Law No. (10) of 2021 Concerning the Governance of Family-Owned Companies in the Emirate of Abu Dhabi

Article 1 — In the implementation of the provisions of this Law, the following words and ¶

phrases shall have the meanings corresponding thereto, unless the context
requires otherwise:
Department : The Department of Economic Development.
Family : The Spouse and blood or descent relatives up to the
fourth degree.
Founder : Whoever founded the company or participated in its
foundation for the first time.

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Beneficiary : A natural or legal person who is not a partner and may
be from outside the Family and specified according
to the resolutions issued annually by the Company as
stipulated in Article (4) of this Law.
Shares or Stocks
with Double
Vote
: The shares or stocks whose owner’s votes are counted
as double in the meetings of the General Assembly and
are not counted as double for the purposes of fulfilling
the quorum of the meeting.
Preference
Shares
: The shares that give their owner certain advantages
agreed upon by the partners in the Memorandum of
Association, such as obtaining a percentage of the
company’s profits before distributing the rest to all
shares, or as obtaining a number of votes that exceed
that prescribed for ordinary shares.
Endowment
Family-owned
Company
: A Family-owned company that allocates part of its
profits for charitable purposes by endowing its assets in
whole or in part for such purposes.
Endowment
Administrator
: The person appointed by the Endowment Family-owned
Company to carry out specific administrative works and
who is licensed under the aforesaid Federal Law No. (5)
of 2018.

Article 2 — Scope of Implementation ¶

The provisions of this Law shall apply to the company at the request of all its
owners, Founders or Family members owning such company that takes one
of the forms stipulated in the aforesaid Federal Law No. (2) of 2015, whether
it was uprunning at the time this Law is effective or it was established
afterwards, based on a request submitted by them to the Department.

Article 3 — Family-Owned Company ¶

a. The company shall be considered a Family-owned company, whatever its

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legal form, in any of the following cases:
1. The members of one Family own the entire capital of the company.
2. The members of one Family own a company that is owned by several
legal persons wholly owned by the members of such Family.
3. The Founder alone owns the one-person company, and he allocates all
or some of its benefits to his Family members.
4. The Family owns the majority of the company’s capital or retains the
majority of the votes in the event where partners from outside the
Family are included therein to the extent stipulated in this Law.
5. The Family-owned company allocates a portion of its profits to the
Beneficiaries, according to what is decided by the Founders or the
company’s regulations.
b. The Family-owned company shall be established, or its status adjusted
to comply with this Law in accordance with its memoranda and articles
of association and their annexes in accordance with the provisions of
the aforesaid Federal Law No. (2) of 2015 and the rules and regulations
governing the economic activities in the Emirate of Abu Dhabi.

Article 4 — Distribution of Profits ¶

a. The Founders shall specify in the Family-owned company’s memorandum of
association the aspects of distributing profits to the heirs or Beneficiaries,
whether by name or by degree of kinship, and their descendants, up to a
maximum of 30% of the company’s net profits. Such percentage may be
increased with the approval of the General Assembly.
b. Beneficiaries shall be entitled to profits, whether periodically or once,
according to the approval of the General Assembly and upon the
recommendation of the Board of Directors. The Beneficiaries, their legal
guardians, or their heirs shall not be considered partners in the Family-
owned company, they shall not exercise any right to vote and they have
no rights in the company except to benefit from the profits according to
the will of the Founders or the General Assembly, unless they replace the
Founders by inheritance or by any other means of ownership.
c. The Founders or their substitutes shall have the right to amend the aspects

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of profit distribution and the names of the Beneficiaries by virtue of a
resolution issued by the General Assembly or in accordance with what is
stipulated in the memorandum of association.

Article 5 — Privileges and Advantages of Family-Owned Company ¶

a. The Founders shall have the right to stipulate in the memorandum of
association that it is prohibited to sell shares or stocks to any natural
or legal person outside the Family, or to specify the degree of kinship
that allows the trading of shares and stocks, while prohibiting this sale or
disposal in the event where the percentage of ownership from outside the
Family exceeds 40% of the shares or stocks.
b. The Founders shall have the right to issue their own Shares or Stocks with
Double Vote, and this privilege shall be transferred with the share or stock
in case of inheritance.
c. If the Family-owned company takes the form of a public or private joint
stock company, it may issue Preference Shares without voting rights
or redeemable shares pursuant to a General Assembly resolution by
a majority of 75% of its capital. The same resolution shall specify the
privileges of these shares concerning the distribution of profits.

