This Charter Maximizes and Develops the Value of the Companies, also supports their Expansion and the Opportunities of their Success
The Ministry of Commerce and Investment has issued a guiding charter for the Saudi family businesses, aiming at enhancing the family's business values, achieving the objectives of the companies and developing their business according to an institutional framework that supports the possibility of their expansion, and increases the chances of their success.
The Guiding Charter is considered a family oriented business document primarily intended to regulate the family property in the company and represents a company record that shows what value does the company represent for the family.
The Guiding Charter regulates the relations among the family members, it includes the precepts and desires of the founders, it regulates the transfer of ownership among the family members in the family companies and the criteria of employing the family members in the company, and sets out the rules for dispute settlement that may be encountered.
The Guiding Charter aims at maximizing the value of the company and developing its business, making the family members aware of their rights and obligations, balancing the interests of the family members and the company's interests, strengthening the family members' ties to achieve success and development, making the company a base for permanent contribution of the family to the serve the National Economy and community, encouraging the independence of the company’s branches and its executive team from the family, besides promoting transparency and clarity among the family members relationships.
The most important features of the Guiding Charter are: organizing the work of the family members in the executive system of the family company, determining the profit distribution policy of the family company, drawing up the mechanisms for the management of the shareholder with his shares and the shareholders going out of the family company to avoid any dispute or dissension among the family members, and to assure the business family to retain the ownership of its company.
The Charter Development Mechanism is designed to establish a written institutional organization and create a common understanding among the family members on how to manage their current and future commercial ownership. It may also create a regulatory situation that encourages the entry of investors from outside the family in the company if it is prepared under an effective institutional framework that takes into consideration the preservation of minority rights in the company.
MCI was keen to investigate the problems that can lead to the weakness of the companies, loss of their resources and material and moral gains. MCI was also keen to review a number of international experiences and specialized studies to exploit that in the preparation of the Guiding Charter, besides its desire to reach a model that meets the needs of the Saudi family business community and opens the horizons for applying the mechanisms of governance.
The Guiding Charter provides selected provisions for the content of family charters, for more information, please have access to the following link: mci.gov.sa/sf