectors of the new economy,” Al Saleh said.

Adding to the nation’s efforts, the UAE also launched a programme to double the contribution of family-owned businesses to the economy, earlier this year.

The programme aims to increase the nation’s gross domestic product (GDP) to $320 billion by 2032.