Family businesses are commercial or corporate organizations owned, controlled and managed by a family. According to data from El País, they have a very important value in the economic sector as they produce between 70% to 90% of the world’s GDP and, therefore, have between 50% to 80% of the jobs around the world.

Although it is known that less than a third of these companies survive the transition from the first to a second generation, those that have succeeded have done so through a special dynamic: Family Governance.

This term refers to the structures and processes that families use to organize and guide their relationships with the company. When the structure is well designed, the impact is extremely positive.

This approach is crucial nowadays, as it allows families to develop and implement strategies to diversify and manage risk, and protect the assets they have worked so hard to accumulate. Not having a plan in place can be catastrophic for a client’s family, both emotionally and financially. And it doesn’t have to be like that, when it is possible to have a structure such as Family Governance, as well as the support of experts in the sector whose main value is to provide reliability and security.

Among the great achievements of Family Governance are:

• to generate a stronger and more consolidated business family, by having the consensus of its members, 
• to help in the planning of future possessions and exercises of patrimonial power, 
• to allow planning the role of family members in the company, 
• to collaborate in the creation of safe methods for the administration of wealth, 
• to help obtain the necessary support to professionalize the company, reduce conflicts, and 
• to reduce conflicts and strengthen family-entrepreneur relations.

These issues are precisely where the difference lies between companies that just do business and truly family-led companies that transcend generations. The flexibility to adapt to changes, the preservation of history, traditions and family values, having thoughtful policies on compensation, the purpose of benefits, responsibilities, present and future ownership as well as the willingness of its members to be accountable are key points for the durability of the company through several generations.

There are many things in life that we cannot control. Every day brings a certain level of risk, which can be mitigated and minimized through Family Governance, which is based on the implementation of customized strategies to diversify and manage risk and protect assets. Family Governance provides total certainty as it manages investment strategies and tax planning, thus ensuring that assets are not only preserved, but continue to grow and prosper.

In conclusion, Family Governance is the right choice for transgenerational success. Its reliability can be summed up in four points: patience, trust, dialogue and a common future.

By Alejandro Zubiria.

Dubai is one of the seven Emirates in the United Arab Emirates. It has a remarkable history that has shown us the process faced to become one of the most important destinations and “Business Hubs” in the world. 

Thanks to its exponential development and growth, Dubai has become a very important gateway to the Middle East, building a diversified economy that has allowed it to position itself as a global trading hub with a very sophisticated infrastructure.

Within Dubai there are areas known as Free Zones, in which entities can be established that offer competitive advantages for foreign investors. One of its main free zones is the DMCC.

What is DMCC?

Dubai Multi Commodities Centre – DMCC is a government entity established in 2002 in the United Arab Emirates (Dubai) as a leading hub for international commodities trade and is the world’s fastest-growing Free Zone.

Establishing an entity within the DMCC offers numerous commercial and competitive advantages in a wide range of trading activities and multiple business sectors, with a secure and regulated trading environment.

Below are some of the benefits of having your own company within the DMCC:

• 100% Business ownership.
• No restrictions on capital repatriation.
• 0% personal and corporate income tax. 
• Effective immigration services including visa issuance and support.
• Monthly networking opportunities, events, segment-specific clubs and educational workshops.
• Education updates on the latest developments in regulations and compliance standards.

We invite you to learn more at https://www.dmcc.ae/about-us

Throughout our career, we have developed close professional relationships, which is why Fidemont through its offices in Fidemont Curaçao can now provide direct local assistance as a “Certified Service Provider of DMCC Free  Zone” (https://www.dmcc.ae/free-zone/international-service-providers) for all of Central and South America.

With such certification, we provide the necessary assistance for the incorporation of a company within the DMCC, offering the following services:

• Extensive support in the process of incorporating a new company.
• Assistance in the selection of the license activity, company registrations, application forms and the collection of required documents.
• Support with modification of licenses, change the entity incorporation, increase share capital, etc.
• Link between the DMCC and the applicant, providing a wide network of business contacts suitable for business expansion.
• Assistance with post-company formation procedures, such as obtaining visas and opening bank accounts.

A Trust Protector is a third party entrusted to ensure compliance with the terms of a Trust, the wishes of its creator and the fulfilment of the Trustee. It is without a doubt a powerful tool that should always be considered when planning a Trust.

The fundamental reason for appointing a Trust Protector is to have an independent and objective professional who can monitor how the Trust’s assets are managed and distributed over time.

What can a Trust Protector do?

Their duties are specified in the Trust document and may vary significantly. Generally, the Protector may have functions related to the Trust, but not linked to the Trustee´s powers, and their powers may include:

• Replacing the Trustee whose compliance is unsatisfactory and name another one instead.
• Terminating the Trust.
• Changing the jurisdiction of the Trust.
• Resolving deadlocks or disagreements between Beneficiaries or between Beneficiaries and the Trustee.
• Vetoing investment decisions.
• Redirecting distributions from the Trust or amending the administrative provisions and terms of the Trust based on unforeseen circumstances in the lives of the Beneficiaries or changes in the law, being able to transfer the administration of the Trust to a different jurisdiction.

Trust Protectors can play an invaluable role. Many times, family members are the first natural choice, although it is very likely they lack the proper knowledge in the matter. A professional Trust Protector has the ability to ensure that the terms of the Trust and decision making are truly in the best interest of the beneficiary and in compliance of the wishes of the person who established the Trust.

