Alternatives to Family Business Governance in the UAE: A Comparative Applied Legal Study

Prof. Emad Al Dein Abd Elhay
Professor of Commercial Law – Acting Dean
College of Law – University of Sharjah – UAE


This study examines the alternatives available in accordance with the Federal Law No. (2) of 2015 on Commercial Companies, in order to curb the problem of the lack of regulation of family business governance, as the transition is considered an alternative to the lack of regulation of family business governance. Practical applications of the transition in the private joint stock company and the public joint stock company are mainly represented in the desire of a number of family companies to be listed on the Dubai Financial Market, Abu Dhabi Financial Market and the Securities and Commodities Market, since it would make the application of the rules of governance mandatory by law. The family company faces several difficulties and obstacles in the process of transition, especially in the transition to a public joint stock company, because it requires listing in the country’s Securities and Commodities Market, and to a lesser extent in the transition to a private joint stock company. Transitioning offers an advantage in preserving the company and not sacrificing its termination upon the death of its founder or the first generation of the family.
The study concludes by discussing the possibility of providing family businesses wishing to transition with guarantees that ensures maintaining family control over the company such as voting agreements, preferred shares, and veto right for the preferred shareholder. In addition, the transitioning of family businesses into public joint stock companies has several advantages, the most important of which are: raising the capital necessary for financing the growth of these companies, obtaining a fair and transparent stock assessment, planning the succession of generations, not to mention applying the best governance practices and investors relations, and enhancing the effectiveness of operation in these companies and attracting as well as retaining qualified staff, and finally strengthening the company’s presence at the local and international levels. The study ends by wishing that the legislator would intervene by obliging family companies to list in emerging markets first, and next, by setting the percentage of IPO to not exceed 20% of the shares of the family company and then increasing the percentages gradually and at lengthy intervals in order to ensure the success of the subscription and avoid failure due to lack of turnout.

Keywords: Private joint stock company, public joint stock company, listing, financial market, founder/founders, the succession of generations.

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