You start a company with your best friend. 50/50 Partners.
You work hard for 10 years. The company is now worth AED 10 Million.
Life is good.
Then, tragically, your partner dies in a car accident.
In the UK or USA, the shares might pass to a Trust, or you might have a smooth Buy-Sell agreement.
In the UAE, you face a unique crisis that destroys businesses overnight.
It centers on two things: Sharia Inheritance of Shares and Frozen Bank
Accounts.
1. The “Wife as Your New Partner” Problem
Under UAE Law, your partner’s shares (50% of the company) are now assets of his estate.
- His wife inherits 1/8th.
- His children inherit shares.
- His parents inherit shares.
The Result: Suddenly, you don’t have one partner. You have 7 partners.
And they know nothing about the business.
The wife wants cash immediately (to pay rent). The brother wants to sell the company. The uncle wants a job.
The Fix: “Partnership Protection Insurance”
This is a Life Insurance policy on each partner.
If Partner A dies, the policy pays AED 5 Million (his share value) to the surviving Partner B.
Partner B uses that cash to BUY the shares from the deceased’s family.
- Family: Gets Cash (which they need).
- You: Get 100% control of the company.
- Business: Survives.
2. The “Key Man” Risk (The Rainmaker)
Every small business has one person who brings in 70% of the revenue.
Maybe it’s the Founder. Maybe it’s the Top Sales Guy.
What happens if they die?
- Sales stop.
- Clients leave (because they trusted him, not the brand).
- Creditors panic and call in loans.
The Solution: “Key Man Insurance”
The Company buys a policy on the life of this Key Person.
If they die, the Company receives AED 2 Million cash tax-free.
This cash is used to:
- Survive the drop in sales.
- Pay a headhunter to find a replacement.
- Pay off bank loans to stop foreclosure.
3. The Bank Freeze (Again)
If you are a Sole Establishment, or if the deceased partner was the sole signatory on the bank account…
The bank freezes the corporate account.
Even if you have AED 5 Million in the bank, you cannot pay salaries this month. You cannot pay DEWA.
The business suffocates due to lack of air (cash).
Key Man Insurance (paid to a separate unaffected entity or surviving partner) provides the emergency oxygen
to pay staff while the courts unfreeze the main account.
4. Liability for End of Service
If you close the business because the partner died, you legally owe “End of Service Gratuity” to all 20 staff
members immediately.
Do you have AED 400,000 liquid cash sitting there?
If not, you (the surviving partner) might be personally liable in civil court. Insurance covers this
liquidity gap.
Comparison: The 10-Year Plan
| Scenario A (No Agreement) | Scenario B (Buy-Sell Agreement + Insurance) |
|---|---|
| Partner dies. | Partner dies. |
| Wife + 3 kids + Uncle inherit 50%. | Insurance pays AED 5M to Survivor. |
| Arguments. Deadlock. Business stagnates. | Survivor pays Family AED 5M for shares. |
| Outcome: Business sold for scrap value. | Outcome: Family rich. Business strong. |
FAQ: Setting It Up
Q: Is this expensive?
A: It’s just Term Life Insurance. For a healthy 40-year-old, covering AED 1 Million might cost AED 2,000 per
year. It is a tiny business expense (and tax deductible in some jurisdictions).
Q: Can’t we just write a contract saying “I get his shares”?
A: You can write it, but if you don’t have the CASH to pay the family for those shares, the contract is
useless. The family won’t give you a AED 5M asset for free. The insurance provides the cash to make the
contract work.
my wife?” If the answer is No, call a broker and set up Partnership Protection.