Succession planning in family businesses need not be an epic drama

Nearly three quarters of the UAE's private sector workforce is employed by family enterprises. Taking further steps to manage transition and inheritance will help such firms thrive

Nick Donaldson / The National
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When I returned to the UAE after four years in France in the late 1990s, I joined my father and brother in our family business. Back then, I found myself encountering a number of challenges related to something that most business schools in the 1990s did not prepare us for: succession planning in family businesses.

I signed up for a series of family business conferences in Dubai, and fortunately I was able to learn from some of the most seasoned business families in the region, including WJ Towell in Oman, the Sultan Group and Bader Group in Kuwait, Al Muhaideb and the Kanoo Group, both of which are Gulf-wide, Al Shirawi in Bahrain and Al Fahim in the UAE, among others. One recurring topic was the challenges faced by many of the region's family businesses when a founder passes on.

Over the past few years, the UAE has realised the importance of family businesses in the economy. This is no abstract matter. According to a report by the UAE Ministry of Economy, 70 per cent of the UAE's private sector workforce is employed by family businesses, which also make up 90 per cent of all private companies in the country.

Yet their importance is not a guarantee of their longevity. For example, one study by the Harvard Business Review estimates that "some 70 per cent of family-owned businesses fail or are sold before the second generation gets a chance to take over."

The Gulf states, and certainly the UAE, are not immune to such challenges. Over the past three decades, a number of families in the UAE and the Gulf have either been challenged by or succumbed to the disputes that arise following the passing on of a founder. Even today in the UAE, many are keenly awaiting to see what the outcome will be of a transition in one of the country’s leading family businesses.

Although more needs to be done, there are positive steps being taken in the country, including the setting up of the Dubai Centre for Family Businesses under the umbrella of the Dubai Chamber and the DIFC Family Wealth Centre. In 2015, my own family endowed the Sheikh Saud Bin Khalid Al Qassemi Chair in Family Business at the American University of Sharjah, now held by Prof Rodrigo Basco. The class has proven to be so popular that there are now multiple courses offered every semester.

But succession planning does not only apply to large businesses. Each one of us is responsible for making sure our loved ones, whether tied in a family business structure, or not, can be made aware of our assets and liabilities and the final wishes which we would like to be carried out.

On my part, the first will I wrote was in May 2011, and I have revisited and updated the text twice since then. As priorities shift and new causes emerge, I had to modify and amend it. In my own will, I mention what assets I have and to whom I owe money (in one case it is a friend who loaned me 700 Francs in 1997 and has refused to allow me to pay him back since). I also mention which charities I would like money to be donated to, and what happens with the vast art collection of which I am currently a custodian.

The case for updating wills was made clear to me when my own father passed away in 2005. Although he had left a hand-written will, it was neither notarised nor were there witnesses to it. We then found out that there was another will written a few years before that, and that some adjustments were made.

Again, in this field some positive developments are taking place in the UAE, such as the setting up of the Dubai Courts Public Notary, where expatriates' wills can be notarised or the DIFC Wills Service Centre. In this case, as well as in family businesses, laws could be streamlined and it could be made possible to assign assets at will, regardless of gender and nationality for those who wish.

Islam gives its followers the right to decide the allocation of up to a third of one's assets after their passing on, while the remaining two thirds must be allocated as per Sharia (Islamic law).

Planning for a succession of a large family business or writing a will for an individual are not easy or quick processes. They can take a few hours or weeks of your time. But they can save loved ones a lifetime of uncertainty.

Published: September 22, 2023, 6:00 PM
Updated: September 25, 2023, 6:20 PM