17 February 2023
Family-owned entities have always been an essential component of the economic success and growth of the UAE. The Ministry of Economy states that family-owned enterprises account for approximately 70% of the country’s gross domestic product.
The new Family Arrangements Regulations 2023, effective as of 31 January 2023 by the DIFC are to be implemented following a 30-day public consultation period. The new regulations were issued in conjunction with the Global Family Business and Private Wealth Centre and aim to provide a structure for the Centre’s initiative. They will also lay down the framework for family businesses, private wealth, and ultra high net worth individuals that require a platform regionally and globally.
The new regulations aim to assist the UAE Business Law in the DIFC. Its objectives stipulate the arrangements to be made by families within the DIFC to ensure better operation of their businesses, succession and legacy planning and preservation of wealth. In addition, they set out the procedures wherein accredited advisers, corporate services providers and registered persons in the DIFC may be able to provide services to families in or from the DIFC. This will create a benchmark for good conduct that will be enforced throughout the UAE and other neighbouring nations.
The Family Arrangements Regulations 2023 repeal and replace the Single-Family Office Regulations (SFO Regulations) issued in 2011 and the new regulations revoke the requirement for a family office to register as a Designated Non-Financial Business or Profession with the Dubai Financial Services Authority (DFSA).
Of particular note is that they prescribe mechanisms on which family offices or trusts within a family entity may incorporate binding arbitration procedures in the event of a dispute. It also provides terms under which the registrar may enter into arrangement with a corporate service provider, enabling them to streamline onboarding and compliance.
The new regulations also introduce a totally new means of certification and accreditation programs on running family businesses under the UAE Family Business Law. The certifications are aimed at creating good conduct among the family business and to encourage such businesses to follow the principles of proper governance. Advisors responsible for advising families on their business ventures must maintain a high level of quality and diligence in their activities, which is ensured by the accreditation.
The introduction of the new regime is in accordance with the goals of the DIFC’s 2030 plan, which aims to expand the community in terms of size and its economic contribution to Dubai’s gross domestic product.
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