Family offices across the Middle East are restructuring and diversifying in response to local and international regulatory, tax and law changes. That’s according to Ocorian, a specialist global provider of services to high-net-worth individuals and family offices.
Ocorian, which works with more than 60 family offices around the world, is seeing strong growth across the Middle East in general and the United Arab Emirates in particular with ‘significant’ families deciding to onboard. One family is working with Ocorian to develop a governance structure on a par with FTSE-100 or FTSE-250 companies.
What’s driving the changes with Middle East family offices?
Major changes include new local Kingdom of Saudi Arabia companies’ law aimed at modernising and simplifying the corporate code, increasing flexibility, and attracting inward investment. Global initiatives such as Pillar 2, BEPS (Base Erosion and Profit Shifting), global minimum taxation, and amendments to the Proceeds of Crime legislation are also having an impact.
Along with changes in UAE corporate tax and the implementation of Global Minimum Standards, the focus is increasing on improving governance at family offices and ensuring they are compliant with regulation, Ocorian says.
Lynda O’Mahoney, Global Head of Business Development at Ocorian said: “In the Middle East, family businesses are being driven to adopt stronger governance practices, professionalise operations, simplify structures and address family governance issues. This is crucial for ensuring the long-term sustainability, stability, and success of these businesses in the region.”
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The response among family offices across the region includes family businesses increasingly separating business and personal assets, both domestically and internationally as well as reducing complex layers of special purpose vehicles (SPVs) in multi-jurisdictional structures.
Businesses are looking to diversify local investments using UAE Foundations and international investments using new institutional style structures such as Private Funds and Cell Companies to optimise their investment strategies.
Some institutional and family-owned structures are migrating to top-tier jurisdictions such as Jersey and Guernsey due to concerns over reputation and their ability to attract joint venture investors, and access financial services.
What does Ocorian do for family offices?
Ocorian advises families in the Middle East considering setting up family offices using the expertise of qualified lawyers and financial advisers. Families also need to decide between a fully-fledged or virtual family office and consider incorporating holding entities or foundations.
Where family members and assets are based is another key consideration influencing the decision on the location of the family office and how it is managed.
Long-standing issues require attention
Ocorian said families are conducting assessments of their current situation regarding local and international assets, investments, and businesses. These assessments are shedding light on long-standing issues that require attention.
Traditionally, family offices in the region have operated with a single decision-maker structure and viewed generational wealth as inherited, leading to a conservative mindset of maintaining the business legacy and core values. However, with the increasing involvement of third and fourth-generation family members, there is a greater openness to diversification and non-traditional investment strategies.
Ocorian’s focus in the Middle East is working with families, assisting them in setting up and supporting family offices, and structuring their wealth. It also collaborates with managers, including those based in Europe and the US, who are seeking investors. This link is important as it involves professionalising the family office and aligning with the requirements of international co-investors or managers.