Family business and their impact of the zakat fund

15/09/2022 Business | DR. Mohamed Suliman Al blooshi

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What are family businesses?

Various terms are used to refer to the family business such as 'family owned', 'family controlled' and 'family run
: in short, a family business can simply be defined as
 "A commercial company with two or more family members having financial control over the company"
. In other words, a family business is: "a business owned and/or managed by more than one member of the same family" 
We can classify a company as a family business; If the following conditions are met: 
ü  The effective percentage of the capital contribution by family members
ü   The largest percentage of voting rights in the board of directors are owned by family members
ü   The strategic direction of the company as a whole is owned by family members
ü  There should be at least one generation of family members participating in the management of the company

The future of family businesses?

:The future of family businesses falls into 4 main strategies, which are illustrated in the following figure 


:Rejuvenation: Embracing the Family's Legacy

,Families that succeed with the renewal strategy tend to be cohesive across generations and tend to follow family traditions
. intergenerational trust encourages cooperation, and younger family members go along with the family's way of doing things
:Rebirth: Turning over a New Leaf 
.Some close-knit families are characterized by existing and younger family members who openly collaborate on major business decisions and display high levels of flexibility
 .Existing family members are more open to their children's ideas inside and outside the business, emphasizing that they do not want to burden their children with running the family business
:Exit
.This strategy is often seen in families with low intergenerational cohesion that lack flexible leaders. Existing leaders often tolerate self-sacrifice for the sake of family and company, and usually prioritize business over family 
.The new generation will also be separated from work and may not be associated with him or other family members. They have many opportunities to leave and few reasons to return - in fact, many seek to study or work away from home
:Exaptation
.Often families with low loneliness and flexible leaders see their children following their dreams. Increased parental flexibility reduces pressure on the new generation to inherit the family business 
.This support leads the younger generation to pursue new entrepreneurial activities that are related to the work or even separate from the original work 
.Because leaders are resilient, the older generation is perfectly fine with this behavior and adopts a "laissez-faire" approach
 .However, the younger generation may build a different, but equally powerful legacy
.The intergenerational distance allows the new generation to pursue projects on their own terms, but often with parental support, transforming the family legacy into something new


What is the impact of family businesses on the Zakat Fund?

,From the foregoing, it became clear to us that family businesses are companies in which the decision-makers are from the owners of the company that unites them by the bond of kinship
 ,and since family businesses constitute two-thirds of the world's wealth and are the basis of the national economy of many countries, and 85% of business start-up projects are in Its core is family businesses 
.which is reflected in the strengthening of social cohesion and social responsibility; Therefore, the fund will have to be in continuous contact with these companies 
and allocate what it can of its services and facilities to them, which will increase and maintain the zakat resources of the fund

,One of the most prominent opportunities for the Zakat Fund is that the first generation of founding partners in most cases does not seek to speed up the distribution of profits
 which will be reflected in the amount of Zakat that must be paid to the fund based on Sharia principles, as the owner usually seeks to preserve wealth (the company) and pump profits into more of its investments or operating expenses and the expansion of its activities
.which positively affects the Zakat Fund by maintaining the company's fixed income and ensuring an increase in the value of Zakat paid by this type of company. Through the expansion of the establishment of projects dedicated to dealers

, One of the most important challenges facing the life of the family business is the transformation of its activity into the nature of a family conflict, in light of the end of the founding partner and the absence of replacement and succession plans
.which poses a threat to the continuity of the founders' approach and their relationship with the Fund. This threat dissipates in the presence of force in the board of directors


,On the other hand, the problems of family businesses may start with the entry of emergency partners (by inheritance) into the company, who view that facility as a way to quickly achieve returns and profits without their first and last concern being the company's survival
, success and sustainable development. Therefore, all the decisions they will take will focus on achieving profit. The quick, which may negatively affect the Zakat Fund as a result of the company's fragmentation and the partners' failure to pay Zakat
.in addition to the possibility of directing Zakat to parties other than the Zakat Fund due to the changes that may occur in the values in the UAE society in the new generations (heirs) as well as the difference in their cultural backgrounds

,Also, any founding partner in the family business will firmly believe that it is best to manage his own money, including the company, and therefore it will be difficult to separate ownership and management
. which will cause weak management, the collapse of the company and the interruption of its contributions to society
 which will lead to high unemployment rates in society, which will be reflected in an increase The burden is on the fund, especially in the projects concerned with helping the unemployed Zakat recipients

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