As published on internationalinvestment.net, Monday January 20, 2020.
The UAE Cabinet has approved a draft law allowing family-owned businesses to list on the country's financial markets as new research reveals that over three-quarters of advisers expect high net worth families to become more global over the next five years.
The draft law amends provisions in Federal Law No. 18 of 1981, otherwise known as the 'Agency Law' that regulates commercial agency and distribution agreements within the country.
The amendments come within the "framework to enhance the country's trade and investment development and boost the UAE's competitive business climate in line with international standards and regulations," the UAE Cabinet's General Secretariat said in a statement.
"Advisers are witnessing dramatic changes in the Middle East region’s wealth structuring landscape"
The new proposed law provides for the transformation of family-owned businesses to join the UAE's financial markets and encourages UAE nationals to engage in business activities.
The proposed draft law allow UAE nationals to invest in public shareholding companies and their commercial agencies with the least possible risk in investment, especially for small shareholders and owners of SMEs.
"Public companies require effective corporate governance and disclosures — family-owned companies must ensure that all governance sensitivities are understood by all stakeholders," Tariq Chauhan, group CEO at EFS told the Gulf News. "They were finding it difficult to go public due to complex IPO preconditions.
"If these conditions are modified and aligned to meet the needs of family businesses, it will be a great boost," he added.
A new survey from Intertrust revealed that there is a growing demand by wealthy Middle Eastern families for legacy plans to be based on international best practice (58%) and greater awareness of the impact of governance and regulation (58%).
Around 74% of advisers expect HNW families to become more global over the next five years, driven primarily by the next generation's desire to expand their business interests beyond the region.
Intertrust surveyed professional advisers servicing clients based in the UAE, Saudi Arabia, Qatar, Oman, Kuwait and Bahrain to examine their views on wealth structuring, the rise of families with a global mindset and succession planning.
According to PwC, with a workforce contribution of 80% and $1trn estimated to pass from one generation to the next within a decade, the region is set for a wealth boom.
According to the study, family offices are predicted to be the fastest-growing wealth structuring vehicle among Middle Eastern wealthy families.
With their investment management, ownership tracking and reporting capabilities, family offices are gaining pace especially in the UAE thanks to its sophisticated infrastructure, skilled employment market, flexible regulatory regime and excellent global transport links. Special purpose vehicles and corporate structures were ranked in second and third places respectively.
Ian Rumens, Global Head of Private Wealth said: "Advisers are witnessing dramatic changes in the Middle East region's wealth structuring landscape. As living, learning and working overseas is becoming common particularly among the next generation, families are becoming increasingly mindful of the region's political landscape and the need to mitigate risk by taking a more sophisticated approach to managing their wealth.
"As a result, we're seeing significant growth in investment structures such as family offices, special purpose vehicles, funds, offshore trusts and PTCs."