Business Ownership Issues - part 1

WHAT will happen to my business and whose responsibility will it become if I die?

If you are part of a business partnership, how will your partners continue on without you and will they be able to liquidate your shares to pass on inheritance?

An estimated two thirds of family businesses do not survive beyond the first generation of owners. A proportion of these failures is directly attributed to inadequate succession planning. It is not only death but also on disability or retirement that can destroy a business and plans for its successful continuation.

Many people have started a business partnership (or limited liability company) with at least one 
other person.

The lack of direction after a death can cause fear within staff and customers, and competitors can soon seize that opportunity to move in. A considerable percentage of value can be wiped out in months. The key is to have the correct instructions and protection in place to avoid a 
financial catastrophe.

As a business owner, you’ll surely want to ensure that your business continues to succeed after you retire, whether wanting your children succeed you or sell your business to others. Ensuring the right arrangements are put in place during your lifetime will help. Much depends on the type of business you have and how it is set up in the first place.

With ownership goes control over compensation, benefits, hiring and firing, management, short and long term business goals. Ownership also allows for the creation and maintenance of a Board of Directors, necessary to the long term health of the organisation. Many succession plans involve dividing ownership and control so that the business owner retains control but passes ownership to others.

The most basic and essential requirement, especially for those in business, is to make a will.

If a person dies ‘intestate’ (without having made a will), the law specifies how their assets are to be dealt with. Where shares or other business assets are held, it can also affect business partners, directors, other shareholders and the business itself.

A well drafted will can limit the potential for claims against the deceased’s estate. This includes claims made against the deceased share in a business, which without a will could result in serious damage to the business. Businesses need to ensure their directors have wills and that these concur with any articles or shareholder agreements. Many businesses are family run with the intention that the business should pass to another family member working in the firm. Often a child working with a parent in the family business will have an expectation that the business will come to them. Where this is not covered by a Will, or if the articles of the business allow for another shareholder to buy the deceased’s shares, families can quickly fall out. The child working in the business may be expected to purchase their siblings interest even if the other siblings have never worked in the business or contributed to its success.

Rajiv Shah

Head – Life & Pensions
Earnest Insurance Brokers

Succession planning and safeguarding your assets – part 2

It is essentially important therefore to keep separate bank accounts in addition to any joint accounts you may have if you are married, as well as a primary offshore bank accounts as Bank accounts that are maintained outside the UAE are not be governed by the UAE's legal jurisdictions and laws.

International Life Insurance is one of the most important steps to succession planning. Beneficiary payouts are paid out of trust held offshore & paid directly to the beneficiary thereby not falling as part of your estate for the purposes of distribution under sharia.

Although preparing a will is not something many people relish it is essential in the UAE and in the long term. Succession planning is something that we all should be prepared with.

Parents of minors should consider the possibility for temporary and permanent guardianship of their children resident in the UAE. Instructions in relation to this should be made before, and lodged at the embassy of which the parents are nationals.

The procedure upon death of an expatriate who has made a Will is to obtain an application for a grant of representation in the deceased’s country of domicile. Once probate is obtained, it must be notarised, and attested at the notary public or the ministry of foreign affairs here before it may be recognised by the UAE courts as authentic and valid. Upon recognition by the government authorities of the deceased’s representatives the trustees or executors would have full power to administer the deceased’s estate in accordance with his wishes. In the case of intestacy, a letter of administration would also have to be obtained from the country of domicile and duly notorised & attested.

People are often misinformed that when they die their estate will be passed to their next of kin even without a will. This is certainly not the case as the laws relating to inheritance of an estate are often complicated when there is no will in place. Without a Last Will and Testament (“Will”), these very important decisions will be made by the government.

Rajiv Shah
Head - Life and Pensions
Earnest Insurance Brokers

(Rajiv Shah is a Personal Finance Specialist and Head of Life & Pensions at Earnest Advisors. The opinions expressed by the author are his own)

Succession planning and safeguarding your assets – part 1

The UAE law of inheritance is based on the principles of Sharia Law, which differs greatly to the laws that many of us expatriates are used to and to the way in which our total assets are normally distributed upon death away from the UAE. 


In a Muslim country like the UAE, all courts adhere to Sharia - the primary source of Islamic law. Legal systems in the Gulf are usually quite complicated and those unfamiliar with their workings can find this difficult to understand & accept.

So what happens when a non-Muslim expatriate dies out here in the UAE?

According to the UAE Civil Code, Federal Law No.2 of 1987 (Article 17/1) stipulates that inheritance shall be subject to the law of the deceased at the time of death. This law was promulgated to stem confusion surrounding inheritance issues for expatriates. Therefore the law of the domicile country of the deceased would apply.

Your “Last Will & Testament” is a document that details exactly what you would like to happen to your estate in the event of your death. The professionally drafted document can cover all aspects of your life, from physical assets such as property, investments or cash, to who you would like to look after your children until they are of an age that they can look after themselves. It is worth noting that if you marry, you will have to start again, as marriage automatically revokes a will; however, possibly just as important, a divorce does not.

Your Dubai freehold property is still governed by the inheritance laws of sharia and would not be distributed as per your wishes or your Will. The UAE treats movable assets (such as cash, investments, cars, etc) differently to immovable assets (property) for inheritance purposes. Only moveable assets as safeguarded when making a Will. 

The laws relating to foreign owners of property in the UAE and inheritance still need to be examined closely and the process is ongoing. But as the situation stands, UAE law (sharia) shall apply to immoveable property (real estate) in the UAE held by foreigners.

When purchasing real estate in the UAE, it is always advisable to try to do so through a foreign company that may be jointly owned by you, your spouse and/or your children.

When an expatriate dies in the UAE, their visas are cancelled and banks are instructed by the courts to freeze all transactions on the accounts of the deceased, including joint accounts. The bank is obliged to freeze the account from such notification until the successors of the deceased are nominated as per Article 379 (4) of the Commercial Transactions Law, UAE Federal Law No. 18 of 1993. Unfreezing of the account can only be carried out by order of the Sharia Courts. This process aims to safeguard any payments that need to be made after an expatriate has died, such as outstanding loans and any debt payments and can take as much as 6-9 months to clear up.

With Visas cancelled (and 30 days grace to make visa re-arrangements), and bank accounts frozen, does one even have time to grieve over the loss of their loved one? Many of us do not understand the possible implications of death in the UAE and the financial implications that entail.

Simple financial planning can help overcome such obstacles and help create a safety net. It’s not just about safeguarding your assets by making a Will but also the welfare of your family & young children who are dependent on you even when you are not around.

Ravi Shah
Head - Life and Pensions
Earnest Insurance Brokers