Succession planning in the UAE: Family businesses and private wealth

Succession planning is becoming increasingly important as family businesses and privately held wealth in the UAE grow in scale and complexity. Families are also becoming more internationally mobile, with assets, family members and business interests often spread across multiple jurisdictions. There is a clear generational shift taking place and this is another catalyst of the growing urgency in developing a proper succession plan.

For a family-owned business, succession is not simply about who inherits the shares. It is about ensuring continuity of ownership, governance, leadership and decision-making. Continued growth, or at least maintenance of present wealth, are key objectives that proper succession planning achieves.

We often think about this in terms of what happens “above the line” and “below the line”. Above the line, the family needs to consider ownership, overall strategy, succession and the relationship between different family branches. Below the line, the focus is on the operating businesses, management, boards, ongoing decision-making, financing and day-to-day operations.

A robust succession plan needs to connect those two levels. Without that connection, a family may successfully transfer ownership but still leave the business without an effective management or governance framework.

The UAE has become home to increasingly international families whose wealth is held across multiple jurisdictions and asset classes. A family may have operating businesses in the UAE, real estate in different countries like the UK and France, investment portfolios in Switzerland and Singapore, private equity interests and family members living across several jurisdictions.

This makes succession planning much more than an inheritance exercise. Families need to consider how ownership is organised and how those ownership interests translate into control and decision-making below the line. Proper tax analysis from the outset is crucial to mitigate unnecessary leakage of value in any cross-border context.

That requires coordination between different legal and tax systems, corporate structures and governance arrangements. Holding companies, foundations, trusts and other ownership structures can help families separate ownership from day-to-day management and create clearer lines of control.

The objective is to build a legal and governance framework that can withstand changes in family circumstances, asset composition and geography.

The consequences can extend well beyond the family itself. Uncertainty over future ownership or leadership can delay strategic decisions, complicate financing and create uncertainty for employees, customers, suppliers and business partners.

The risk is particularly acute where the family has multiple branches. If ownership is transferred without an agreed governance framework, disagreements can emerge over who controls the business, how capital should be allocated and what decisions require family or shareholder approval.

In other words, succession needs to address both sides of the equation: who owns the business and how the business continues to operate.

Without that alignment, disputes can result in deadlock, litigation or pressure to sell assets at an inopportune time, potentially undermining the enterprise value that previous generations have built.

Businesses depend on confidence in their ownership and governance structures. Where there is uncertainty about who will control a business in the future, customers, suppliers, co-investors and lenders may seek additional protections or reassess the risks associated with the relationship.

This is another reason why the distinction between ownership and management is important. A family may determine who owns the shares above the line, while putting in place professional management, board structures and delegated authorities below the line.

That separation can provide continuity even when ownership changes between generations. Employees, lenders, customers and strategic partners can see that the business has a functioning governance and decision-making framework regardless of changes in the family ownership structure.

Cross-border ownership introduces additional layers of complexity because each jurisdiction may have different inheritance, corporate, regulatory and tax rules.

The legal architecture therefore needs to be considered as a whole. Appropriate holding structures and ring-fencing can help separate different businesses and investment activities, limiting the extent to which risks in one part of the group affect the wider family wealth.

The starting point should be to map the family’s assets, ownership structures and relevant jurisdictions and then develop a coordinated succession and governance architecture around them. Tax is an important consideration that has cross-border implications.

This is one of the most important principles in family-business succession: ownership, management and control do not necessarily have to pass to the next generation at the same time or in the same way.

A family may decide that different family branches should participate economically in the family wealth. However, management responsibilities can be allocated according to experience, capability and the needs of the business.

Voting rights, board representation, reserved matters, dividend rights and management responsibilities can all be structured accordingly.

This allows the family to preserve economic participation while ensuring that operational and strategic decisions are entrusted to the appropriate people. It also gives the next generation a pathway into the business without assuming that inheritance automatically means management responsibility.

The biggest mistake is often waiting until succession becomes an immediate issue. Families can also focus heavily on who inherits the wealth and how without addressing how the business will actually be governed and operated afterwards.

A further issue is treating the family’s wealth and operating businesses as though they are the same thing. The family may need one governance framework for ownership and wealth and another for the management and operation of businesses.

Families should therefore start succession planning well before a transition is expected. This creates time to establish governance structures, document ownership arrangements, develop the next generation and test how the proposed framework would operate in practice. There is no one size fits all; each family has its own circumstances which dictate the bespoke architecture that applies to it.

Succession planning is ultimately not a single transaction. It is an ongoing governance process that should evolve with the family and the business.

The position for non-Muslim expatriates in the UAE changed significantly with Federal Decree-Law No. 41 of 2022 on Civil Personal Status, which introduced a civil framework for non-Muslims in the UAE, including provisions governing wills and inheritance. That said, internationally mobile families still need to consider the interplay between UAE laws and the law of other jurisdictions in which they, their beneficiaries or their assets are located. Many non-Muslims in the UAE have put in place either DIFC or Abu Dhabi wills, at least to deal with assets located in the UAE.

