“Transfer Family Business Firms to Public Shareholding Companies” Family Business Forum – Dubai 2006
Dubai: 24th April 2006
Dubai International Arbitration Centre launched today (April 24), in cooperation with Dubai Chamber of Commerce & Industry and Dubai University College, the 'Family Business Forum – Dubai 2006.’ It was held at the Dubai Chamber of Commerce & Industry premises, Dubai. Many VIPs and experts in Family Business from all over the world attended the event and contributed to the forum.
Dr. Hussam Al Talhuni, Director of Dubai International Arbitration Centre, spoke on “Dispute Resolution for Family Business.” “Family Business Firms are not just a regular firms. They are huge companies. Sometimes they are a group of companies owned by one or more families. Such firms support the national economy in different ways,” he said.
“The first generation founded the business, the second generation is running it now, and future generations will come up and take the business forward. Due to these transitions, many problems can appear. Some of them can break the business, so it can’t compete with big foreign companies,” Dr. Hussam added.
“In Gulf countries and the Arab World, we need to put up more foundations that can help in directing and providing the main keys for successful companies. DIAC is a leading centre in the region, specializing in providing facilities for conducting commercial arbitration, promoting settlement of disputes by arbitration, as well as developing a pool of arbitrators in the practice of international arbitration,” he added.
“This forum is designed to identify useful tools that support family businesses in the UAE and other Arab countries through the examination of the effects of globalization and international economic treaties and the impact such treaties have on family businesses. This meeting will also highlight the importance of modernizing management systems to ensure the stability of family business through strategies for developing leadership. It will address challenges specific to family businesses when considering a merger or transfer to public shareholding companies,” Dr. Hussam said.
Dr. Ali Lutfi, Former Prime Minister of Egypt, discussed the subject of “Family Business in Open Markets.” He had a close look at the General Agreement on Tariffs and Trade (GATT), its principles and goals. In addition, he pointed out the positive and negative aspects of Family Business. To his mind, the main positive aspect is that it gave you a free hand in all decision making, thus boosting the interest of future successors. But, according to him, the negative aspect is that it can create a sort of monopoly in the market. To improve and increase the efficiency of Family Business Firms, Dr. Lutfi recommended that such firms have to be merged with national and international organizations so that more intensive research and development will be readily available to them to enable them to face established companies. “Pre-planning of shifting the leadership from generation to generation is a must and women’s role should not be neglected at all,” Dr.Lutfi said.
“UAE government had done many researches and conducted lots of studies in this field. UAE Family Businesses should take full advantage of those resources and studies if they wish to optimize their businesses,” Dr. Lutfi added.
Dr. Izz Al Din Akasha, Professor of Business Law, Dubai University College, discussed “Dispute Resolution for Family Business.” The typical family business places a high value on “equality” and “feelings” while the non-family business is more likely to stress “fairness” and “logic,” according to Dr. Akasha.
Dr. Akasha recommended that Family Business is in need of gradual and well studied legal changes. Legal transfer of the business is a necessity to face the expected future. “I suggest conglomerate merger of family business for economies of scale. The transfer to public share holding companies will lead to high benefits, less expenses and make for better contribution to the national economy. The responsibility of the government is to draft such flexible laws and regulations to help the transfer of family business to public joint stock firms and to protect them legally and financially from big companies operating internationally. The public joint stock companies are one of the best legal forms for transfer of family businesses because it will enlarge the foundation of the national and public contribution in the state and national economies,” he added.
Mr. Hisham Al Shirawi, Board Member, Dubai Chamber of Commerce & Industry discussed the topic of “Evaluation of Merges and Transfer of Family Businesses to Joint Stock Businesses and Entering the Financial Market”. He focused on the Positioning of Arab World, illustrated some successful experiments and showed how economic power lead to respect. “We have to learn from the experiences of advanced countries. Merger is not just a choice, it’s survival,” he said. He described the role of Ministry of Economy in such cases.
Dr. Habib Al Mulla, Managing Partner, Al Mulla & Associates and Board of Trustees Member, Dubai Chamber of Commerce & Industry lectured on “Administrative and Legal Challenges Facing Family Businesses: Impact on Development”. He discussed commercial corporate laws in UAE (law # 8, 1984)Dr. Al Mulla said “the main drawback is the lack of a clear clarification for holding companies in UAE. And the prime drawback facing Family Business Firms is the lack of experience and competence of the new generation which is part of a group”.
Mr. Antoin Aqal, Honorary President, International Union for Lawyers, spoke on “The Necessity of Introducing Changes to Corporate Law to Serve the Needs of Family Business”. He highlighted the importance of the family business firms and its role in the economy. “Research shows 90 per cent of US firms are owned and run under the supervision of one or several families. These firms create 30 per cent – 60 per cent of Gross National Product, and almost pay 50 per cent of private sector retirement benefits,” Mr. Aqal said.
Mr. Aqal also suggested changes to corporate laws. According to him, its very important to change the laws in a way that allow five or more people to establish a corporate firm. He suggested including an item in the contract of establishment that tolerated the life period of the company to the maximum. “I would prefer to add an item also to the contract which won’t accept increasing the capital of the company without a consent agreement,” he said