Overview
Family Companies Law is the UAE’s first federal legislation dedicated specifically to regulating family-owned businesses. According to the Ministry of Economy, up to 90% of private companies in the UAE are family businesses, employing more than 70% of the private sector’s workforce and contributing around 40% to the country’s GDP — making this law significant well beyond its technical scope.
Before this law, family businesses in the UAE were generally structured under the standard Commercial Companies Law (Federal Decree-Law No. 32 of 2021), which was not designed with the specific succession, governance, and continuity challenges of multi-generational family ownership in mind. Federal Decree-Law No. 37 of 2022 introduces a more flexible legal framework tailored to these needs, while remaining subject to the Commercial Companies Law (or the relevant Free Zone legislation) for matters not specifically addressed.
Key Provisions Relating to Family Business Owners
1. What Qualifies as a “Family Business”
To be registered as a Family Business, an entity must generally meet the following conditions:
- It is incorporated in accordance with the relevant companies’ law, but not as a public joint stock company or a general partnership (both are excluded from the scope of this law).
- The majority of its shares or stock must, at all times, be owned by members of a single family.
- It must be registered in the relevant Family Business Register.
A Family Business may have any number of partners, and the law applies both to businesses already existing in the UAE at the time the law entered into force, and to those established afterward.
2. Removal of Shareholder Number Restrictions
Unlike certain company structures under the standard Commercial Companies Law, the Family Companies Law abolishes restrictions on the number of shareholders a Family Company may have — a notable flexibility for larger, multi-branch family groups.
3. Multiple Share Classes
The law permits Family Companies to create different classes of shares, where holders of each class may enjoy different rights (such as differing voting or dividend rights). This is not generally available under the standard Commercial Companies Law and offers families greater flexibility in balancing control and economic interests across generations.
4. Share Buy-Back Mechanism
A Family Company may buy back up to 30% of its own shares to facilitate the exit of a family member who wishes to leave the business — providing a structured, internal liquidity mechanism that avoids the need to bring in outside investors.
5. Restricted Exit Mechanism
The law includes a prescribed exit mechanism that prevents existing shareholders from selling their shares to individuals or entities outside the family, helping to preserve family control and ownership continuity across generations.
6. The Family Charter
One of the law’s most distinctive innovations is the Family Charter — a document families may adopt in addition to their Memorandum of Association (MoA) and Articles of Association (AoA). A Family Charter typically addresses:
- Ownership structure, objectives, and the family’s values.
- Mechanisms for evaluating and pricing shares.
- Methods of distributing profit among family members.
- Education and qualification requirements for family members wishing to work in the Family Business or its subsidiaries.
- Processes for resolving family disputes connected to the business.
A copy of the Family Charter may be deposited in the Family Business Register. Importantly, if there is a conflict between the Family Charter and the company’s Memorandum of Association, the Memorandum of Association prevails.
7. Interaction with Personal Status Law
The law expressly confirms that the transfer and ownership of shares governed by this Decree-Law — or by the equivalent rules applicable in the Free Zones — do not constitute a violation of UAE Personal Status Law. This gives families greater confidence to structure succession and ownership arrangements without running into conflicts with inheritance rules, supporting long-term generational succession planning.
8. Application in Free Zones
The Family Companies Law applies across all UAE free zones, including the DIFC and ADGM, provided its provisions do not contradict the specific laws and regulations of the relevant free zone. Free zone family businesses should confirm how the federal law interacts with their specific free zone’s company regulations.
9. Government Incentives
The law allows for incentives and concessions to be granted to registered Family Companies at the discretion of the UAE Cabinet. The precise nature and scope of these incentives is determined separately and is not fixed within the Decree-Law itself.
Key Provisions Relating to Governance and Management
- Manager Appointment and Removal: Where the Articles of Association do not address the appointment of a manager, a manager may be appointed by a subsequent decision of partners holding at least 51% of the company’s shares.
