LEGAL FRAMEWORK OF THE FAMILY BUSINESSES IN THE KINGDOM OF SAUDI ARABIA

Abstract

Family businesses are the oldest and most common model in economic organization and are considered the backbone of country economies. Therefore, the countries have been keen to develop charters and guidelines that include principles and controls ensuring the continuity thereof. One of those countries is the Kingdom of Saudi Arabia, where family businesses are a significant economic stream that impacts economic development in the Kingdom, particularly in the non-oil industries, trade, construction, and building sectors. However, these companies face numerous challenges that threaten their existence and continuity, forcing them to regularize their status to enhance their ability to continue, grow, and compete (Diab, 2010, p. 452).

Family businesses are subject to the general provisions of companies. However, the management is under the control of one family, and the family businesses do not have a specific legal form. Still, such businesses could be civil, commercial, industrial, or service companies, and adopt one of the legal frameworks stipulated in the Companies Law and do not go beyond these legal forms. The limited liability company and the closed joint stock company are the most suitable legal frameworks for family businesses, according to the research results.

From this perspective, this research aims to identify the legal framework suitable for family businesses that accommodates the increase in the number of partners and ensures their continuity, and to examine the relationship between internal and external challenges and the continuity of family businesses, as well as strategies for overcoming such difficulties. The research concluded that there is a relationship between the legal framework and the continuity of companies, and that the closed joint-stock company is the most suitable legal framework for ensuring continuity. Additionally, it found a connection between internal and external challenges and the continuity of family businesses.