Dubai: The Family Business Network (FBN GCC), a GCC focused non-profit organisation established under the patronage of Shaikh Hamdan Bin Mohammad Bin Rashid Al Maktoum, Crown Prince of Dubai, on Monday released a legal white paper on GCC family businesses.
The white paper provides a set of concrete recommendations on the need to strengthen the legal framework across the GCC after assessing the legal structures currently available to family businesses in the GCC for succession planning.
“The legal systems available in the Gulf region are not adequate to address the succession planning of family businesses. The objective of the white paper is to work with the governments to create a robust set of laws. It is critical that family businesses take adequate time to incorporate the legal structure that best fits their family business succession plan, unique family dynamics and goals,” said Abdul Aziz Al Ghurair, Chairman of the Family Business Network GCC.
An estimated $1 trillion (Dh3.67 trillion) in assets will be transferred to the next generation of family-owned companies over the next decade in the Middle East. The handover from the first to the second generation, and increasingly, the second to third generation will have tremendous implications on the sustainability and growth of companies.
“We have realised that without a well-planned and resilient legal structure for a family business, the pursuit of continuity by focusing on good governance, professionalisation and next generation can be futile,” Al Ghurair said.
The FBN GCC legal white paper analyses the effectiveness of legal structures, such as the Trust legal framework in the Dubai International Financial Centre (DIFC) and the Waqf legal framework, a recognised Islamic concept, as succession planning tools by GCC countries, including Saudi Arabia.
“FBN GCC legal white paper presents an aggregate outlook at legal obstacles, risks and solutions for succession planning in the context of GCC family dynamics. This is the first time that a study takes a comprehensive approach across GCC countries, and across various legal vehicles,” said Fadi Hammadeh, General Counsel of Al-Futtaim group.
FBN plans to present the white paper to governments across the GCC and work closely with relevant government agencies to address some of the key legal structure challenges. “Effective family business succession planning aims to achieve management and ownership continuity. GCC family businesses are particularly vulnerable to risk of fragmentation due to lack of impenetrable legal frameworks to support their continuity,” said Hammadeh.