- Fixed-Term vs. Indefinite Appointments: A manager appointed for a fixed term may be removed under the same conditions applicable to their appointment. A manager appointed for an indefinite period, by express provision in the Articles of Association, may only be removed by the same majority required to amend the Articles of Association — offering greater management stability where families choose this structure.
- Interaction with the Commercial Companies Law: For any matter not specifically addressed by the Family Companies Law, the relevant provisions of the Commercial Companies Law (or the applicable Free Zone legislation) continue to apply.
- Share Purchase Procedures: Where a specific procedure is not otherwise provided under the Commercial Companies Law, the relevant Emirate-level legislation, or Free Zone rules, the Minister of Economy — in coordination with the Competent Authority — may issue a decision governing the procedures for purchasing Family Business shares.
Frequently Asked Questions
Can a public joint stock company register as a Family Business? No. Public joint stock companies and general partnerships are expressly excluded from the scope of the Family Companies Law.
What happens if the Family Charter conflicts with the Memorandum of Association? The Memorandum of Association prevails. The Family Charter operates as an additional governance document but does not override the company’s core constitutional documents.
Can family members sell their shares to outside investors? Generally, no. The law includes a prescribed exit mechanism designed to prevent existing shareholders from transferring their shares to individuals or entities outside the family, in order to preserve family ownership and control.
How can a family member exit the business without selling to an outsider? The Family Company may buy back up to 30% of its own shares specifically to facilitate the exit of a family member, providing an internal liquidity route.
Does registering as a Family Business affect inheritance under Personal Status Law? No. The law expressly confirms that share transfers and ownership structures under this Decree-Law do not violate UAE Personal Status Law, giving families more room to plan succession without conflicting with inheritance rules.
Does this law apply to family businesses based in the DIFC or ADGM? Yes, in principle. The law applies across UAE free zones, including the DIFC and ADGM, provided its provisions do not conflict with the specific rules of the relevant free zone.
Is there a minimum or maximum number of shareholders for a Family Business? No maximum. The law specifically abolishes restrictions on the number of shareholders a Family Company may have.
When Do You Need a Specialist Family Business Lawyer?
- When registering an existing or new business as a Family Business and confirming it meets the ownership and structural requirements under the law.
- When drafting a Family Charter to govern succession planning, profit distribution, family member employment criteria, and dispute resolution mechanisms.
- When structuring multiple share classes to balance control and economic rights between different family branches or generations.
- When planning a family member’s exit from the business through the share buy-back mechanism or another structured route.
- When coordinating a Family Company’s structure with UAE Personal Status Law and broader estate or succession planning.
- When resolving a dispute between family shareholders regarding management appointment, share valuation, or exit terms.
Related Services from Our Firm
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References
- Federal Decree by Law No. (37) of 2022 Concerning the Family Businesses, UAE Legislation: uaelegislation.gov.ae/en/legislations/1608/download
- “Federal Decree-Law No. 37 of 2022 in relation to Family Companies,” Al Tamimi & Company: tamimi.com/news/federal-decree-law-no-37-of-2022-in-relation-to-family-companies
- “UAE Family Businesses Law Update (2022),” Charles Russell Speechlys: charlesrussellspeechlys.com/en/insights/expert-insights/family/2022/uae-family-businesses-law
- “A New Law on Family Companies in the UAE,” Meysan: meysan.com/a-new-law-on-family-companies-in-the-uae
- “Family Business Law in the UAE,” ohllp: ohllp.com/uae-family-business-laws
- “Navigating UAE Family Business Law: Here’s What You Need to Know,” ohllp: ohllp.com/uae-family-business-law
- “Important Highlights In UAE’s Family Business Law,” Al Rowaad Advocates: alrowaad.ae/legal-blog/important-highlights-in-uaes-family-business-law
Content last updated: July 2026. This content is provided for general informational purposes only and does not replace specialist legal advice.
