DUBAI, UAE - April 12, 2025 – The United Arab Emirates government is intensifying efforts to encourage prominent family-owned businesses to formalize succession planning, recognizing the critical need to safeguard trillions of dirhams in assets and ensure economic stability ahead of a massive generational wealth transfer.
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| UAE Urges Family Firms to Secure Future as $1 Trillion Succession Looms |
With an estimated $1 trillion poised to transition to the next generation in the coming years, officials are highlighting the risks associated with unprepared handovers within these influential enterprises. Family businesses form the bedrock of the UAE's private sector, accounting for approximately 90% of private companies, contributing around 60% of the nation's GDP, and employing over 70% of the private workforce.
Recent meetings between Economy Ministry officials and heads of major family conglomerates underscore the government's focus on mitigating potential disputes among heirs, which have historically destabilized or dismantled successful family firms. The sheer scale of the wealth involved – fueled partly by the UAE's success in attracting high-net-worth individuals and establishing itself as a global hub for family offices managing vast sums – amplifies the potential economic disruption. Dubai alone is reported to host family office structures overseeing well over $1 trillion in assets.
| UAE Urges Family Firms to Secure Future as $1 Trillion Succession Looms |
Experts point to a concerning global trend, reflected in the UAE, where only 10-15% of family businesses successfully navigate the transition to the third generation. Challenges include establishing robust governance structures, managing internal family dynamics separate from business operations, navigating complex inheritance laws (including Sharia principles for Muslim families), and preparing successors adequately for leadership.
Recognizing these hurdles, the UAE introduced Federal Decree-Law No. 37 in 2022. This landmark legislation provides a dedicated legal framework designed to support family businesses by:
- Establishing clear rules for ownership and governance.
- Facilitating smoother generational transfers.
- Allowing flexible structures like different share classes (with varying voting rights).
- Providing mechanisms for dispute resolution, aiming to avoid protracted court battles.
- Enabling families to create formal "Family Charters" outlining their values, goals, and rules.
The government push is seen as a crucial step in future-proofing a vital segment of the economy. "Succession planning is a core strategic tool," noted a statement from Dubai Customs regarding its own internal succession framework, reflecting the broader government emphasis on ensuring continuity and developing leadership. Failure to plan adequately not only jeopardizes individual family legacies but also poses a collective risk to the UAE's broader economic growth and diversification strategy.
As this significant wealth transfer approaches, the focus remains firmly on encouraging families to adopt formal structures and strategic planning, ensuring these economic powerhouses continue to thrive for generations to come.