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The Ruler of Dubai issued on 13 August 2020, Law No (9) of 2020 Regulating Family Ownership (the “Law”).
The Law enables members of a family to enter into a legally binding and notarized contract (the “Family Property Contract”), that provides for the collective ownership and administration of family owned property for the benefit of the family members who are party to the Family Property Contract, and their successors.
The provisions of the Law enable family members (up to the fourth degree) with a common interest to jointly own property on the terms of the Family Property Contract. All types of movable and immovable property may be the subject of the Family Property Contract, save for shares in public joint stock companies.
The Law enables family members to tailor-make the terms of the Family Property Contract as they deem appropriate, allowing them to provide for varying aspects of the collective enjoyment of the family property, including providing for specific proportionate ownership provisions in relation to rights to income and capital and administration and management of the family property.
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 Family Property Contract.
The Law further provides for acquisition of interests in the underlying family property via the transfer of an individual family member’s interests in the Family Property Contract, whether to successors via inheritance or through specific provisions dealing with bankruptcy and disposal to third parties.
Any disputes arising from a Family Property Contract shall 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.
The Law is valid from the date of its publication in the Official Gazette.
The Law demonstrates a progressive approach towards protecting family wealth, and provides an option in the onshore legal environment in the Emirate of Dubai for those families who are cognizant of the need to regulate intra-familial relationships.
The Law specifically intends that any Family Property Contract should be interpreted ‘to ensure the continuity, development and smooth transition of family property from one generation to another’ and for those families who are concerned with the preservation of family wealth for the successive generation of family members the Law could be a useful tool for families to reach agreement on issues relating to succession.
The provisions of the Law relating to the governance of the Family Property Contract may also enable even the most complicated of family business structures to be managed via a combination of key family members and professional appointees.
A key aspect of the success of the Law will be the approach of government entities in the Emirate of Dubai in their implementation of necessary measures to give effect to the Law, including the preparation of appropriate corporate and real estate records, etc. and we wait to see how governmental bodies will implement this Law in practice in light of current policies and regulations in place.
Al Tamimi and Company has a dedicated Family Business Practice that delivers specialized advice and solutions to families in business to defend family assets from risks and pave a way to succession and stewardship.
Al Tamimi and Company Family Business Practice provide solutions to preserve wealth for complex and significant business holdings within the region.
If you require any assistance in this regard, please let us know and we will be happy to provide our support.