Sudden death may lead to fund freeze for Dubai firms
As published in Thomson Reuters – Zawya
BY Shane McGinley
Single-shareholder firms may have their accounts locked for three months without a will
21 March 2016
Single-shareholder companies based in Dubai risk having their funds frozen for more than three months if the stakeholder suddenly dies without clear inheritance policies, according to a lawyer.
The Personal Status Court of the Dubai Courts issued a new order last month stating that should an individual shareholder of a Dubai-based firm pass away unexpectedly the company’s bank accounts would be frozen. The funds would then be transferred to the court’s treasury until it determines who is to inherit the company and its funds.
Cynthia Trench, principal of Dubai legal consultancy Trench and Associates, said it could take three to six months for the funds to be released, a situation which has represented a severe challenge to some of her clients who did not have a clear succession plan in place.
“For a company who has an individual shareholder who dies, it is absolutely unacceptable that the death of a shareholder would affect the company’s operating accounts,” Trench told Zawya.
The new court order affects Muslim and non-Muslim owners.
Trench advised individual owners of small and medium-sized enterprises (SME) to register an official will with the Dubai International Financial Centre (DIFC) Wills and Probate Registry in order to avoid potential freezing of company funds in the unlikely event of the death of the main shareholder.
“They need to do something about having a DIFC will, which then takes it outside of Dubai Courts entirely, or they restructure their shareholding into a corporate shareholder and the company is formed offshore,” she added.
SMEs are a vital part of the United Arab Emirates’ business community, with around 90 percent of the country’s workforce employed by around 300,000 SMEs, according to the Khalifa Fund for Enterprise Development.
© Zawya 2016
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