By Robert SurcoufDirector - Private Client
Services, Jersey Trust Company
Running a successful family business is hard work and leaves
very little time to plan for the ownership and management changes
that will inevitably occur. Historically less than 30% of family
owned businesses survive to the second generation and less than 12%
to the third. In the GCC, there is a strong desire to maintain
businesses as family owned, rather than to focus on alternative
exit plans such as listings. Importantly, with nearly 90% of all
businesses in the GCC being family run, maintaining long term
family ownership requires a creative approach to develop a
succession plan that will allow the family and the business to
Discretionary trusts have, historically, been a successful
element of succession planning. However the concept of a trust does
not always sit comfortably with the Shari'a rules of
inheritance, as there is an expectation of direct ownership and a
level of day to day management that is not always possible when a
trust is in place. In response to this, Jersey advisors have
developed alternatives such as Private Trust Companies, Reserved
Powers Trusts and Foundations. There is also a lesser well known
solution, the Jersey Family Limited Partnership (JFLP), which
particularly has great potential in the GCC.
The JFLP has a General Partner, normally a Jersey limited
company, which is responsible for managing the partnership and its
underlying assets. Family members can be on the Board of the
General Partner in accordance with the associated family
constitution, which would form part of the succession plan. This
can help to create a family meritocracy for those who are involved
in strategic decisions, in addition to any ongoing involvement in
the day to day management of the underlying family businesses.
The Limited Partners of the JFLP, commonly the second or third
generation family members, will often have a clearly defined direct
interest in the JFLP and have limited liability similar to that of
a shareholder. They are not, however, involved in the strategic
decision making process unless they are specifically appointed to
assist with the management of the General Partner.
A growing number of advisors now appreciate that to assist GCC
families with their succession plans they must first take account
of family culture and expectations. Trusts are not the only answer.
Evolving entities such as the JFLP ensure that Jersey continues to
play a leading role in assisting GCC families and their
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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