Family business assets worth about SR15 billion are virtually frozen due to disputes and litigation, according to an expert in the sector.
Saleh Al-Sarie, member of the strategic trading committee at Jeddah Chamber of Commerce and Industry, said when the founder of a family business dies, it can lead to poor performance and its ultimate collapse.
Disputes among heirs contribute to the decline of family businesses, which represent a big portion of the Kingdom’s overall economy, he said.
Al-Sarie, who is also member of the board of Al-Sarie Trading Est., said it is high time to convert family businesses into joint stock companies to ensure the safety of future generations.
He said: “This would also help protect family businesses from complications resulting from disputes and litigation.
“Companies should be founded on principles such as administrative efficiency and professionalism rather than family considerations.”
Al-Sarie also noted owners’ fears of losing their power in decision-making is the major reason why many family businesses are not becoming joint stock companies.
About 98 percent of companies in the Gulf region are family-owned.
Only 4 percent of them are run by the founders’ fourth generation, he added.