Case Study: Structuring a Family Business

Advising and setting up a parent entity to hold a series of family business operating companies and investments

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Our client is group of UAE nationals and residents—siblings who had built businesses in shipping, engineering, and general trade throughout the Gulf Cooperation Council. Now there are two generations running the various enterprises; each business and regional branch is established in its own exclusive company vehicle.

They asked Arch to advise on the best way to consolidate their interests into a single business entity—a parent company to hold the existing assets and constitute a home for their family business.

Arch studied the activities of the client’s various businesses and mapped out the cross-ownerships throughout the family. This was necessary to understand the possible statutory and financial costs in constructing the new group, as well as the long-term growth potential in the businesses and the jurisdictions they needed to be in to achieve this growth.

Our client required this parent holding company to be structured in a way that protects the longevity of the family business. It needed to set rules and procedures for succession to ensure a constructive, efficient and fair manner of passing responsibility and control to younger family members. It also needed to provide enough flexibility for future generations to manage change and maximise opportunities.

We undertook a study to compare the cost benefit of establishing the parent holding company in different locations based on taxation, political risk, sound legal jurisdiction, suitability for securing financing, and the commercial costs of operation. The study showed that the optimal choice at the present time was to establish the parent company at home, in the UAE.

We then tabled the cost benefit of the various incorporated entities available in the UAE for our client. Their preference was for the company model with the most flexibility in providing future generations with a more liquid holding. This model also provides strong shareholder protection with greater transparency through public disclosure and audit requirements under the law.

Arch arranged for the incorporation of the company and various shareholder agreements to provide the family business with an appropriate holding entity to manage and protect their businesses and investments. We also advised and assisted our client in formalising the parent company’s operational rules and procedures in a constitution that provided control and structure for adopting best business practice and sound leadership.

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