For HNWIs, however, the key risk is not simply who inherits. Without a locally recognised succession plan, there can be uncertainty and delay in the administration and transfer of UAE assets, particularly where the estate includes real estate, bank accounts, investments or interests in family businesses.

For family business owners, this can also create a disconnect between ownership, control and governance, which can flow through to business operations and, ultimately, affect the continuity and effective control of the business. A well-structured succession plan should therefore align the family's succession objectives with the legal and corporate structures through which its wealth and businesses are held.

The DIFC Courts Wills Service provides a framework through which eligible non-Muslim individuals can make arrangements for the succession of their UAE (and potentially non-UAE) assets under a DIFC Courts Will. The current eligibility requirements include being non-Muslim and at least 18 years old, with UAE assets and/or minor children residing in the UAE, subject to the type of will being registered.

For HNWIs, there is particular value where assets include DIFC real estate, shares in DIFC holding structures or interests in other DIFC companies. A DIFC Will can provide greater certainty around succession to those assets and a clear route for enforcement through the DIFC Courts, helping to reduce uncertainty and potential delays following death.

The DIFC Courts Wills Service offers different types of wills covering real estate, business interests, financial assets and digital assets. The scope of such wills is not limited to DIFC assets. For example, a Property Will can cover eligible real estate anywhere in the UAE, while a Business Owners Will can cover shareholdings in UAE onshore and free-zone companies. A Full Will can provide broader coverage of an individual’s UAE movable and immovable assets. A DIFC Will may also address certain assets located outside the UAE; however, where an individual holds non-UAE assets, advice should be sought in the relevant jurisdiction to confirm whether, and to what extent, the DIFC Will will be recognised and enforceable there, and whether any additional local succession planning is required.

However, a DIFC Will should not be viewed in isolation. Where an individual owns shares in a family business, the succession plan should also consider the company’s constitutional documents, shareholders’ agreement, transfer restrictions, pre-emption rights and applicable regulatory requirements.

This is where the broader family-business architecture becomes important: the DIFC Will addresses the succession of the individual’s interest above the line, while the underlying corporate and governance arrangements determine how that ownership translates into control and decision-making below the line.

Succession needs to be considered at both the estate-planning and corporate-governance levels.

A DIFC Will can determine who is intended to receive an individual's shares on death, but that should be considered alongside the company's articles, shareholders' agreement, pre-emption provisions, financing arrangements and regulatory requirements.

Families can also use DIFC structures such as foundations and companies (including holding, prescribed and variable capital companies) to separate economic entitlements from control, ensuring ownership transfers do not unintentionally disrupt business operations or leadership. We can also structure the ownership and governance relationship between family branches. For example, different family members may have economic interests above the line, while management, board representation and operational authority below the line are allocated through a separate governance framework.

The objective is to ensure that the transfer of ownership does not unintentionally disrupt control or the operation of the business.

The starting point should be a complete map of the family's ownership structure and succession documents.

The Will should be reviewed alongside shareholder agreements, articles of association, trust or foundation documents, foreign wills and any other instruments governing the family's assets.

For larger family groups, we would generally recommend developing an overarching succession strategy, with the appropriate legal instruments implemented in each relevant jurisdiction.

That strategy should look at the family above the line (ownership, wealth and succession) as well as the businesses below the line (governance, management, capital allocation and operational continuity).

This is particularly important where a family uses a holding company or foundation to centralise ownership. The legal structure can create a clearer separation between ownership of the family wealth and the management of the underlying businesses, but only if the documents are properly aligned.

The main challenge is that succession does not necessarily follow the same legal rules in every jurisdiction. Different countries may apply different rules concerning forced heirship, matrimonial property, testamentary freedom, trusts, foundations and the recognition of foreign Wills. There can also be practical issues around probate, court jurisdiction, asset registration, regulatory approvals and taxation.

For internationally mobile families, an effective succession plan therefore needs to consider both the legal entitlement to an asset and the practical mechanics of transferring it. In appropriate circumstances, this may include using separate, coordinated Wills for assets in different jurisdictions, particularly where local Wills can provide greater certainty and ease of enforcement. Careful drafting is essential to ensure that the Wills operate together and do not inadvertently revoke one another.

It is also important to consider whether the structure remains operational after succession. Transferring ownership above the line is only part of the exercise; governance and decision-making below the line should continue without interruption.

Succession planning should be treated as an ongoing governance process rather than a one-off legal exercise. We would recommend a formal review every three to five years. That said, a review should be triggered by events such as marriage, divorce, births or deaths, significant acquisitions or disposals of assets, significant corporate transaction or restructuring, changes in family relationships, relocation to another jurisdiction or changes in tax residency.

The review should address both, ensuring that the ownership and succession framework above the line still reflect the family's intentions, and that the governance and operational framework below the line still work for the businesses.