Valuation mechanisms and buy-sell arrangements: who prices a family company share

Families discuss who will lead more readily than what a departure costs. A 2019 paper jointly developed by PwC and the Family Business Council Gulf records an anonymised case in which an exit was agreed in principle after a disagreement over dividend levels, and the lack of pre-defined protocols and an exit roadmap drove the process to deadlock. Mid-negotiation the company won a large government contract requiring bank finance, and the bank required the company's reserves to be converted into capital before approving it. The departing holder refused to comply until a share price was agreed that was much larger than a fair valuation would have indicated. The same paper records a second case in which protocols and a shareholders' agreement drawn up at a generational handover, including exit methodologies and agreement on how a valuation may be conducted, were applied years later and produced a separation agreed by all.

A share in a private family company is priced in one of three ways: by agreement at the time, by a mechanism fixed in advance, or by a third party's determination. Where the first two are absent, current law names the third.

• Article 9(2) of Federal Decree-Law No. 37 of 2022: the committee evaluates shares in accordance with the mechanism stipulated in the memorandum of association or the charter. Where neither contains such a stipulation, the shares are evaluated by one or more financial and technical experienced experts selected by the committee, at the purchaser's expense.
• Articles 8(3) and 23(2): a value determined by the committee where the parties do not agree.
• Article 10(1): on the bankruptcy or insolvency of a partner, any other partner has a priority right to purchase that partner's share at the price and within the period determined by the court considering the bankruptcy or insolvency.
• Article 80(2) of Federal Decree-Law No. 32 of 2021: on a disputed pre-emption price in a limited liability company, valuation by experts with technical and financial experience nominated by the Competent Authority, at the expense of the applicant for pre-emption.
• Articles 14(a) and 15 of Dubai Law No. 9 of 2020: a price agreed, or determined by the Tribunal.

Article 6(1) of the Decree-Law names mechanisms for evaluating shares among the contents a charter may have. Article 6(3) provides that where the memorandum and the charter conflict, the memorandum applies.

Valuation mechanisms generally address the valuation standard and the valuation date, the approach used, who appoints the valuer and who bears the cost, whether discounts or premia apply, and how often a reference valuation is refreshed. The 2019 paper describes fair value as defined under International Financial Reporting Standards, sets out the income, market and net asset approaches, and states that discounts and premia for family businesses depend on a number of factors and are not easily quantifiable. As an example of a high range it gives 25 to 30 per cent for a minority shareholder of a privately held family business selling to an external third party, describing that figure as typically a combination of the discount for lack of marketability and the discount for lack of control. Factors it lists as bearing on a discount include lack of reliable financial information and ineffective or inexperienced management or lack of governance.

Funding sits alongside price, and here current law differs from the position families may remember. Article 11 permits a family company to purchase not more than thirty per cent of its shares, to reduce its capital, or to purchase or redeem some or all of the shares of a partner who wants to sell, or who is bankrupt or insolvent, where there is no purchaser or redeemer among the partners. Article 11(2) requires the agreement of partners holding the majority of the shares represented in the general assembly meeting, unless the memorandum stipulates another percentage, and shares held by the company carry no vote in general assembly deliberations while it holds them. The 2019 paper recorded that most free zones and mainland UAE did not then allow a company to buy back its own shares, and described declaring dividends as the way a company could instead facilitate a purchase by the shareholders. Article 11 changed that position. The Ministry's account of its 2023 decision on a family company purchasing its shares sets out the steps: general assembly approval, application to the relevant authority with documentation, execution within the period that authority specifies, and a decision by the authority within fifteen business days.

Dividends remain a funding route. Article 13 requires the company to distribute a portion of its annual profits to its partners, each in proportion to his share, unless the memorandum stipulates otherwise, and Article 7(2) provides for shares giving equal or differentiated rights in profits.

Sources, all retrieved 11 August 2026. Federal Decree-Law No. 37 of 2022: https://www.moet.gov.ae/documents/20121/0/family+company+english+version+examined+and+correcetd.pdf Federal Decree-Law No. 32 of 2021: https://www.moet.gov.ae/documents/20121/376326/Commercial+Companies.pdf Ministry of Economy and Tourism announcement, 26 December 2023: https://www.moet.gov.ae/en/-/ministry-of-economy-launches-unified-family-businesses-registry-and-reviews-four-new-decisions-to-strengthen-the-sector-s-governance Dubai Law No. 9 of 2020: https://dlp.dubai.gov.ae/Legislation%20Reference/2020/Law%20No.%20(9)%20of%202020%20Regulating%20Family%20Property%20in%20the%20Emirate%20of%20Dubai.pdf PwC and Family Business Council Gulf, April 2019: https://fbc-gulf.org/mediafiles/articles/doc-1495-2019_05_16_07_05_53.pdf

This content is written with law firms as an educational reference on how these mechanisms appear in current law. It is not legal, tax or financial advice, no provision described here has been verified or endorsed by the programme, and a family takes its own advice on its own circumstances.