What a family charter records, and what it cannot do

Family charter, family constitution and family protocols are used in Dubai as names for one document. Announcing the Governance Guidelines in July 2023, the UAE Government Media Office described them as addressing the development of a family constitution, "also known as a 'Family Charter' or 'Family Protocols'". The guidelines are published by the Dubai Centre for Family Businesses, which operates under the Dubai Chambers umbrella and was launched in May 2023. Federal Decree-Law No. 37 of 2022 on Family Businesses, which took effect in January 2023, uses the term family constitution and defines it as "the written document regulating the governance of the dealings of the Family relevant to the Family Business, and the relationship between the Family and the Family Business."

Article 6 of that law sets out what such a document may contain. The guidebook published by the Dubai Department of Economy and Tourism with the Dubai Centre for Family Businesses reproduces the article as follows: "The Family may have a constitution containing rules on Family ownership, objectives and values; mechanisms for evaluating shares, methods of distributing profits, and education and qualification requirements for Family members to work in the Family Business and its subsidiaries; as well as methods of resolving Family disputes related to the Family Business, and other rules and provisions."

The legal character of the document is set out in the Governance Guidelines. They state that a family constitution "is a moral obligation between Family Members to comply with the rules of engagement set forth in the Constitution", and that legalisation of the relevant portions of the constitution provides a measure of certainty in ensuring adherence to the rules. They also state that, given the breadth of the document, certain guiding principles for the family, such as family vision statements and family values, cannot be binding, although they can still bind family members emotionally in their dealings with each other. They describe a family constitution as typically working in conjunction with other documents such as wills, shareholders' agreements, articles of association and trust deeds, which follow more standardised legal forms and are more widely recognised as legally binding and enforceable documents in courts of law.

There is a stated ceiling on a charter's authority. The guidebook records that in the event of a conflict between the articles of association and the family constitution, the provisions of the articles of association prevail, citing Article 6(3) of the law.

Some subjects are addressed by other instruments. The guidebook records that a transfer of the shares or assets of a family business under the provisions of the Family Business Law, whether by sale, gift (hiba) or usufruct, is also considered compliant with the UAE Federal Personal Status Law, provided the transfer occurs during the lifespan of the transferring shareholder. The sample family constitution published by the Dubai Centre for Family Businesses states that, while it provides a process for resolving conflicts, it does not serve as a replacement or alternative to a formal dispute resolution process or professional mediation.

A charter's provisions on matters such as conflict resolution operate through the forums a family has established. The guidebook describes three such forums, which a family may establish depending on its size, complexity, business, objectives and vision: a family assembly, a family council and family committees. The Governance Guidelines link the need for these tools to the ownership stage of the business, treating a family constitution as one of a set alongside family meetings and formalised conflict resolution mechanisms.

Registration is a separate question. Registration as a family business under the 2022 law is opt-in: the guidebook records that families must themselves choose to be formally registered with the registry office in the relevant emirate, citing Article 4.1, and that a registered family business may also choose which specific provisions of the law apply to it. Filing the charter is a further and voluntary step. In the Dubai procedure for registering a new family business, preparing and submitting the charter to the Dubai Business Registration and Licensing Corporation is listed as an optional step, and a newly registered family business receives a message from the Ministry of Economy with an option to register its charter voluntarily. The Ministry describes Cabinet Decision No. 106 of 2023 as providing for online registration of the charter on the Ministry's website.

This article is educational and is written with law firms. It describes general positions under the law in force and is not advice on any family's circumstances. A family should take its own legal advice. Nothing here indicates that the programme has verified or endorsed any structure, document or arrangement.