Article 6 — Introducing Partners from outside the Family ¶

• With the exception of general partnership companies, the Family-owned
company may, according to a General Assembly resolution, sell part of its
capital to partners outside the Family or increase the company’s capital
by introducing new partners and selling new shares or stocks according
to the following:
a. The provisions of pre-emption rights reserved for the partners
shall apply in accordance with the legal form of the company, and
the provisions of the strategic partner’s contribution to joint stock
companies shall apply, provided that in all cases, the percentage of
ownership of partners outside the Family shall not exceed 40% of the
total company’s capital.

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b. The Family-owned company may issue non-voting Preference Shares
to the Beneficiaries and transfer them to partners before starting the
procedures for introducing partners from outside the Family.
• No partner may dispose of his share to a person outside the Family outside
the framework of the preceding paragraph of this Article except with the
consent of all the partners. In the event where a person outside the Family
owns shares or stocks in the company for any reason, the company shall
have the right to exercise the right to redeem those shares at the fair
market value.

Article 7 — The Family-owned company shall lose its characteristics and privileges ¶

derived from this Law if the share of new partners from outside the Family
exceeds forty percent (40%). Similarly, the Shares with Double Vote shall
lose their privileges and the Preference Shares shall be transformed into
ordinary shares or debts owed by the company that are due immediately,
provided that its capital is reduced by the amount of the Preference Shares
that have been removed.

Article 8 — Management of the Company through the Endowment Administrator ¶

• A Family-owned company whose property is subject to lineage endowment
under the aforesaid Federal Law No. (5) of 2018, shall have the right to
appoint one or several Endowment Administrators.
• The Endowment Administrator shall have the authority to participate in the
control or management in accordance with the appointment resolution
and he shall be considered as a non-executive Board member.

Article 9 — • All material elements of the Family-owned company’s capital shall be ¶

evaluated according to an evaluation report issued by an auditor within
one year of its establishment or endowment of its properties in the event
where the capital includes a charitable or lineage endowment. This report
shall be registered with the property list at the Department as an annex to
the memorandum of association.

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• Any new endowment or increase of an endowment shall be considered
an amendment to the company's capital and shall be declared to the
Department.

Article 10 — General Assembly ¶

The provisions of the General Assembly stated in the aforesaid Federal Law
No. (2) of 2015 shall apply according to the company’s legal form, taking the
following into consideration:
a. In the event of Preference Shares, they shall not be calculated for the
purposes of convening the General Assembly or achieving its quorum.
b. In the event of Shares with Double Votes, the votes of their owners when
voting in the General Assembly shall be doubled and counted once for the
purpose of convening the General Assembly or achieving its quorum.
c. The Beneficiaries among the heirs shall become partners upon the death
of their legator in accordance with Article (12) of this Law and the shares
or stocks shall not lose any of their privileges upon transfer by inheritance.

Article 11 — Mortgage and Prohibited Activities ¶

• It shall not be permissible to mortgage the assets of the Family-owned
company or to place any additional burdens in kind on these assets, which
may lead to their forcible expropriation. However, the proceeds of shares
and stocks may be mortgaged.
• The Founders shall have the right to ban or limit types of activities to
certain categories, and this condition cannot be modified for a period of
10 years after the death of the last founding partner or by consensus of
the Founders.

Article 12 — Replacement of the Legator by the Heirs ¶

• The partners shall be granted a period of one year to adjust the situation
after the death of one of the founding partners to transfer his shares to

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his heirs, or by converting to a private or public joint stock company in
case the number of partners outside the Family exceeds the maximum
permissible limit. This period may be extended by a resolution issued by
the Chairman of the Department based on a justified request.
• In the event of failure in applying this Article, the first living founding
partner whose name is mentioned in the memorandum of association
shall be considered the representative of these heirs.

Article 13 — Liquidation ¶

The Founders may include in the memorandum of association the method
of liquidation in the event where the term of the company is specified and
the assets are redistributed, provided that in the event of stipulating in-kind
liquidation, the ownership of shares and stocks by non-nationals, which
will be liquidated, does not lead to granting them any real estate or in-kind
benefits that shall not be granted to foreigners under the applicable laws.

Article 14 — The Chairman of the Department shall issue the regulations, rules and ¶

circulars necessary for the implementation of the provisions of this Law.

Article 15 — This Law shall be published in the Official Gazette and be effective from the ¶

date of its publication.
Khalifa bin Zayed Al Nahyan
Ruler of Abu Dhabi
Issued by us in Abu Dhabi
On: 29 September 2021
Corresponding to: 22 Safar 1443 Hijri

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