Family Businesses and Succession Planning-a Middle East Perspective
Type
E-journal
Date
11 Jul 2012
Jurisdiction
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates
Taxonomy
General Succession Law & Estate Planning, General Company Law & Business Entities, Estate Taxes
Copyright
LexisNexis
Relevant company
Clyde & Co
Analysis
The family business is one of the most dominant and enduring forms of business organisations in the world. In fact, according to some estimates, over 90% of all commercial activity within the Gulf Cooperation Council (GCC) countries is controlled by family businesses. (Source: "The Impact of Private Equity on GCC Family Businesses", a report by Ithmar Capital in partnership with Dow Jones Private Equity.)
However, the family business is also an ageless structure which must overcome succession issues in order to survive. According to the Institute of Family Business in the US, a major obstacle which prevents family businesses from successful transition into the next generation is the absence of a sound succession plan. Yet in spite of its importance, in a 2010-2011 survey by PricewaterhouseCoopers, almost half of all responding companies which were due to be passed down to the next generation within the next five years had no succession plan in place. Unique challenges, issues of culture, personality and hierarchical structures makes succession more complicated than in most listed entities.
What is a succession plan?