Family Owned Business
Who are Family Business Lawyers?
Family business lawyers are legal practitioners who offer legal advice and services to family-owned businesses. Their role is to assist such businesses to operate effectively, legally and with the least amount of conflicts especially on ownership, management and succession planning across generations.
Why Family Business Lawyers are Important in the UAE
The UAE governs family businesses through Federal Decree-Law No. 37 of 2022 which establishes rules for family business governance and ownership and succession planning. The law works to preserve business continuity and reduce family member disagreements.
Family business lawyers help clients understand the complex legal aspects of their business operations.
They offer specialized guidance regarding multiple aspects which include:
- Succession Planning: The process of transferring ownership and management responsibilities to future family members.
- Corporate Structuring: Legal experts help clients choose optimal business structures which both protect family assets and maximize tax advantages.
- Dispute Resolution: Family members receive assistance to resolve their conflicts through mediation which helps preserve business harmony.
- Compliance: The business must follow UAE laws and free zone regulations including DIFC and ADGM specific rules.
Family Business Disputes
Just like any other business, there are 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
Owner
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.
Partnership
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.
Public
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.
Key Legal Frameworks for Family Businesses in the UAE
The UAE has come up with various laws that are favorable to family businesses among them:
- Federal Decree-Law No. 37 of 2022 (Family Business Law): This law permits family businesses to be registered as such, thus giving them legal status and advantages. It also defines the duties and obligations of the family members who are involved in the business.
- Family Business Governance Laws in Abu Dhabi and Dubai:
- The family business law stresses on the importance of good governance principles including the development of family charters and the formation of family councils.
- The Charter may specify the minimum educational qualifications and practical experience that the partners and family members shall have to work in the Family Business and its subsidiaries.
- Compliance with these standards shall be subject to audit by a committee affiliated with the Family Council, if any;
- Trusts and Foundations: These legal entities are recognized in free zones like DIFC and ADGM and are used in asset protection and succession planning.
Family Owned Business Lawyers in Dubai
HHS Lawyers and Legal Consultants is composed of a team of a family business lawyers 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 the following:
- 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
