LEGAL PERSPECTIVE: Going-Public Companies Part One by Dr AbdelGadir Warsama, Legal Counsel

Enjoy
Dr AbdelGadir Warsama, Legal Counsel

There are many family companies working in different business activities. Family companies, normally started by dedicated fathers, who worked very hard to keep such companies rolling even in very difficult times. Sure, some family companies, are prospering and taking great role in helping themselves and the economy in many sectors. Examples of such bright companies are many and very difficult to list and we wish them brighter future and more lucrative business. However, on the other face of the coin, there are many family companies who trembled, suffered from many loses and diminished due to local or external business matters and some failed due to corporate and operational matters inside the company or, in other words, inside the family owning the company. As revealed in many studies, most family companies fall-down after the 2nd or 3rd generation. This comes from the fact that, the collapsed companies lack clear vision and mission in the business and, in addition, there is no proper succession plan to enable new generations to continue leading the company.

Asia 728x90

Due to the collapse or, if we could say, the failure of family companies there are many calls for transferring family companies to shareholding public companies or, in other words, going-public. This option could emerge due to many reasons including business factors. There is a move among sole enterprises or family companies to go public, irrespective of the fact that there is genuine need for sustainability of family companies. We believe that, each economy needs public companies as well as family companies. To go-public, we need to mention that, there are important duties to be undertaken by concerned family members who are supposed to be the founders, of the new public company. The founders, are supposed to prepare Memorandum of Understanding (M o U) and the necessary Articles of Association (A o A). This is required by law, for the new company. The public or potential investors, to a large extent, depend and rely on the information available in such documents and accordingly decide to join forces or to refrain. The two important documents shall include, inter alia, the name of the new company, the place of work including the head office and branches if any, duration of the company, objects of the company, names of all directors and necessary personal information as occupation, nationality and place of residence, amount of capital for the company and the number of shares into which the capital is divided, the value of each share and any other necessary information related to such shares such as price …etc. Also, among the necessary information to be mentioned, the amount to be paid by founding directors regarding the incorporation of the company and an undertaking by all to finalize incorporation formalities within the permissible time…..(To be continued)

Print Friendly, PDF & Email