Kuwait City, Kuwait: Over 30 of Kuwait’s leading and well-known family business owners attended a seminar for family business owners at the Al Tijaria Tower and engaged in an open and frank conversation about the many issues surrounding succession planning. The event, which was hosted by Private Bank, Coutts & Co. in association with International Legal Group and SNR Denton, provided a networking opportunity for guests, enabling them to share and exchange examples of best practice. Russell Hunter, Private Banker for Coutts in Kuwait, explains the background of the event.

Why host a family business seminar in Kuwait?

Hunter: Kuwaitis are known for their family orientated approach to life, and so it’s only natural that the country should be home to so many extremely large and successful family run companies. The seminar was aimed at providing a useful and informative open forum, to help family businesses in Kuwait recognize and address some of the many pitfalls and issues that can arise when passing down a business to the next generation. The forum was hosted by the Head of Coutts’ Family Business Division, Mark Evans and Private Bankers Laurent Bardet, Pascal Natali and Russell Hunter who gave detailed examples of case studies and provided advice on best practice as well as some useful tips on avoiding some of the problems

The event was organized by the International Legal Group in association with SNR Denton, who are the trusted advisors to a large number of family businesses across Kuwait. Guests included many of SNR Denton’s clients and local contacts and were hosted at their offices in the Al Tijaria Tower.

Why is Coutts so involved in the area of family business?

Hunter: We see the private banking relationship as a partnership, and it is our role to help clients preserve and grow their wealth over the intergenerational long-term. Unfortunately, all too often, we see that wealth is destroyed when it is passed down through the generations, and so it is part of our responsibility to assist families with their succession planning and provide helpful advice based on our experience with other clients where we can. We have a number of clients in Kuwait, and we see that a large part of their wealth is invested in their family business, so it’s important we look at this area as part of the bigger picture to ensure that they are able to leave the legacy they wish for future generations.

Why is family business succession an important topic for families’ businesses to address?

Hunter: There are two ways of looking at a family business. You can ultimately see it as a family, or as a business. This means that some people see the business as a means to serve the family, while others see the family as a means to serve the business. There is no right or wrong perspective but what is important is that there is some separation between the two. It is of course absolutely normal for businesses to have problems, and for families to encounter problems too, however, we see that it is all too common for family issues to transfer into the business and vice versa. The good news is that this is something that can be avoided with proper stewardship, structure, and planning.

What useful advice can you give to families in business?

Hunter: We believe that families should not neglect planning for the family when considering their long term future. Although it’s true that family business owners need to look closely at a whole raft of things related to the business side of things, it’s equally true that they need to pay as much attention to the family side of things. Preparing the next generation for responsible ownership or responsible leadership takes time and requires a lot of planning. Creating a structure for discussing and making decisions relating to the wealth and well-being of the family are also critical to long term success.

What family businesses can do to ensure a smooth transition from one generation to the next?

Hunter: Across the globe, it is estimated that just five percent of firms survive until the fourth generation. As such, Coutts’ experience has shown that in order to achieve long term success, family businesses need to have a clearly articulated vision which all family shareholders can both understand and buy into; and they need to make sure family goals are aligned with the goals of the business.

Hunter: Across the globe, it is estimated that just five percent of firms survive until the fourth generation. As such, Coutts’ experience has shown that in order to achieve long term success, family businesses need to have a clearly articulated vision which all family shareholders can both understand and buy into; and they need to make sure family goals are aligned with the goals of the business.

• An aligned group of shareholders is crucial. All shareholders need to understand and support the company’s long term goals and strategy. This is where mechanisms for exit from the company become important. Successful family businesses make sure that family members who have short term financial needs, or who don’t support the company’s long term vision, can exit fairly and harmoniously from the business.

• Clear family communication and governance matter. A family constitution or charter, written by the family, can clarify the relationship between the family and the business and spell out expectations of the owning family with respect to key questions like succession, employment and family meetings.

• Education is key to prepare the next generation of shareholders to become a cohesive and responsible group of beneficiaries, and to understand the responsibilities of being owners, as the business passes down the generations. The earlier they can start; the better.

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