Wealth planning update - India and the Middle East

Video transcript

1. What are the key developments you are seeing in the Indian private client market?

It's been very interesting since we met in Mumbai last year, in September. Just after the introduction of the ODI regulations came in, in India we have seen a massive increase in inquiries, clients and advisors alike, wanting to learn more about how to set up a family office in the Middle East. I think traditionally Singapore captured the market in terms of the Indian outbound investments. The pandemic has obviously given Dubai chance to shine and show how robust and consistent the business environment has been here in the Middle East. We've all been inundated consistently with advising clients over the past few years, and the recent introduction of more family office regulations in the UAE, as well as options as to where to establish your family office, has only been beneficial for a lot of the Indian families looking to establish themselves here. The recent articles that have been in the media in relation to the Adani family looking to establish a family office in the Middle East is actually reflective of this. I think there's still not enough information in the public domain or in the advisory community as to the kinds of options that are available. But even within the DIFC, which is one of the first free zones and financial centers to establish a single family office set of regulations, they're also at the moment updating their regulations. Again, probably to cater and to be a little more inclusive to the family businesses that are emerging and the family businesses that are wanting to come and use the Middle East. So extremely beneficial and something that's very topical, something that we expect to have more conversations about throughout the year with you.

2. Another country you focus on is Saudi Arabia, how is the private client opportunity developing?

I moved to Hourani & Partners at the end of last year, which certainly turned a few heads. And the reason for doing that from my perspective is that Saudi Arabia is certainly a place for the future, the investment landscape and the infrastructure is only going to get better and better. The future is in the Middle East at this point in time, and I think that's undisputable. The families that have helped the economy of Saudi Arabia develop, again, are far more sophisticated and evolved in terms of family governance and constitution than perhaps the rest of the world even give them credit for or are perhaps even aware of. It's a very closed book at the moment, but that is certainly in the process of changing. Saudi Arabia themselves earlier on, just a few months ago, in this year will be introducing the new company's law and that company's law now enables family constitutions and family charters to be enshrined and incorporated into the articles of Association of Companies. And what that essentially means is enabling families who actually had already over the years, put family charters and governance plans in place, to actually now enshrine them in a more legal framework, enabling them to be enforced if and when necessary in the event of a default. So we're actually seeing this as a very good mechanism for two types of families. The families that want to update and enshrine existing charters, and the families that then actually want to put something in place afresh. And that's where we as advisors are seeing a huge amount of activity and interest. And it is incredibly encouraging to see just how dynamic the families are wanting their entire suite of affairs to be, whether it is within the family dynamic itself or whether it is within the corporate boardroom. And alongside that also comes then as a point that I was talking about earlier in relation to family offices. So again, enabling Saudi families to perhaps come out of the Kingdom and establish family offices and jurisdictions that are going to be conducive to economic development and diversification of their investment activities. So yes, I think 2023, you're going to see Saudi shining a lot more. And certainly it's a place where Hubbis, and the advisory community of Hubbis should start to be taking more of an interest in.

3. The UAE have recently created new family business laws. Can you please explain how these impact the market?

We had the very, very unfortunate demise of Majid Al Futtaim, a significant sign in the business community in the UAE. The Futtaims are one of the key business families. Unfortunately, the demise of Majid Al Futtaim shone a spotlight on how not to do it, what happens if there's no clear succession and governance that has been put in place and properly enshrined in a formal manner. As a result of this, I think a long overdue piece of legislation, which is the federal law on family businesses, has been enacted and will be shortly introduced. It's an opt-in piece of legislation. When I say it was long overdue, it's probably reflective again of the fact that the economy within the UAE, which has developed at a ferocious pace, is built on the back of a handful of core business families. The ramifications of having no clear succession, enabling not only the transition of wealth within the family, but enabling the transition of power within the operational business, is something that we are all too conscious of. So the federal family business law, with the provisions that it contains, now enables a framework to be put in place. Again, whereby governance mechanisms and provisions for succession can be formally enshrined in the constitutive of documents of a company. And this has been incredibly welcoming for many of the family businesses who have been grappling as to, well, I do know that I need to have some governance in place, but for example, what should the content be? What should the context be? And just how far should we take this in terms of enforceability? So I think it's a very, very welcoming change indeed. And again, as I mentioned, it's an opt-in piece of legislation and that coupled with, for example, the succession tools that we have already in the UAE, such as foundations and trusts, I think is going to be an extremely positive development for the economy and for the family run businesses of the UAE.

4. Are there any specific developments in the DIFC?

The DIFC is one of the more robust and well-developed international financial centers in the Middle East. We've all known that for a while. And again, the DIFC are very focused upon succession and smooth succession in terms of operations of businesses and ownership of businesses. The DIFC introduced a foundation regime. The foundation regime has been very actively used, not only just by business families within the UAE, but international families that have chosen to make the UAE the hub for their business operations and for their personal purposes. As a result of this. What we've seen now is the DIFC taking things one step further to continue to incentivize families to prepare and to get their house in order, as such. And what I mean by that is bringing in some kind of governance and what they've done therefore is they've created a global family center that is aimed at the private wealth community, is aimed at the ultra-high net worth and high net worth families that use the DIFC. And they're encouraging these families to adopt global best practices for running their family businesses, operations, ownership aspects, succession aspects, diversification. It will slowly encourage families to become far more organized and will hopefully prevent situations that arose recently with families such as the Al Futtaim family where the patriarch had passed away, leaving all the affairs in what seemed to be a very orderly manner, but in terms of succession was left in great disarray. That coupled with the corporate tax that is coming in the UAE and perhaps encouraging families to adopt best practices by using tax incentives, I think is going to be a recipe for success.

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