For a Saudi family business, some of the most important questions in an initial public offering (“IPO”) are not regulatory but questions for the family. The answers are likely to shape how the family holds and diversifies its wealth, how the business is managed, and how ownership passes between generations.
Families list for different reasons, and those reasons often overlap. In each case, however, the same questions arise, and they should be answered before the regulatory process begins. The answers will determine the transaction structure, the proportion of shares offered, the extent of the family’s continuing ownership, and the governance framework of the listed company.
This article addresses four of those questions.
I. Who will sell, and how will the proceeds be managed?
The distinction between a primary and a secondary offering is fundamental. In a primary offering, the company issues new shares and receives the proceeds, which may be deployed towards expansion, investment, or other corporate purposes. In a secondary offering, existing shareholders sell part of their shareholding and receive the proceeds themselves. A combined offering achieves both objectives.
The family should determine, before listing, whether any family members wish to realise part or all of their investment, and on what terms.
Where family members sell, the proceeds require a plan. A substantial proportion of the family’s wealth is often concentrated in a single operating business, exposing the family to the risks associated with a single asset, industry, and management structure.
Realising value is only one part of the exercise; managing that value is equally important. A family office, supported by an appropriate investment mandate and professional investment oversight (such as through the appointment of a chief investment officer), can help ensure that the proceeds are deployed in accordance with a diversified investment strategy.
II. Who will hold the family’s stake?
The family may hold its shares through one or more holding companies, which act as the family’s shareholder in the listed company. The holding company exercises the family’s shareholder rights – it does not manage the business.
The holding-company structure can also facilitate the allocation of economic interests between family branches without requiring every family-level decision to involve the listed company.
The structure must be settled before the listing prospectus is finalised. Substantial shareholders (those holding 5% or more) named in the prospectus may not dispose of their shares for six or twelve months after trading begins, depending on the market, unless the prospectus sets a longer period. The entity holding the family’s stake at listing will be the entity subject to the lock-up.
III. Who will run the company?
Family businesses often develop around a close relationship between ownership, management, and control. That structure may be effective in the early stages of a business, but listing requires a clearer distinction between ownership, management, and oversight.
A listing formalises the separation between the family’s role as shareholder and the company’s responsibility to operate in the interests of the company and its shareholders as a whole. This requires a coherent ownership and governance structure, including delegated authorities, internal controls, and policies on related-party transactions and conflicts of interest.
On the main market, the Capital Market Authority’s Corporate Governance Regulations require that the majority of the board be non-executive directors, and that independent directors number at least two or one third of the board, whichever is greater.
Before listing, the family should agree which members will join executive management, which will sit on the board, and which will remain shareholders only.
IV. How will the family’s arrangements be made binding?
The transition between generations raises questions about management appointments, board representation, ownership distribution, liquidity for family members wishing to exit, and the treatment of family members who do not participate in the business. An IPO does not, by itself, resolve these questions.
Saudi law gives the family the tools to answer them. The Companies Law allows shareholders to enter into agreements governing their relationship with each other and with the company, including how their heirs will enter the company, whether directly or through a company established for that purpose. It also allows them to adopt a family charter covering family ownership, governance and management, the employment of family members, profit distribution, the disposal of shares, and the resolution of disputes.
Such an agreement or charter is binding and may form part of the company’s constitutional documents, provided it does not conflict with the Companies Law or those documents.
For a family preparing to list, the question is where these arrangements should sit. Once the company is listed, its shares trade on the market and its bylaws must protect all shareholders. Transfer restrictions, pre-emption rights, and the entry of heirs are therefore best placed at holding-company level, in the holding company’s constitutional documents or a shareholders’ agreement among family members.
The distinction between family governance and corporate governance is important. Family governance regulates the family’s internal relationship with the business and its ownership interests. Corporate governance regulates the management and oversight of the listed company in accordance with applicable laws and regulations. A successful IPO accommodates both without allowing the family’s internal arrangements to undermine the rights of public shareholders.
V. Setting priorities
The four questions are interrelated, and their relative importance will depend on the family’s primary objective. Where the priority is diversifying family wealth, the question of who sells, and how the proceeds are managed, will take precedence. Where it is structuring family ownership and preserving the interests of different family branches, the holding structure will be central. Where it is separating ownership from management, the roles of the board and management will be particularly important. Where it is ensuring continuity across generations, the family’s binding arrangements will take priority.
The starting point is therefore agreement within the family on what it wants the listing to achieve. Once that is settled, the next question is where to list: the main market or the parallel market. Each offers a different route to the Saudi capital markets, with distinct admission requirements and continuing obligations.
This article is for general information only and does not constitute legal advice. It reflects Saudi laws and regulations as at November 2026. Specific advice should be sought before acting on any matter discussed.