Tests faced by wealthy family businesses in the Gulf are usually related to a stock market crash, loss of an investment or, at worst, the sudden death of the family patriarch. However, the Covid-19 pandemic has brought about a new and unprecedented challenge.
When the outbreak was announced the immediate concern for wealthy families, or private clients as we refer to, was the health and safety of the family patriarch since they were now of an advanced age which placed them in the vulnerable and high-risk category.
Even before the lockdown in the United Arab Emirates (UAE), families kept their elderlies quarantined, and family members were prevented from visiting them even in the month of Ramadan, which has never happened before. All family Majlis houses are closed, so are mosques, an extraordinary situation unprecedented in this region.
The total lockdown for almost a month was forced in some Emirates. Other GCC (Gulf Cooperation Council) states eased later with permits and exemptions, but it has already had its dire impact on the economy. So even now with malls/retail outlets partially re-opened and businesses reopened with less capacity, the situation at large with oil prices at their lowest, import and export businesses and air transport at a halt, the total economic outlook is rather gloomy.
Wealthy family businesses in the UAE continue to manage their businesses on a day-to-day basis, not impacted by the lockdown in the same way as other businesses since they managed to meet and stay at a socially distanced proximity when others could not. They have also managed to deal with the issues arising of the Covid- 19 outbreak with the help of the numerous resolutions issued by the authorities to address many of their business concerns.
Most wealthy families in the UAE are owners of real estate and their businesses rely heavily on rental incomes. To combat loss of revenue during the lockdown, they offered incentives and relief packages to assist in the recovery from the pandemic. Malls, commercial centres and other real estate across the UAE have offered either deferred rents or have waived or reduced rent to give smaller businesses the time to attempt to recover from the effects of the lockdown. They also managed their HR crisis by cutting salaries instead of firing staff in compliance with Resolutions issued specifically for the purpose of stabilising employment this time of crisis.
In addition to the financial relief packages offered by the government many wealthy families have stepped up to help the country in its fight against the spread of Covid-19. Notable family businesses in the UAE have made contributions in the form of cash donations, free services, equipment and facilities.
It is obvious that the crisis of corona has brought succession planning to the surface again. It seems now the one agenda item to be discussed later has indeed become an urgent matter that needs to be addressed sooner. Being high net worth lawyers in the UAE and involved with the authorities and clients in drafting a number of the laws which are issued, or soon to be, we have been contacted by many families, local in the GCC and expat, who are looking into available options for a smooth transition.
We have yet to see how the economy post Covid-19 will impact wealthy family business governance and structures and how they will adapt to the new reality.
Until then, from all of us in Dubai we hope you are all keeping safe and well.