Dubai enacts new rules for ultra-wealthy and family businesses operations

Dubai International Financial Centre is formally launching the world's first Family Businesses and Private Wealth Centre next month

Dubai International Financial Centre is among the top financial hubs in Middle East, Africa and South Asia region. Khushnum Bhandari / The National

Dubai International Financial Centre has finalised regulations to enable more family-owned businesses to start operating from its Global Family Business and Private Wealth Centre which opens next month.

DIFC, one of top financial centres in the Middle East, Africa and South Asia (Measa), has enacted DIFC Family Arrangements Regulations, after a 30-day public consultation period, it said in a statement on Wednesday.

The new regulatory framework provides a “firm foundation” for the new wealth centre. It will govern how UAE, regional and global family-owned businesses, and ultra-high net worth individuals (UHNWI) and private wealth offices operate from the DIFC.

“The introduction of these new regulations marks a significant step forward in our commitment to setting the standards for excellence in the industry,” said Jacques Visser, chief legal officer at DIFC.

“With a focus on transparency, accountability and stability, these regulations provide a comprehensive framework that will allow our clients to operate with confidence, knowing that their interests are protected by the highest level of legal and regulatory oversight.”

In August last year, DIFC announced setting up the wealth centre in a push to double the sector’s contribution to the emirate's economy by 2030.

The centre, the world's first, which is already under the soft launch phase, will be formally launched in March, Mr Visser told The National in an interview.

It is expected to bring family businesses and UHNWIs — people with a net wealth of $30 million or more — from the UAE and the broader Measa region and beyond to DIFC.

The centre will open at a time when about Dh3.67 trillion ($1 trillion) in assets will be transferred to the next generation in the Middle East over the next decade.

“If you add the family wealth centre, the [new] laws, you add the enabling environment and you add the service providers, then there's no one else like it, essentially, globally,” Mr Visser said.

Family-owned businesses are key drivers of the UAE economy, accounting for a substantial number of jobs, and boost economic activity through their supply chain ecosystems.

In 2021, the UAE Ministry of Economy said it was considering new policies to help family businesses grow.

The DIFC's new centre will further differentiate it as a global hub.

“We are ... becoming a far more serious competition to the likes of Hong Kong and Singapore,” he said. “We see a lot of business coming in from Hong Kong, and we see a lot of business coming in from Singapore."

More than 460 entities in DIFC have a “family structure”, accounting for almost 10 per cent of companies in the financial hub.

These entities manage businesses of some of the most prominent families in the UAE, the GCC, the broader Middle East, CIS countries, India and as far away as China.

DIFC’s existing family offices have the choice to move to the new centre and take advantage of tailor-made services and extra privacy benefits it offers.

“It makes it — easier and better for … the [entities] that are here already,” Mr Visser said.

DIFC expects the number of family businesses will grow significantly with the addition of the new wealth centre.

Growth, in part, will also be driven by UHNWI who are moving out of European jurisdictions such as Switzerland, France, Italy, Portugal and the UK to set up in the UAE.

“People are moving here for tax reasons and for lifestyle reasons, and they're bringing their wealth with them,” Mr Visser said.

Financial wealth in the UAE is growing at a rapid pace and is expected to accelerate at a compound annual rate of 6.7 per cent to $1 trillion in 2026, from $700 billion in 2021, driven by growth in financial and real assets, Boston Consulting Group says.

Financial wealth in the UAE grew an annual 20 per cent in 2021, compared with 11 per cent globally, with the Emirates recording a net inflow of more than 2,000 millionaires, which helped the country account for 30 per cent of the total financial wealth in the GCC, BCG estimates.

About 41 per cent of the UAE’s wealth was derived from UHNWIs in 2021 and this is expected to grow to 43 per cent by 2026.

Meanwhile, financial wealth worldwide increased by 10.6 per cent in 2021 to $530 trillion, the fastest growth in more than a decade, the report said.

Bringing global family-owned businesses, private wealth offices and UHNWIs together on a single platform will further boost growth of the sector in the UAE. It will provide access to a full range of support services to enable legacy and succession planning, Mr Visser said.

The newly enacted regulations replace the previous Single-Family Office Regulations and DIFC Single Family Office regime, he said.

The new regime enables families to manage their businesses and preserve wealth through succession and legacy planning within DIFC in a manner that will also assure recognition and enforceability in the rest of the UAE and elsewhere.

The regulations also establish certification and accreditation programmes for family businesses and their advisers in DIFC to support benefits and incentives planned for family businesses in the UAE under the UAE Family Business Law.

The primary objective with the certification regime is for family business to adhere to principles of good conduct and governance and for the accreditation regime to ensure that advisers adhere to high levels of quality and expertise when advising families, DIFC said.