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A family office is an organisation that serves the interest of a
family or a number of families. It may be a single family office
(SFO), which is focused on managing the affairs of only one
'ultra wealthy' family, or a multi-family office (MFO),
which focuses on the affairs of two or more families and managed by
a management team that may not be linked to any of the families
that it advises. While a SFO is usually driven by the preferences
of its sole 'client', the MFO would typically be structured
around the services provided by and the skill set of the
professional management running such MFO, and the needs of more
than one family.
Family offices tend to provide broadly two types of services or
a combination thereof: (i) those centred on financial planning and
investments; and (ii) those centred on the family and supporting
its day to day needs. The first category would typically include
investment and asset management, asset monitoring, trust services,
tax and legal services, and under the latter category, concierge
services, travel planning and administrative functions may be
included.
There is no standard way in which to structure a SFO; it could
range from an organisation that only focuses on family investments,
to offering a very elaborate and broad platform and range of
services.
Why consider establishing a SFO?
There are a number of reasons for setting up a family office,
and these essentially will centre around the family's vision,
plans and needs. The fundamental objective would be to protect and
preserve family wealth through generations, and to ensure that this
objective is given a structure that caters to that family, and
evolves as the family grows or changes.
Options for establishing a SFO in DIFC and DMCC
Family offices in the Middle East may not be formally structured
as family offices but perform, in essence, very similar functions.
Certain offshore jurisdictions have been chosen by families based
in the Middle East as the base for their family offices. Examples
include Geneva or London. Reasons for this phenomenon included
security issues and lack of expertise and legal frameworks in
'home' jurisdictions. However, as a need for family offices
grows, and the number of families who are considered 'ultra
wealthy' grows, so does the legal landscape and availability of
professional services and expertise catering to this demand.
The regulations promulgated by each of the Dubai International
Financial Centre (DIFC) Authority and the Dubai Multi Commodities
Centre (DMCC) Authority support the creation of a SFO, to serve the
interest of one wealthy family. Set out below is a comparative
analysis of the options presented by each of these free zones.
DMCC
DIFC
1
Applicable Regulations
DMCC Company regulations 2003 (DMCC
Regulations) apply together with DMCC SFO licence
requirements.
Single Family Office regulations in force as of 27 December
2011(SFO Regulations)
2
Person licensed to undertake the activity
A free zone limited liability company which may be owned either
by individuals or a corporate entity or a registered trust (in each
case wholly owned by the same family and UBOs).
A body corporate incorporated in the DIFC.
Partnership registered in the DIFC.
3
Activity description
'Single Family Office' which is described as
'offices founded by family members for the provision of
services to the same single family; such services include wealth
management, asset management, concierge work, day to day accounting
and management of legal affairs, corporate governance issues and
all the administrational and office affairs; such firms are not
allowed to offer any of the above mentioned services to any third
party other than the family's own members, entities,
businesses, trusts or foundations'.
All professional advice (legal, financial, investment managers,
etc.) must be provided by accredited qualified regulated
professionals.
A SFO may provide services to a family member, family business,
family entity or family trust or foundations.
Provision of services to 'Single Family', which
means:
services to one or more 'Family Members';
services to 'Family Fiduciary Structure';
services to a 'Family Entity';
services to a 'Family Business'.
4
Minimum share capital/ investible funds
Minimum AED 50,000 per company or AED 10,000 per
shareholder.
The family has a minimum of USD 1 Million investible/liquid
assets.
Minimum USD 50,000 per company.
A Single Family office must have minimum investable / liquid
assets of USD 10 million.
5
Restrictions
Only permitted to manage the assets of one family group.
Not permitted to act as trustee but might act solely as
protector or as conduit with offshore regulated trustees operating
the trusts or foundations. May supervise and coordinate activities
amongst foreign fiduciary service providers.
May not sell shares of the company to any party. Exception is
in the case of transfer within family members.
DIFC may, on case to case basis, while considering the
application for grant of licence, impose restrictions and
conditions.
Not allowed to offer any of the above mentioned services to any
third party; may only manage assets of a single family.
6
Meaning of Single Family
A family constitutes a Single Family when it has one or more
individuals all of whom are bloodline descendants of a common
ancestor or their spouses; widows and widowers, whether or not
remarried, are also included in the family. Individuals adopted as
minors, step children, children of adopted children are also
included in the single family.
One individual or group of individuals all of whom are the
bloodline descendants of a common ancestor or their spouses and
includes family's own members, entities, businesses, trusts or
foundations provided 100% of the ultimate beneficial ownership of
the DIFC entity vests with the members of a single family.
7
Board of Directors/ Authorised
Representative
Only a family member may be a member of the board of directors;
with the exception of a 'consultant' to the SFO who may be
appointed as a director.
At least one family member must be appointed as a board member
or legal representative.
Each Single Family Office must designate an Authorised
Representative who must be ordinarily resident in the UAE, to act
as the point of contact between Single Family Office and DIFC
Registrar.
The composition of the board will depend upon the structure of
the company; for instance, a limited liability company must have at
least one director and a company limited by shares must have at
least two directors.
8
Compliance and Reporting
A SFO needs to assure DMCC management that:
it continues to provide services solely to a Single
Family;
there has been no material change in the legal and beneficial
ownership of the SFO;
there has been no change in the total number of Family Members
to be served by the SFO;
the services provided by the SFO have not changed; and
any changes to the above must be reported to DMCC.
Annual return to be filed by the Authorised Representative by
end of March every year in which the Single Family Office is
established confirming that there have been no material changes in
the operation of the Single Family Office since its establishment
or since the last SFO annual return.
Final thoughts
No two families are alike. It is therefore up to each family to
consider whether the creation of a SFO would enable it to further
achieve its goals and long term plans. For families based in the
Middle East, there may be additional comfort in knowing that there
are options closer to home, that support their objectives, whilst
also offering a legal framework that makes it mandatory for a
standard that is comparable to other parts of the world, to be
maintained.
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.
