United Arab Emirates: Succession And Asset Protection In The UAE

Last Updated: 31 January 2018
Article by Alexandros Philippides

Business Succession

As a business owner, it is quite likely that a significant portion of your personal wealth is tied up in your business and, at some stage, every family owned business must be transferred.

Business succession planning seeks to manage these issues, setting up a smooth transition between you and the future owners of your business. With family businesses, succession planning can be especially complicated because of the relationships and emotions involved.

Why Structure?

90 percent of Middle Eastern family businesses have no succession plan, which is even higher than the global average of 85 percent. More worryingly, the Middle East figure is higher than the 86 percent recorded in 2014.

The most obvious potential "failure factor" for the family firm is the succession process. There is no point in having detailed plans for business continuity, if the single most significant risk to this is not dealt with.

A well-managed succession process can be a rallying point for the family firm, allowing it to reinvent itself in response to changing circumstances and find new energy for growth, diversification and professionalization. To do this effectively family businesses need to develop, implement, and communicate a robust succession plan, and do so as early as possible before the actual handover.

This is especially important in the Middle East, where a higher proportion of family businesses want to ensure that their business stays within the family - 38 percent, against 30 percent globally.

Asset Protection

The key to asset protection lies in the separation of liabilities: personal liability, different business ventures, real estate, pension or 'rainy-day-funds' should all be separated. The simplest form of asset protection is a limited liability company. It can be used to separate your private assets from the risks associated with your business venture.

Depending on your needs, additional layers of protection can be added to protect your interests. For example, you can protect your company from the risks of a former sole proprietorship or general partnership by setting up a Trust. Your estate can be protected from claims using a Foundation, intellectual property can be managed by an offshore IP holding company and so on.

Trusts and Estate Planning

In the world of international tax planning, trust formation is popular. A trust offers the possibility to separate your business assets from your private assets, and have those assets managed on behalf of a beneficiary or charity.

When you decide to set up a trust, you can benefit from all the features of this asset protection tool and the jurisdiction that it is in. You will be able to allocate your funds and assets according to your wishes.

A trust is created by a settlor who transfers some or all of his property to a trustee, who holds those trust assets for the benefit of the beneficiaries. The trustee owes a fiduciary duty to the beneficiaries, who are the beneficial owners of the trust property.

Wills

A will is a legal document that declares your intentions as to what should happen to the distribution of your assets, on death. These assets typically include real estate, money, investments, jewellery, vehicles and personal or household belonging that you own, and they can be bequeathed to individuals, families or institutions, either in part or as a whole. A will can also be used to specify other wishes.

For those that have assets in the UAE there is a simple reason to make a will. The Government of Dubai official website states that 'The UAE courts will adhere to Sharia law in any situation where there is no will in place'.

Inheritance

Inheritance issues for Muslims are dealt with in accordance with Sharia, whereas for non-Muslims, the law of the deceased's home country can apply. Succession under Sharia law principally operates by a system of forced heirship or reserved shares.

After years of observing the pressing need for clarity on the current UAE wills and inheritance legislation, we welcome the newly launched DIFC Wills and Probate Registry. It provides certainty for non-Muslim expatriates to pass on their Dubai estate in the event of death to their chosen beneficiaries. The Registry marks the introduction of a new set of rules relating to succession and inheritance matters for non-Muslims with assets in Dubai and a mechanism to pass on their estates in Dubai according to their wishes.

Family Office

You may wish to set up your family office with us, to work with you in administering your company or group and personal affairs. You will be assigned an experienced relationship manager from our office who will take care of your private and family financial affairs. He will be monitored by a partner of our office. We will review together your personal situation, assess your wealth, assets and income and personal expenditure. We will then agree objectives and targets and set out a business and personal plan to accomplish them.

What we can do for you

Robust strategic planning is key to the succession process: without clarity about what you want the future to look like – both for the business and the family – it is impossible to choose the right leaders, or know what qualities and skills they will need. In other words, strategic planning and succession planning are inextricably linked with succession planning being a subset of the strategy process.

Our aim is to maximize your wealth and, at the same time, deal with issues of succession, asset protection and inheritance.

  • Advise and set up a tight asset protection structure
  • Rationalization of asset holdings and investments
  • Incorporate succession plan
  • Advise on wealth management, investments and maximization of returns on assets

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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