Simply, a business that is run or with the majority of the ownership belonging to two or more family members is a family-owned business. It is considered to be an ancient type of business, and an example of this is a farm that is owned by a family.
There are a number of family-owned business in the Middle East, being prevalent in major industries. More often than not, their company or workforce size is bigger than the others, making them prominent. Obstacles that family businesses are expected to face include the task of having to hand over the business to the person who is next in line to the ownership of the company.
This is considered as a challenge because the next person should be trained to uphold the values and practices of the company and develop them even more. These factors will protect the business and help it cope with the external environment that it has to grow in within an industry that it belongs to.
This is not an easy challenge to win over, that is why family-owned businesses are advised to seek help to ensure that they are taking the proper steps of transferring succession.
Family Business Disputes
Family versus Non-Family Employees
Just like any other business, there is family business legal issues that families in a business tend to deal with often times. Because of this, problems can arise from having family and non-family employees in the company. When these two are mixed, the latter will tend to find it difficult to do their job because of the following:
- Limited opportunities because the family members already take up the higher positions so they are expected to stay in one position for as long as they stay in the company
- Special treatments that are granted to family members even when they are on the wrong just because they are part of the family that runs the business
- Resentment of some family members towards non-family employees because they do not agree with attaining outsiders to be part of their company
- Family conflicts that happen on the job that can cause to affect the way non-family employees work
The latter can be because of disputes within the family such as jealousy on who gets to be the “owner” of the business, who gets to run it, and who gets to have a higher salary, having complaints on increments, decisions that are made without consulting another family member, conflicts on company shares, disagreements on whose sons and daughters should be included in the business, etc. There are many things that can cause disputes in a family-owned business, especially when they do not originally get along and especially because of familiarity with the family.
Because of this kind of occurrences, business owners are advised to have family business lawyers in UAE by their sides as they draft agreements between parties (family members) in order to avoid or control any possible disputes in the future.
Family-Owned Business: Models of Ownership
This type of ownership is considered to be an effective strategy to make family-owned businesses to work as there is only one who is chosen to own the business and run it. It also prevents any possible disputes with regard to ownership control.
This next model is seen to be fitting for some families. There are chosen leaders who will run the business and have equal shares and profit distributions. The family members who are in this partnership contribute their skills or talents to ensure the growth and development of the company.
This kind of model is when a family business is decided to be seemingly a public company wherein its shares are publicly traded. A company that is under this kind of model is not really run by the owners but by professional people who become managers as the owners are simply acting as board members who are responsible with major decisions with regard to the direction of the company. This is done by some business owners to have additional outside capital. Sometimes, families tend to use this model because of the numerous members that they find it difficult to have effective decision-making procedures without having problems and disagreements.
Family Owned Business Lawyers in Dubai
HHS Lawyers and Legal Consultants is composed of a team of a family business lawyer in Dubai who are well-versed with the family-owned business laws. We are capable of creating a unique strategy for family businesses in order to foster family harmony and commercial success. Our team of experts with hands-on experience in assisting to manage family businesses will be with you side by side to develop practical strategies and execute them. At continuous basis, we will be monitoring the fitness of the strategy and will assist you promptly regarding new developments and constructive solutions.
Our services include but not limited to:
- Drafting family constitution
- The family business governance system
- Managing legal risks associated with family business investments
- Providing legal support for family businesses
- Structure and restructure of the family business