The Ruler of Dubai issued Law No (9) of 2020 Regulating Family Ownership on 13 August, which provides a governance framework that is appropriate for family-owned property and businesses. The intention is to ensure the continuity, development and smooth transition of family property from one generation to another.
The Law recognises and legitimises the concept of a Family Property Contract that can be entered into between family members up to the fourth generation to govern the collective ownership, management and administration of family-owned wealth.
A Family Property Contract can be entered into for all kinds of movable and immovable property, with the exception of shares in public joint stock companies, and will be valid provided it meets six conditions set out in Article 6 of the Law, including notarisation by a notary public.
A Family Property Contract can provide for specific proportionate ownership provisions in relation to rights to income and capital and administration and management of the family property. It further provides for acquisition of interests in the underlying family property via the transfer of an individual family member’s interests in the contract, whether to successors via inheritance or through specific provisions dealing with bankruptcy and disposal to third parties.
Administration of the family property will be the responsibility of one or more managers, and the terms of reference of their management, as well as provisions relating to the manager’s oversight by a board of directors, and their appointment and dismissal, would be set out in the contract.
The Law includes protections against division or disposal of the family wealth that run contrary to the terms agreed by the partners to the contract. A partner is not permitted to divide the family property while the contract is valid. Disposals to any third party are subject to a right of first refusal held by the other partners,. The consent of partners owning at least 51% of the family property is also required.
Any disputes arising from a Family Property Contract will be settled by a special judicial committee comprised of experts in legal, financial and family management matters, ensuring the confidentiality and privacy of any dispute, as well as time efficient procedures for their resolution.
The Law further repeals any provision in any other legislation that contradicts its provisions and will be valid from the date of its publication in the Official Gazette.