This article has been researched and written by the Business Development team at Creation Business Consultants. AI has not been used in generating this article.
Family businesses constitute a very high percentage of private businesses in the UAE, and to ensure legacy preservation, structured governance and smooth succession planning, the need for a robust wealth management structure comes to the picture.
Wealth management structures are legal vehicles often used by high-net-worth individuals, families, and investment professionals for asset protection, estate planning, and investment purposes. The Dubai International Financial Centre (DIFC) Free Zone legally recognizes and regulates these structures, amongst which are DIFC Family Offices.
LEGAL STRUCTURE & COMPLIANCE OF A DIFC FAMILY OFFICE
ASPECT
DETAILS
Legal Structure
A Family Office in DIFC can be incorporated as a Private Company or a Limited Liability Partnership. The shareholder can be an individual or a corporate body. Individual shareholders can be family members, allowing centralised control & liability protection
Shareholder & Directors Requirements
A Family Office must have at least one shareholder (individual or corporate) & appoint one director above the age of 18
Net Asset Requirement
A family office must have a minimum net asset requirement of USD 50 million, established with reference to fair market value or book value assessment
Governance
A family charter is required to be developed by the Family Office, it acts as a framework that outline roles, responsibilities & decision-making processes. It is governed by appointed board of directors which include family members & external advisors
DFSA Authorisation
A DIFC Family Office can provide a range of services to manage various aspects of a family’s wealth including asset investments, coordinating real estate planning & overseeing philanthropy. These services are categorised as non-restricted services. Non-restricted services are non-financial services that provides lower regulatory burden, however, if the family office operational scope goes beyond to include or offer financial or regulated services, then further Dubai Financial Services Authority (DFSA) authorisation & licensing is required
Regulatory Compliance & Reporting
Family Offices need to ensure adherence to DIFC Anti-Money Laundering (AML) & Know-Your-Customer (KYC) requirements, & preparation of annual financial statements in accordance with the International Financial Reporting Standards (IFRS)
Operational Scope
A family office can serve a single family or multiple families. A Single-Family Office (SFO) manage wealth, administration, & succession for one family, while a Multi-Family Office (MFO) serve multiple unrelated families & may require DFSA authorisation as it provides regulated financial services such as tax planning, bill payments, legal advice & asset management
HOW TO SET UP A DIFC FAMILY OFFICE
Determine Type: To set up a Family Office In DIFC, families must first decide between a Single-Family Office (SFO) or a Multi-Family Office (MFO), depending on their service scope and scale.
Appoint a Corporate Service Provider (CSP): Appoint a DIFC-licensed CSP such as Creation Business Consultants to incorporate your family office and engage with our in-house corporate structuring and tax advisors to form your family office according to your objectives and wealth complexity.
Documentation: Prepare the following documents:
Comprehensive overview of the family office, services provided and expected number of staff.
Family Structure: Include the family members’ profiles (including PEP status), common ancestor and family tree for 3 generations.
Details about the family businesses and entities.
Source of Wealth: Identifying the overall origin of the wealth, how it was generated and accumulated over time.
Source of Funds: Identifying the origin of money used in the transaction and verifying the funds legality.
Ultimate Beneficiary Owners (UBO) and controllers’ identification details, includes:
Certified passport copies for each of the UBOs, shareholders and directors.
Certificate of incorporation for corporate shareholders.
CSP Statement of Confirmation verifying:
Family lineage (common ancestor).
Due diligence on UBOs, controllers and source of wealth and source of funds.
Minimum asset threshold met.
Data Protection Notification: Determine if the Family office will be engaged in processing personal data and provide declaration to the DIFC Commissioner of Data Protection accordingly.
Registered Address: Identify the office registered address. This can be an owned or leased office space in DIFC, and for families with UAE presence, they can use our own Registered Address if they decide to engage us as their CSP.
Governance Framework: Prepare a family charter with investment philosophy, succession rules, and establish family council to involve younger generations.
Compliance and Reporting: Determine the compliance officer to oversee DIFC compliance (AML/KYC).
THE MOST TYPICAL SETUP MISTAKES (AND HOW TO AVOID THEM)
1. Setting Up Without a Governance Framework
Many families don’t have a clear governance structure in place before setting up the Family Office. Disputes and inefficiencies can occur rapidly in the absence of clearly defined roles, responsibilities, and decision-making procedures. Families should prevent this by beginning with a well-written family charter or constitution that specifies how decisions will be made, how disputes will be settled, and how the family’s values and long-term objectives will be maintained.
2. Overlooking Cross-Border Tax and Regulatory Compliance
Families that own assets abroad frequently overlook the tax and regulatory implications in other countries. Penalties, double taxation, or reputational risk may result from this. The DIFC Family Office should be set up with global tax efficiency in mind, backed by expert-led assessments of compliance requirements in every pertinent jurisdiction, to avoid this.
3. Appointing Underqualified Advisors or Management
Placing control in the hands of individuals without relevant expertise can compromise both compliance and investment performance. The solution lies in selecting experienced professionals with a proven track record in wealth management, legal structuring, and fiduciary responsibility, ensuring decisions are both compliant and strategic.
4. Delaying Succession Planning
Some families defer succession discussions until much later, creating a vacuum when transitions become necessary. A seamless and legally sound transfer of ownership and leadership should be ensured by incorporating succession planning into the DIFC Family Office design from the beginning. Instruments like wills, trusts, and foundation bylaws can be used for this.
FLEXIBILITY AND SCALABILITY
A DIFC Family Office can evolve over time, scaling with the family’s needs. Structure can be converted between Single and Multi-Family Office, subject to regulatory approvals.
A Family Office may act as Trustee to manage assets in a trust, but only for trusts that are within the same family. Alternatively, the Family Office can use DIFC Foundations as trustee vehicles.
DIFC Foundation or DIFCPrescribed Company are other type of DIFC legal structures which are for families needing simpler wealth management structural models. In short, a Foundation operates similarly to trusts, and Prescribed Company is useful for holding assets or isolating financial risk, widely used in structured finance and investment holding.
TAKEAWAY
Establishing a DIFC Family Office provides families with a trusted and regulated environment to manage their wealth and ensure smooth generational transitions, achieving stability, limited liability and control over assets. Reach out today to our corporate structuring and tax advisory team to learn more about the different wealth management structures to ensure that the selected structure is optimised for the family’s individual circumstances and facilitate a smooth setup.
Contact Creation Business Consultants at [email protected] or +971 4 878 6240 to set up your DIFC Family Office with confidence.
