What would happen if your business partner died in UAE?

Many of the UAE’s small businesses are set up as partnerships with two friends becoming equal shareholders.

But if one of the partners were to die or suffer a critical illness, their holding would pass to their next-of-kin as opposed to the co-director who helped to build the company from scratch.

However, now there are policies in place that can deal with this problem. According to the Dubai-based financial planning company Guardian Wealth Management (GWM), it has come up with a new partnership assurance policy, designed to allow the unaffected partner to take full control of the company, while ensuring that the family of the deceased shareholder is financially compensated if they decline to take a holding in the business.

“In all the excitement of setting up and running a company with a business partner, it’s understandable that no one wants to consider what happens in the event of a tragic accident or illness.

“But after such an unfortunate event, there is a real possibility that businesses can fall apart without the proper planning and agreements in place. Everything that the partners have worked so hard together to achieve can suddenly be lost,” said Hamzah Shalchi, who manages GWM’s Dubai operations.

He cites a case where the co-director of a private company founded in the UAE died suddenly. His will meant his stake in the company went to his wife.

“We had an unfortunate situation where a grieving widow was left with a 50 per cent stake in a company that she had no interest in, while the other business partner was left to run the company by himself,” he said.

“The ideal scenario would have been for the widow to be financially compensated and the other director to take full ownership of the company he helped to build.”

Partnership assurance policies like these help cover the costs as of the affected director’s stake in this case.

Business persons can also cover the cost to a business should the death of a key member of staff occur that would threaten the viability of the company.

Under the policy, the company takes out life cover on its key employees and becomes the beneficiary of the policy.

If any one of those people were to die, the company receives a pay out from the insurance company. The company can then use the pay out to find a replacement person or to pay off debts.