Successful family businesses turn into joint stock companies

Successful family businesses turn into joint stock companies:

The new system of companies gives more flexibility in the practice of business, pointing out that the previous system had obstacles in particular with regard to the shareholding companies and the operation and composition, where the joint stock companies closed in the former system of the fundamentals of preserving entities, especially with regard to family entities or family businesses to ensure continuity .

The former regime has set a minimum of five persons. Some companies have the desire to convert two family entities into a closed joint-stock entity and can not be converted with two partners. The minimum five partners have been reduced by the new system to two partners, In this area, especially in many entities and family businesses.

On the other hand, the new corporate system encourages traders to take the name of the company instead of the establishment when they start their business activities by reducing the number of partners in the joint stock company to become partners instead of five, and reducing the minimum capital of the shareholding company to five hundred thousand riyals instead of two million riyals, And helps companies to achieve the objectives of national investment, and encourage investment of entrepreneurs in small and medium enterprises, and achieve the economic diversification required by facilitating the conditions for the construction of joint stock companies without any impediments, and contributes to increase the number of companies in the Kingdom, New job opportunities for citizens and supports the role of the private sector in the fight against unemployment, and provides suitable job opportunities for Saudi youth.

The new corporate system aims to regulate the private sector represented by the companies contributing to the Kingdom and support it, which brings great benefits to all parties, pointing out that the Kingdom has not always faltered to support the private sector at all levels as one of the most important pillars of the national economy, noting that the business sector is in dire need of such These measures guarantee the facilitation and facilitation of building joint stock companies with as few partners as possible, thus alleviating differences in views among members. The new system provides a systematic and stimulating environment for investment in the Kingdom. This helps to strengthen the role of companies in building a strong national economy. P entrepreneurs and small and medium-sized enterprises and investments.

In light of the changes and developments in the international economy and the need of the globalization trend of opening markets and liberalizing trade restrictions of protection, in addition to the accession of countries to the World Trade Organization, it is natural that companies, especially small or medium-sized families are exposed to serious risks threaten the entity and its continuity sooner or later , So it became necessary to work on the development of companies, especially the family through their transformation as shareholding companies, which increases their ability to meet the fundamental challenges that result from these variables, as well as protect them from stumbling and collapse.

However, he notes that successful family businesses are not interested in doing so and do not wish to become joint stock companies.

The question now arises why family businesses do not turn into joint stock companies, despite the advantages that this form provides. The importance of transforming successful family businesses into other legal forms as joint stock companies will be addressed here.

The importance of transforming family businesses into joint stock companies:

Family companies, especially the large ones, have a significant influence on the national economy through their important role in many areas. Consequently, their continuity and development is primarily a national interest. Any imbalance affects not only the economy, And beneficiaries of the services of those companies.

On the other hand, in addition to the problems that family businesses may suffer, the most important of which are the short life expectancy, the problems of the heirs and the incompatibility of the company’s management with its growth and development, there are many factors that suggest that family businesses can not continue with the same degree of durability and economic performance For example, the openness of the market and the entry of large companies are very competitive, and therefore it is necessary for owners of these companies to reconsider the status of their companies by making strategic decisions that serve their interests. In order for family businesses to maintain their stability and long-term sustainability, it is important to work towards becoming closed stock companies in preparation for a general transformation.

Effects and advantages of family businesses turning into a “closed” contribution:

There are many benefits and benefits that can be derived from the transformation of family businesses into joint stock companies, which benefit the family businesses in particular and the national economy in general.

First: For family businesses:

Ease of providing cash to the company, allowing it to finance its expansion plans and investment projects at the lowest cost.
Obtain new capacities, capacities and competencies.
Providing solid capital capable of executing large projects.
Improve the financial, managerial and productive capabilities of the company, making it able to increase competitiveness in domestic and overseas markets.
Protect the company from collapse and disappearance after the absence of the first generation of founders and the transfer of property to the heirs.
Eliminate the weaknesses and nepotism that may appear in the management of family businesses.
To prepare for the generalization of incentives and benefits granted by the government to public shareholding companies.
One of the most important benefits of transforming family businesses into joint stock companies is that the company will enjoy a minimum of control by applying certain rules of governance.
Obtain a fair and transparent valuation of shares
Strengthening the company’s presence locally and internationally
Second: For the national economy:

Developing the national economy by expanding the base of shareholding companies and thus expanding the base of ownership and diversifying activities, leading to increased revenues and domestic output.
To activate the performance of the stock market through the entry of new companies, which will contribute to the activation of the primary market, and will contribute to attract domestic and foreign investments, both the private sector or small investors.
Create economic entities capable of implementing large-scale projects.
The stability of the labor market by maintaining the continuity of the rights of the employees of the company,