Including Business Shares in Your UAE Will: Protecting Company Ownership

For UAE business owners, preparing a will is not only about personal assets. It can also be an important part of protecting the future of your company.

If you own shares in a UAE business, failing to include those interests in your estate-planning arrangements can create uncertainty for your family, co-founders, employees and other stakeholders.

Including business shares in a UAE will allows business owners to formally document their wishes regarding ownership and succession, subject to the applicable legal and corporate requirements.

Whether you are a sole shareholder, founder or part of a multi-shareholder company, business succession should be considered alongside your personal estate planning.

Why Do Business Shares Need Specific Attention?

Company shares are different from ordinary personal possessions.

Your shareholding may determine voting rights, ownership percentages, dividends and influence over important company decisions.

A general estate plan that does not properly address your business interests can therefore leave important questions unanswered.

For example:

• Who should inherit your shares?

• Should beneficiaries become active shareholders?

• Should your co-founders have an option to purchase the shares?

• Who manages the company during the succession process?

• How should the ownership structure change after your death?

These questions become particularly important when you are a founder, majority shareholder or key decision-maker.

This is why a Business Owners Will or appropriately drafted Full Will can form an important part of business succession planning.

What Can Happen Without Business Succession Planning?

If a business owner dies without clear arrangements for their company interests, the succession process can become more complicated.

Depending on the circumstances and applicable laws, the deceased shareholder’s interests may need to be dealt with through the relevant estate and legal procedures.

Potential issues can include:

Uncertainty Around Ownership

Family members, beneficiaries and surviving shareholders may need to establish how the deceased person’s shares should be dealt with.

Disruption to Decision-Making

If the deceased owner was responsible for important company decisions, their absence can create operational uncertainty.

This can be particularly significant where the company relies on a small number of shareholders or where certain decisions require shareholder approval.

Difficulties for Co-Founders

Surviving founders may suddenly find themselves dealing with beneficiaries who have different expectations about the business.

A co-founder may want to continue operating the company, while a beneficiary may simply want to realise the financial value of inherited shares.

Impact on Employees and Clients

Uncertainty around ownership can also create concerns among employees, suppliers and clients.

For businesses where the founder plays a central role, clear succession planning can help provide greater continuity during a transition.

What Does a Business Owners Will Typically Address?

A properly structured business shares in UAE will arrangement can address several important questions.

Depending on your circumstances and the applicable legal framework, this may include:

• Who should inherit your company shares

• The proportion each beneficiary should receive

• Whether beneficiaries should become active shareholders

• Whether beneficiaries should hold shares passively

• How business interests should be managed during succession

• Relevant buy-sell arrangements

• Coordination with existing shareholder agreements

• Other succession instructions relating to the ownership structure

The precise wording and legal effect will depend on the company structure and the applicable UAE laws and regulations.

Who Should Inherit Your Business Shares?

This is one of the most important decisions for business owners.

You may want your shares to pass to:

• Your spouse

• Your children

• Other family members

• A business partner

• Multiple beneficiaries

• A family holding structure

• Another person or entity permitted under the applicable arrangements

However, inheritance and company ownership are not always the same thing from an operational perspective.

For example, your children may inherit your shares but may not have the experience or desire to run the company.

This is why business succession planning should consider both ownership and management.

Active vs Passive Shareholders

When preparing your will, consider whether your beneficiaries should actually participate in the business.

An active shareholder may be involved in:

• Strategic decisions

• Management

• Voting

• Company growth

• Business operations

A passive shareholder, on the other hand, may simply hold an ownership interest without becoming involved in daily management.

Making this distinction in your succession planning can help your advisers understand the outcome you are trying to achieve.

Coordinate Your Will With Your Shareholder Agreement

One of the most important considerations when including business shares in a UAE will is ensuring that your will does not conflict with your company’s existing documents.

These may include:

• Memorandum of Association

• Articles or constitutional documents

• Shareholder agreements

• Buy-sell agreements

• Transfer restrictions

• Rights of first refusal

• Other corporate arrangements

For example, a shareholder agreement may give existing shareholders certain rights if one shareholder wants or needs to transfer their shares.

Your will should therefore be reviewed alongside your company’s governing documents.

This is particularly important for companies with multiple founders or family-owned businesses.

What Is a Buy-Sell Arrangement?

A buy-sell arrangement can establish what happens to a shareholder’s interest following specific events, which may include death.

Depending on the agreement, surviving shareholders may have rights or obligations relating to the purchase of the deceased shareholder’s interest.

This can provide a structured mechanism for handling ownership changes.

However, the arrangement needs to be properly drafted and coordinated with the company’s governing documents and estate-planning arrangements.

Business owners should obtain professional legal advice before relying on a buy-sell arrangement.

Holding Companies as a Succession Planning Tool

Some entrepreneurs own multiple businesses or investments.

In these circumstances, a holding company may be used to consolidate ownership of different businesses or assets.

Instead of dealing with multiple operating-company interests individually, the ownership structure may allow succession planning to focus on the holding company itself.

