The Ministry of Economy has introduced a unified registry for family businesses through four new cabinet resolutions. This initiative aims to bolster governance within family companies and support legislation to enhance their competitiveness in the UAE.
HE Abdulla bin Touq Al Marri, Minister of Economy, highlighted the substantial role of family businesses in global economies, making up 70% of private sector companies worldwide, employing 60% of the workforce, and contributing 70% to the global GDP. In the UAE, these businesses account for 40% of the national GDP and 90% of private companies, aligning with the national goal to double the GDP to Dh3 trillion by 2031.
“The development of the family businesses sector in the UAE is being carried out by international best practices in this regard, through the promulgation of several legislation, proactive policies, initiatives and pioneering programs, most notably the ‘Thabat’ program,” said HE Bin Touq. “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 program.”
He added: “The launch of the unified registry for the sector is an important step forward in strengthening its governance and regulating their 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.
HE Abdullah Ahmed Al Saleh, Undersecretary of the Ministry of Economy, outlined the focus areas for family business development: robust legislation like the Federal Decree-Law No. 37 of 2022 and initiatives like the ‘Thabat’ program to foster growth and facilitate expansions into new sectors.
The Ministry’s new initiatives include the unified registry for family businesses, operating under Cabinet Resolution No. 109 of 2023. This registry encompasses all family company-related data, registration procedures, and leadership certificates, ensuring compliance with Family Business Law Decree regulations.
How to register a family business in the unified registry?
The registration process for a family business in the unified registry involves five steps, namely: –
1: The majority shareholders of the family-owned company apply for registration in the official registry through the relevant authority in each emirate.
2: The relevant authority in the emirate, which also covers free zones, verifies that the family company meets all the specified regulations and requirements.
3: The relevant authority connects and shares the mentioned data with the family-owned company, and any changes or updates are communicated to the Ministry of Economy.
4: 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.
5: 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.
Procedures and requirements for deregistering a family company
Additionally, the resolutions outline procedures for deregistering a family company and registering a Family Charter in the Unified Family Businesses Registry, emphasising transparency and governance.
Upon receiving the request, the competent authority shares it with the Ministry of Economy. Subsequently, the Ministry cancelled the family company’s registration certificate and informed the competent authority of the cancellation.
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.
As per the cabinet decision, two scenarios 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 of 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 can object to deregistration by submitting a grievance to the Ministry within 15 working days.
How to register family charter in the Unified Family Businesses Registry
Furthermore, HE Al Saleh highlighted three new resolutions the Ministry of Economy issued to support creating 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 on the Ministry’s website. The charter establishes specific rules on ownership, objectives, and family values, as well as mechanisms for evaluating shares and methods of dividends.
How can family businesses buy back their shares?
Cabinet Decision No. 107 of 2021 enables family companies to buy back their shares. The set of mechanisms to implement the purchase process are 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 purchase process within the period specified by the competent authority to approve the purchase request.
- After that, the relevant authority will decide 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.
Guidelines for issuing multiple share classes
Cabinet Decision No. 108 of 2023 provides guidelines for issuing multiple share classes.
This resolution allows the family company 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.
HE Al Saleh noted that these resolutions aim to provide flexibility and facilitate operations for family businesses, supporting their expansion across various sectors. Efforts will continue to enhance the UAE’s attractiveness for family enterprises, aligning with the objectives of the UAE’s upcoming decades.
