RSM Albazie & Co holds family business event

Third family business event calls for strategic succession planning

RSM Albazie & Co, part of the sixth largest network of independent audit, tax and consulting firms ‘RSM International’, recently organized their third family business event since 2012 for over 120 members from prominent business families in Kuwait at the Regency Hotel. With over 80 percent of businesses in the GCC region being family-owned businesses, the event focused on raising awareness towards the precautionary tools and best practices that can be successfully implemented by family businesses to increase its chances of successful continuity.

The session was led by prominent industry experts Mustafa Sarhan, Director of Family Business Advisory Services at RSM Albazie & Co. who brings along with him over a decade of experience as a family business consultant and Jason Hobday, Executive Director of Family Advisory at UBS Wealth Management who is also armed with over 15 years of experience within the field of family advisory.

With less than 10 percent of family businesses in the region making it into the third generation, the succession process is regarded as a key stage within the lifecycle of a family business which can yield numerous variables that contribute towards the acceleration or deterioration within the business structure. These include: lack of a common continuity plan, dividend vs. reinvestment decisions, working family members’ remuneration, the “tunnel vision” dilemma, and exit strategy & policy, and valuation.

Mustafa Sarhan addressed participants on the key challenges that family businesses in the region face which is an intersection between the family, ownership and the business in itself which result in issues such as informality of clear business norms, family member employment, rights and obligations confusion and the perception of “fairness”. Sarhan then elaborated on the solutions framework in addressing these challenges which include establishing a best fit ownership structure, the development of a family constitution, setting up a corporate governance framework, establishing a family office, and instilling continuous review and improvement.

Jason Hobday provided a comprehensive analysis on the current challenges facing the orderly transmission of wealth within the family business structure with one of the key challenges being the issue of placing trust in potential successors and maintaining relevance with the younger generation. Hobday also illustrated the importance of a family office in steering the family towards a unified direction through generations, thus solidifying and preserving family assets and enabling the family’s overall wealth to multiply over time.

During the event, Nayef Al-Yaseen, Managing Partner of RSM Albazie & Co. said, “Family business is a sensitive subject matter that many are reluctant to tackle which ultimately results in many businesses suffering in silence for an extended period of time. It is imperative to make the right informed decisions to develop and implement a solid business succession plan in coordination with a family business advisory consulting firm to ensure an efficient succession plan is strategically put in place to tackle future milestones successfully.”

By the end of the event, UBS’s speaker, Jason Hobday, the speaker of RSM Albazie Consulting, Mustafa Sarhan, Jameel Al-Sanea, Chairman and CEO of Abdul Razzaq Al-Sanea Group & Sons, and Husni Salameh, Senior partner at RSM AlBazie Consulting were invited to conduct a discussion panel with the audience and share their experience and expertise.

One of the main case studies presented was Jameel Al-Sanea, who explained that after the passing of his late father, Abdul Razzaq AlSanea, he called for a meeting with the family members and asked them to agree on the fate of the family partnership: 1. To continue as a family business? 2. To split and divide the inheritance accordingly?

When the family met, everyone agreed on the necessity to continue the business as a group and they all issued a power of attorney to Jameel El-Sanea to enable him to carry out his duties on behalf of the family.

However, Jameel Al-Sanea decided not use this power of attorney in critical decisions, especially those related to the sale, purchase, mortgage and borrowing transactions. He also continued to hold quarterly meetings involving family members, as he believed in the principle of transparency, to inform them about all matters related to the group’s businesses.

This was followed by the approval of all members of the family on Jameel Al-Sanea’s proposal to cooperate with a specialized advisory firm in the family business services to prepare a family constitution. After several months of discussions, a constitution was developed to structure the relationship between all the family members. Over time, there will be a need to amend this constitution to accommodate the business development and the family needs.

Jameel Al-Sanea stressed on the fact that the issues in family businesses are the similar, despite the difference in location or presence of these companies. Therefore, the advice is always to organize family affairs, working relations, and family employment, through proper agreement of the heirs’ as well as the family constitution.

Hussain Salameh, Senior Partner at RSM Albazie Consulting, who has long experience in dealing with family businesses, estate planning and family members’ exits, said that it is essential that the founder of the family business organizes their financial position during their life, including their fixed and current assets, beneficial owners of their of real estate, shares and payments to their heirs regardless of the entity or entities that have registered these properties and investments under their names and obtain the signature of all family members and heirs to such transactions to avoid several issues and disputes that might arise following the death of the heirs.

RSM Albazie & Co provides a variety of solutions through its Family Business Advisory service line such as Family Constitution, Shareholders’ Agreement, Corporate Governance Services, Succession planning, Estate planning, Ownership Governance and Valuation, & Exit Strategy. Established in 1963, RSM Albazie & Co is considered to be the oldest advisory and accounting firm in Kuwait.