Family businesses are a significant part of the economy in the UAE, and they have been crucial in shaping the country's growth and development. However, family businesses are not immune to disputes, and such conflicts can severely impact both the business and the family members involved.
So what might be the reason why family businesses fail to survive? – Let us look at five common reasons
Succession Planning - Many family businesses don't have a solid plan in place for who will take over the business in case of the eventuality of the shareholder or when the current generation retires or steps down. This can lead to confusion, disagreements, and even the collapse of the business.
Conflicts over personal and professional boundaries - Personal tensions can spill into the workplace when family members are involved in the business leading to disputes.
Financial management - Family businesses often have a more relaxed approach to financial management, which can lead to poor decision-making, mismanagement of funds, disputes over cash flow, debts & investment decisions.
External Factors - Economic conditions, regulatory changes, and market fluctuations can also impact a family business's finances. Family businesses resistant to adopting according to the changing market situation may struggle to stay competitive,
Lack of professionalization - Family businesses often rely on the skills and experience of one or two key members. But, when those members leave or retire, the business may struggle to find new talent to fill the gap.
Cultural and generational differences - In the UAE, family businesses often span multiple generations and cultures, leading to differences in values, expectations, and communication styles.
In summary, financial and commercial disputes can be particularly challenging in the context of family businesses in the UAE. However, by establishing clear governance structures and utilizing the available dispute resolution mechanisms, family businesses can effectively address and prevent such disputes, ensuring their long-term success and sustainability
Have questions? Contact us