The United Arab Emirates (UAE) has enacted a new law designed to bolster the governance and continuity of family-owned businesses, a critical component of its economy. Effective January 2023, the legislation aims to address the unique challenges faced by family enterprises, including succession planning, wealth preservation, and sustainable growth across generations.
Family businesses constitute a significant economic driver in the UAE, contributing approximately 60% to the country’s GDP, according to government data. However, industry studies reveal that only 30% of family businesses worldwide survive into the second generation, and a mere 12% make it to the third. Recognizing these challenges, the UAE’s new law provides a robust framework to ensure such enterprises remain competitive in an increasingly globalized economy.
The legislation introduces legal mechanisms that allow family business owners to establish clear governance structures, define the roles of family members versus external executives, and streamline dispute resolution processes. It also includes provisions to mitigate the risk of fragmentation during generational transitions by enabling the establishment of legally binding family charters. This development is expected to attract high-net-worth families from around the world seeking a stable regulatory environment for their wealth management and business operations.
Looking ahead, the UAE’s proactive approach underscores its ambition to position itself as a global hub for family offices and wealth preservation. As economic uncertainty continues to challenge traditional business models, the new law could serve as a blueprint for other jurisdictions aiming to secure the longevity of family enterprises while fostering broader economic resilience.
(Editors: admin)