(MENAFN- Arab News) Some SR20 billion is being held by Saudi courts as a result of disputes arising from family business-related issues a forum was told in Jeddah.
Ibrahim Aboud Ba'ashin of KPMG Al-Fouzan & Al-Sadhan Company who was addressing the Family Owned Business Forum said 75 percent of the private economy is owned by nearly 5000 families in the Kingdom.
The family owned businesses in the Middle East whose ownership is to be shifted to the next generations are valued more than $1 trillion. The globalization trend has forced family businesses to open branches in different parts of the Kingdom which necessitated the existence of skilled leaderships to run them he said.
Resistance to change in family companies comes from those who carry traditional thought and are reluctant to change due to their fear of risk. It is imperative that leadership of companies be delegated to the second generation equipped with the required skills in the face of challenges and achievement of development he said.
Fawaz Al-Otaibi of Awwab Holding Company stressed the early inheritance of companies to future generations which he said is aimed to preserve properties and ensure continuation of companies.
Al-Otaibi explored the positive aspects of early inheritance inducing solution of any possible disputes in the presence of the founder and achievement of fairness among the heirs where the founder will feel peace of mind and independence of partners.
Family members will bear responsibility toward their company he said. However certain challenges exist including fear that all partners will not be on an equal footing on feeling responsibility and how to deal with expenses of the founder for being no longer shareholder in the company he said.
Normally the first step of early inheritance lies in the transformation of a family company into a closed joint stock company for the easy handling with shares upon distribution he said.
Hayat Jameel Abdulatif Company CEO Ihab Saifudeen stressed the formation of a family council to adopt and qualify next generations. He proposed that the family council be convened on a regular basis where family members could express their viewpoints and problems freely before they develop into personal problems. They may need a social or legal adviser if differences are wide he said.
Al-Andulisiyah Medical Services CEO Dr. Hazim Darwish said 30 percent of the family companies invest for the second generation 20 percent for the third generation and two percent for the fourth generation in the GCC countries.
He said the life cycle of family businesses begins with the founder engagement of brothers and then the union of relatives. However it is not necessary that all family companies should pass the three stages where some may disappear due to bankruptcy or acquisition by another company he said.