RIYADH, 10 January — Minister of Commerce Osama Faqeeh said here yesterday that a new regulation for joint stock companies was in the pipeline as part of the government’s effort to streamline their functioning and boost performance.

He made this announcement even as members of the business community stressed the need for a review of the shareholding companies regulations that have hampered their growth and allowed a few businessmen to dominate them by virtue of their majority stake in the companies. As a result, joint stock companies today constitute only one percent of the Kingdom’s total number of business establishments.

The minister was inaugurating a seminar on "Joint stock companies — now and in the future" at the Riyadh Chamber of Commerce and Industry yesterday. Abdulrahman Al-Jeraisy, president of RCCI, and a large number of company executives as well as businessmen were among those present.

Referring to the forthcoming regulation, Faqeeh said its main thrust was to improve the performance of the joint stock companies enabling them to survive in today’s competitive environment.

The regulations were still under study and would be announced in due course. As for the difficulties being faced by family-owned enterprises, the ministry had published guidelines setting forth the different stages in their conversion into joint stock companies. He said some 10 family-owned companies had already been converted into shareholding companies, and were doing well.

Earlier, the minister said there are 10,500 registered companies in the Kingdom with a total invested capital of SR222 billion. Of these, the number of joint stock companies stands at 98 involving a capital outlay of SR126 billion. Five more companies have either been converted into joint stock companies or are in the transitory phase.

Referring to the performance of the joint stock companies, Faqeeh said some of them were unable to deliver results due to various factors. These ranged from a lack of good policies and planning for the achievement of their goal to inefficient management, inadequate market studies, lack of financial discipline, production snags and improper investment of funds.

Saad Ibrahim Al-Mojel, vice chairman of the Riyadh Chamber of Commerce and Industry, said it was time for a review of the regulations concerning joint stock companies. The main problem, he pointed out, was the procedure for the formation of a joint stock company. Another stumbling block was the conditions attached for the launch of a new company. As a result, no new joint stock company has been floated on the share market since 1993.

"The big problem we are facing right now is that under the Saudi law any public company can be automatically quoted on the stock market."

According to Al-Mojel, the number of joint stock companies is pitifully low, with only one percent of the total number of companies being traded on the stock exchange.

Speaking on the occasion, Dr. Abdulaziz Al-Dukheil, president of Consulting Center for Finance and Investment, said the general assemblies of the joint stock companies have become ineffective. He called for remedial measures to restore the role for which these assemblies were created.

He said one of the problems of the joint stock companies is the domination of the shareholders general assembly by a few businessmen. "The question we are trying to address is how to eliminate the negative influence of such concentration of power in the hands of a few individuals on the company’s management."

Dr. Al-Dukheil called for an institutional mechanism to limit their unbridled powers and to bring transparency in operations.

In reply to a question, Abdulaziz Al-Jazzar, member of the board of directors of RCCI and president of Integrated Systems Engineering (ISE), said the problem of a few businessmen sitting on the boards of major public companies was caused by the circumvention of government rules and exploitation of market forces.

"When the companies are initially floated on the market, the Ministry of Commerce has insisted that nobody should buy more than a specified number of shares. However, it is the market forces that allow a few to use their purchasing power and create a monopolistic situation that elevates them to the position of a board member in a given company," he said.