This can potentially simplify the ownership structure, although whether a holding company is appropriate depends on the business, tax, regulatory and family circumstances involved.

A professional adviser can help assess whether such a structure fits your long-term objectives.

UAE Foundations and Business Succession

A UAE foundation can be another structure considered by certain business owners and families.

Rather than transferring company shares directly to individual beneficiaries upon death, a foundation may hold certain assets or shares according to its governing documents and the founder’s intentions.

This can be relevant to families seeking a longer-term succession structure.

A foundation may potentially provide a framework for:

• Holding business interests

• Managing family wealth

• Establishing governance arrangements

• Supporting multigenerational succession

• Separating ownership from day-to-day management

However, a foundation is not automatically a better alternative to a will.

The appropriate structure depends on your objectives, business arrangements, family circumstances and applicable laws.

Step-by-Step: Protecting Your Business Through Your Will

1. Review Your Current Shareholding

Start by documenting exactly what you own.

Review:

• Company name

• Shareholding percentage

• Number of shares

• Ownership structure

• Other companies you have interests in

2. Review Existing Corporate Agreements

Check your Memorandum of Association, shareholder agreement and any other documents affecting the transfer of shares.

3. Decide Who Should Receive Your Shares

Identify your intended beneficiaries and determine how you want the ownership to be divided.

4. Consider Their Role

Decide whether beneficiaries should become active participants in the business or simply hold the shares as an investment.

5. Consider Alternative Structures

Depending on your circumstances, consider whether a holding company, foundation or buy-sell arrangement may support your succession objectives.

6. Prepare Your Will With Professional Guidance

A Business Owners Will or Full Will can then be prepared to reflect your wishes and coordinate with the company’s documents.

7. Communicate Where Appropriate

Where suitable, discuss the succession plan with co-founders, shareholders and other key stakeholders.

8. Review the Plan Regularly

Business ownership can change quickly, so your will and succession arrangements should be reviewed when your company structure or personal circumstances change.

What Happens in a Multi-Shareholder Company?

Succession planning can become particularly important when several shareholders own a company together.

Imagine a business with three founders.

If one founder dies without appropriate succession arrangements, the surviving founders may suddenly have to work with the deceased person’s beneficiaries.

Those beneficiaries may have different expectations from the original business owner.

They may want to:

• Keep the shares

• Sell the shares

• Receive dividends

• Participate in company decisions

• Transfer their interest to another person

Clear succession planning can help reduce uncertainty by documenting the intended outcome in advance.

Common Mistakes Business Owners Make

Ignoring Company Shares

Some business owners prepare a will covering their personal assets but forget to address their company ownership.

Failing to Review Shareholder Agreements

Your will should be considered alongside existing corporate documents.

Assuming a Business Partner Automatically Inherits Your Shares

A business partner does not necessarily become the owner of your shares simply because they are your co-founder.

Specific succession or buy-sell arrangements may be required.

Not Planning for Interim Management

If you are the main decision-maker, consider what happens to the business immediately following your death.

Ignoring Changes in Shareholding

If you acquire another company or change your ownership percentage, your estate plan may need to be reviewed.

Assuming a Foundation Is Always Necessary

A foundation can be useful in certain circumstances, but it is not appropriate for every business owner.

Frequently Asked Questions

Can I include business shares in a UAE will?

Business interests can potentially be addressed through an appropriately prepared UAE will, subject to the applicable legal and corporate requirements.

Will my business partner automatically receive my shares?

Not necessarily. Without specific arrangements, your shares may pass according to the applicable succession framework rather than automatically transferring to your business partner.

Can a Business Owners Will cover Free Zone companies?

The appropriate estate-planning structure can depend on the company’s jurisdiction, legal structure and applicable rules. Free Zone and Mainland businesses should be reviewed individually.

Should my will match my shareholder agreement?

Your will and shareholder agreement should be coordinated carefully. Conflicting provisions can create uncertainty, so both documents should be reviewed together with qualified legal advisers.

Should I use a foundation instead of a will?

It depends on your objectives. A will can provide instructions for the transfer of assets following death, while a foundation may provide an ongoing ownership and governance structure. The appropriate solution depends on your business and family circumstances.

Can my children inherit my company shares?

Depending on the applicable legal and corporate framework, children may potentially be beneficiaries of business interests. However, business owners should consider whether their children are intended to become active shareholders or simply receive the economic benefit of the ownership.

Should I update my will if my shareholding changes?

Yes. Significant changes to your ownership structure, company interests or family circumstances should prompt a review of your estate plan.

Protect Your Business Beyond Your Lifetime

For entrepreneurs and shareholders, business shares in a UAE will should be considered as part of a broader succession strategy.

Your company may represent years of work, investment and relationships. Without appropriate planning, the transition of ownership can create uncertainty for your family and business partners.

A properly coordinated plan can address your business shares alongside your personal assets and family arrangements.

Klay Consultants works with legal partners to help UAE business owners explore wills, holding companies and foundation structures for business succession and long-term planning.

If you own shares in a UAE company, consider reviewing your succession arrangements before an unexpected event makes them necessary.