RIYADH: The new Saudi Companies Law will play a pivotal role in providing an incubating and stimulating environment for investment, especially in family businesses and small and medium enterprises, according to the chairman of the National Center for Family Enterprises.
The new law facilitates procedures and regulatory requirements to stimulate the business environment and support investment, Saudi Press Agency reported citing Ghassan Al-Sulaiman.
According to the new law, founders, partners or shareholders, during or after the company incorporation period, may make one or more agreements regulating the relationship between them and the company. It outlines how the heirs of these entrepreneurs can join the company.
Additionally, the law allows these entrepreneurs to prepare a family charter that includes the organization of family ownership in the company, its governance, management, work policy and employment of family members.
The family charter also specifies the mechanism for distributing profits, disposing of shares, and settling disputes.
The family agreement or charter is binding and may be part of the company’s articles of incorporation or articles of association. But it is stipulated that it does not violate the company’s law or articles of association.
Contracts, clearances and other documents issued by the company must contain the company’s name, form, head office address and email address, if available, and its registration number with the commercial registry.
They also must include the company’s capital and the paid-up amount, except for the Solidarity Company and the Simple Partnership Company, and the phrase ‘under liquidation’ added to the company’s name during the liquidation period.
Al-Sulaiman referred to the role of the National Center for Family Enterprises in cooperation with the employees of the Ministry of Commerce and their participation in the opinion and contribution to the formulation of the new corporate system to serve family businesses, SPA said.
The Saudi Cabinet approved on June 28 the new corporate law allowing the creation of a new type of company in the Kingdom to boost entrepreneurship.
According to SPA, the new corporate system and its provisions and procedures enhance the sustainability of more than 538,000 family establishments, constituting 63 percent of the total establishments operating in the Kingdom.
A study by the center revealed that these family businesses contribute approximately SR810 billion ($215.8 billion) to the Kingdom’s gross domestic product.