Legal Framework of the Family Businesses in the Kingdom of Saudi Arabia


  • Nagwa Ibrahim Albadaly


Family businesses are the oldest and most common model in the 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 one of the economic streams that affect economic development in the Kingdom, especially in the sectors of non-oil industries, trade, building, and construction. However, these companies face many challenges that threaten the existence and continuity thereof and force such businesses to regularize their status thereof to enhance their ability to continue, grow and compete (Diab, 2010, p. 452). Family businesses are subject to the general provisions in companies. However, the management is under the control of one family, and the family businesses do not have a specific legal form, but 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 best legal frameworks, which the family businesses can adopt, according to the results of the research. From this point of view, this research aims to identify the legal framework appropriate for family businesses, which accommodates the increase of the partners’ number and ensures their continuity, and indicates the relationship between internal and external challenges and the continuity of family businesses and how to overcome such challenges. 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 appropriate legal framework that ensures the continuity of companies, and that there is a relationship between internal and external challenges and the continuity of family businesses.