In the Gulf, Sharia forms the basis of the legal system. Sharia also directly governs intestate succession as a matter of UAE public policy for Muslims.
Intestate describes the estate of a person who has died without making a will.
The legal framework does not easily recognise some of the arrangements families may elect for their family-owned businesses.
Whether you choose onshore or offshore jurisdictions to regulate your succession planning, expert legal guidance in the Sharia space can prove to be the difference between your family receiving what you wish, or not.
Under Sharia rules, inheritance is a complex issue.
Sharia inheritance rules automatically apply a formula for the distribution of inherited assets.
This would apply equally to commercial assets, such as shares in the family business, as it would to personal assets.
In the UAE, this is reflected in Federal Law No 28/2005 (the Personal Affairs Law).
The principles of Sharia, to conserve and distribute wealth fairly across the generations, may actually conflict with a family’s desired succession arrangements. In line with Sharia inheritance law, a will or testament will only be applied and be valid to a third of the total estate and to specific persons, provided that all outstanding debts are settled.
If a will is contrary to Sharia law, it cannot be legally enforced.
As a result, arrangements trying to interfere with the passing of shares between generations, and in particular to retain the shares within the bloodline of the family, are likely to be open to challenge.
This creates uncertainty when considering the most appropriate legal structures.
For example, in the unfortunate event of the death of a second-generation family member and shareholder in the family business, some of their shares would pass by Sharia to their spouse, who would not be a bloodline family member and who could in turn remarry and have children of their own, creating more complicated scenarios.
As a result, the shares could quite realistically and quickly pass outside of the family.
In these circumstances, and to avoid these scenarios, share buy-back provisions can be introduced into the articles of the company, which would mean the shares would have to be sold back to the bloodline family members at “fair value”.
However, while seemingly financially fair, this effectively cuts across the intent of Sharia inheritance and so these provisions are almost certainly unenforceable in the onshore courts.
Indeed, and no doubt to reflect the onshore legal position, the standard form of constitution for an onshore company is straightforward, and it is very difficult to introduce bespoke provisions even though they may suit the requirements and interests of a family business and its family member shareholders.
It is largely because of the lack of flexibility in the onshore laws and regulations that families increasingly consider managing their businesses or locating investment assets offshore.
However, this can create administrative difficulties and is not appealing for obvious reasons to many GCC nationals.
As an alternative, an increasingly attractive middle ground solution is perhaps relying on the DIFC jurisdiction.
Here reasonably complex company constitutions can be established containing the type of provisions families would like to see in their own family companies. These provisions can include enforceable buy-back provisions where family shares fall outside the family through Sharia inheritance.
Another important point to note is that the DIFC also administers a sophisticated trust regime.
Structures taking advantage of the DIFC jurisdiction can put a holding company in the DIFC and then have onshore operational companies, fully owned by the holding company, acting as separate units.
While this type of structure remains uncommon, it can go a long way towards meeting the requirements of many families dealing with generational change and may provide the best solution.
Damian Crosse and Osama Hassan are partners at Pinsent Masons.
business@thenational.ae
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England's all-time record goalscorers:
Wayne Rooney 53
Bobby Charlton 49
Gary Lineker 48
Jimmy Greaves 44
Michael Owen 40
Tom Finney 30
Nat Lofthouse 30
Alan Shearer 30
Viv Woodward 29
Frank Lampard 29
Trolls World Tour
Directed by: Walt Dohrn, David Smith
Starring: Anna Kendrick, Justin Timberlake
Rating: 4 stars
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
UFC%20in%20Abu%20Dhabi
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
The specs
Price, base / as tested Dh1,100,000 (est)
Engine 5.2-litre V10
Gearbox seven-speed dual clutch
Power 630bhp @ 8,000rpm
Torque 600Nm @ 6,500rpm
Fuel economy, combined 15.7L / 100km (est)
Company%20Profile
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Emirates Cricket Board Women’s T10
ECB Hawks v ECB Falcons
Monday, April 6, 7.30pm, Sharjah Cricket Stadium
The match will be broadcast live on the My Sports Eye Facebook page
Hawks
Coach: Chaitrali Kalgutkar
Squad: Chaya Mughal (captain), Archara Supriya, Chamani Senevirathne, Chathurika Anand, Geethika Jyothis, Indhuja Nandakumar, Kashish Loungani, Khushi Sharma, Khushi Tanwar, Rinitha Rajith, Siddhi Pagarani, Siya Gokhale, Subha Srinivasan, Suraksha Kotte, Theertha Satish
Falcons
Coach: Najeeb Amar
Squad: Kavisha Kumari (captain), Almaseera Jahangir, Annika Shivpuri, Archisha Mukherjee, Judit Cleetus, Ishani Senavirathne, Lavanya Keny, Mahika Gaur, Malavika Unnithan, Rishitha Rajith, Rithika Rajith, Samaira Dharnidharka, Shashini Kaluarachchi, Udeni Kuruppuarachchi, Vaishnave Mahesh
Company name: Farmin
Date started: March 2019
Founder: Dr Ali Al Hammadi
Based: Abu Dhabi
Sector: AgriTech
Initial investment: None to date
Partners/Incubators: UAE Space Agency/Krypto Labs
Iftar programme at the Sheikh Mohammed Centre for Cultural Understanding
Established in 1998, the Sheikh Mohammed Centre for Cultural Understanding was created with a vision to teach residents about the traditions and customs of the UAE. Its motto is ‘open doors, open minds’. All year-round, visitors can sign up for a traditional Emirati breakfast, lunch or dinner meal, as well as a range of walking tours, including ones to sites such as the Jumeirah Mosque or Al Fahidi Historical Neighbourhood.
Every year during Ramadan, an iftar programme is rolled out. This allows guests to break their fast with the centre’s presenters, visit a nearby mosque and observe their guides while they pray. These events last for about two hours and are open to the public, or can be booked for a private event.
Until the end of Ramadan, the iftar events take place from 7pm until 9pm, from Saturday to Thursday. Advanced booking is required.
For more details, email openminds@cultures.ae or visit www.cultures.ae
If you go
The flights
Emirates and Etihad fly direct to Nairobi, with fares starting from Dh1,695. The resort can be reached from Nairobi via a 35-minute flight from Wilson Airport or Jomo Kenyatta International Airport, or by road, which takes at least three hours.
The rooms
Rooms at Fairmont Mount Kenya range from Dh1,870 per night for a deluxe room to Dh11,000 per night for the William Holden Cottage.
The specS: 2018 Toyota Camry
Price: base / as tested: Dh91,000 / Dh114,000
Engine: 3.5-litre V6
Gearbox: Eight-speed automatic
Power: 298hp @ 6,600rpm
Torque: 356Nm @ 4,700rpm
Fuel economy, combined: 7.0L / 100km
ATP WORLD No 1
2004 Roger Federer
2005 Roger Federer
2006 Roger Federer
2007 Roger Federer
2008 Rafael Nadal
2009 Roger Federer
2010 Rafael Nadal
2011 Novak Djokovic
2012 Novak Djokovic
2013 Rafael Nadal
2014 Novak Djokovic
2015 Novak Djokovic
2016 Andy Murray
2017 Rafael Nadal
2018 Novak Djokovic
2019 Rafael Nadal
Emergency
Director: Kangana Ranaut
Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry
Rating: 2/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
UAE currency: the story behind the money in your pockets
'Moonshot'
Director: Chris Winterbauer
Stars: Lana Condor and Cole Sprouse
Rating: 3/5
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now