DUBAI: One of the United Arab Emirates’ most prominent businessmen is leading calls for regulations across the Gulf Arab region to smooth the transfer of ownership of family businesses after the death of the founder.
Family businesses generate more than 80 percent of the non-oil gross domestic product in the Gulf, according to accountancy firm PwC, a sector of the economy each nation is trying to bolster, especially in the lower oil price environment.
However, many of these empires are run by ageing patriarchs and so there is much attention on how these businesses hand over control to the next generation.
Abdulaziz al-Ghurair, considered the most prominent member of one of the largest merchant families in the Gulf, is calling for new rules to govern a process that can currently get bogged down if families are in disagreement.
Ghurair, the billionaire chief executive of Dubai-based lender Mashreq and chairman of conglomerate Al Ghurair Investment, among his titles, would like to see the introduction of wills and trusts that are compliant with Islamic principles to allow the passing of control to future generations.
A draft law will be submitted to Gulf policymakers this year that will include rules governing concepts such as Islamic family trusts and family ownership, Ghurair said at a meeting of the Family Business Network, an association representing Gulf family businesses.
At present, many family businesses from the Gulf region opt to register their companies in places such as the Cayman Islands because of the legal weaknesses in their home markets.
Initial public offerings are “the best of the worst” routes for families planning their succession, Ghurair said, with families often only taking that decision if being faced with a breakup of the company.
Especially in the UAE, family businesses have been reluctant to float units or their holding companies as local listing rules have dictated owners must sell a minimum of 55 percent – although new rules reducing this figure to 30 percent were published earlier this month.
The concept of wills and trusts will be officially launched for the first time in the region at the end of this month.
However, this will be restricted to non-Muslim individuals registering through the court of the Dubai International Financial Center, the emirate’s financial free zone.
UAE family businesses have paid better attention to corporate governance in the wake of the financial crisis and to avoid future legal disputes when it comes to family succession.