In summary, the Professional Trust Protector is a good tool and necessary addition to the Trust to safeguard and monitor the Trustee´s activities. In this way it can help the interests of the beneficiary without being in the front line of daily decision making but informed and free from any direct link to the Trust or its assets.

 A Family Office is an independent entity that is created with the purpose of protecting and managing everything related to a family’s wealth, ensuring that it has all the necessary tools for the preservation of those assets over time.

There is no single model of Family Office’s services, as the circumstances of each family are unique and therefore the benefits in each case are adapted to its particular needs.

The use of a Family Office is recommended when you want to manage your family’s wealth in a professional way with objectives commonly related to inheritance planning, preservation of the wealth over generations, facing particular projects and even avoiding family conflicts associated with inheritance.

DSeveral factors should be considered when deciding to use a Family Office. These include: goals, jurisdiction, costs and determining the need to centralize wealth management through this entity. In addition, expert advice should be requested, as a highly qualified team with the necessary experience in the different areas is required for the proper management of family assets.

 A Family Office can provide different types of services, which are determined through the goals, needs and visions of each family. The following are some of the services most commonly provided by a Family Office:

• Wealth Management.
• Wealth growth.
• Estate planning.
• Estate protection.
• Financial planning.
• Business development.
• Project management.
• Asset stability.
• Preservation of family estate.

In summary, using a Family Office is appropriate as long as the needs themselves have been analyzed. These should be aligned mainly for the purpose of protecting, planning the asset transfer and preserving the estate, always tailoring the service to the needs of each family.

The COVID-19 pandemic is shaking the foundations of virtually every economy in the world. Sectors like airlines, hotels, and restaurants have a bleak future in the short term, and a significant number of them are undoubtedly likely to go bankrupt. Was it the pandemic foreseeable? Was it avoidable? Is there a remedy? It is very difficult to answer these questions, but let us move them to the individual level. Specifically, to our assets and the damage they may suffer, both in this pandemic context and with issues such as third-party attacks, divorce, death, health deterioration, bankruptcies, etc.

Knowing that there are elements of prevention and remedy at the assets level and not using them is, to a certain extent, equivalent to having available means of prevention and solution to the pandemic and having consciously left them aside.

If a preventive tool is within our reach and disposal, it is prudent to analyze it and (if it is worth it) incorporate it into our defensive arsenal.

In assets matters, there are many ways to protect yourself. Different legal figures can be used and you can even combine the best of different jurisdictions. The optimal situation should always be sought, emphasizing concepts such as risk, damage, protection, cost and benefit.

 If the risk (potential harm) turns into actual harm, it is usually too late to avoid its consequences. It is true that actions can be taken to mitigate this damage or to shorten its duration. The ones who knew how to prevent it are in the best situation, for having acquired this protection in advance, logically at a certain cost that (without doubt) was very acceptable with respect to the benefit obtained (the absence of damage, the asset advantage, family harmony, etc.).

Because these analyses are multidisciplinary, families should involve their lawyers, accountants, and financial advisers. Together with them and trust company that implements these solutions, they will protect the family assets in the best possible way and at an adequate cost.

 For this reason we have in Fidemont a consistent policy of interacting with all trusted advisors for each family. They are essential not only because of their technical knowledge but because they know the family dynamics. In a context like the present one, it is extremely important to take the time to bring order to all these matters. As in health, at the asset level to prevent is to cure.

“Patrimonial Protection. Generational transfer. Fiscal neutrality”

In line with global uncertainty, transparency and exchange of information among countries and the growth of tax and oversight pressure in Latin America, proposals usually offered are based on a short-term mentality and lack serious analysis. Within this framework of mere opportunism, it is noteworthy that the use of “Trusts” is promoted as a tool whose main and only purpose is tax planning.

In a trust, the person transfers assets to a third party (“trustee”) and such trustee is entrusted with the management of such assets in favor of whoever the contributor indicates. It is no coincidence that the word “trust” is used.

The main purpose of a trust is the protection and defense of the assets. Additionally, estate planning. Logically, any subsequent tax benefit will be welcomed, which will be defined according to the treatment given to the structure by the jurisdictions where contributors and beneficiaries have their fiscal residence. It is the task of the tax advisor to ensure that the trust has the best possible tax treatment.

However, and unfortunately, what has been happening is that some improvised people try to promote the trust as a solution whose main and only objective is to seek a tax benefit, and even copying standard formats that have not been adapted as a solution to the particular case of the client. This is a serious mistake. This should never be the case. The trust must be solid, well-structured and comply with all the requirements required by its nature in order not to be considered a “sham”.

It is essential to be clear that the proper way to plan a Trust should follow the following order of goals: 1-Asset Protection 2- Generational transfer and adequate estate planning 3- Fiscal neutrality. If the design alters the search for these priorities, it puts us at risk of generating undesirable effects for our assets. Once the right goals are accomplished, we can seek to obtain the most favorable tax treatment for the parties, always within the framework of current regulations. Forcing the use of a trust without the correct advice or with the focus on inadequate reasons would leave it open to questioning by third parties.

Trusts are and will continue to be an excellent asset protection and estate planning tool. Neither the client nor their advisor should lose that focus. Going the opposite way will generate mistakes that leave the door open to future contingencies.

Our advice is that families work with serious and solid tax advisors to help them design the appropriate structures for the right reasons. And that such structures are constituted and managed by competent and reliable providers.