Saudi Companies Regulations

Saudi Arabia’s new Corporations Law entered into force on 19 January 2023 with the case of implementing regulations by the Ministry of Commerce (MoC). The new law, agreed in June 2022, replaces the previous Corporations Law of 2015 and the Professional Corporations Law of 2019, which are repealed.

The new Corporations Law governs all shapes of entities in the Saudi market, whether commercial, non-profit, family-operated entities and/or professional, under a single comprehensive law. The following corporate shapes are allowed:

General partnership company

Limited partnership company

Joint Stock Company (JSC)

Simplified joint stock company (SJSC)

Limited liability company (LLC).

The New Law has presented a new adjustable corporate form – the Simple Joint Stock Company (SJSC) – which is designed to encounter the growing demand from investors for start-up and venture capital vehicles. It has no minimum capital needs and can be installed by one or more persons, can be managed by one or more managers, or a board of directors, and can issue several categories of shares.

The new Law relaxes several requirements for JSCs. It permits the establishment of one-person JSCs, eliminates the requirement to hold an establishment meeting, and sets the minimum capital requirement to a general amount of SAR 500,000. It further discharges restrictions on the maximum number of board members and the remuneration of managers and permits the issuance of different classes of shares with various rights and obligations, including common, preferred, and redeemable shares

The new Law relaxes several requirements for LLCs. The restrictions on financing are removed, with LLCs allowed to raise capital through the issuance of Sukuk, debt instruments, or financing instruments. The maximum number of shareholders requirement is lifted and the restriction on single-shareholder LLCs owning another single-shareholder LLC is removed.

The new Law also removes the requirement for the obligatory dissolution of LLCs. It clarifies that if an LLC loses more than half of its capital, the director has 60 days to call a shareholders’ meeting after knowing the circumstances to decide whether to take relevant measures to continue or liquidate the company.

The new Law specifies the requirements for the submission of documents and articles of association for the incorporation of a company. New corporations are required to submit a statement from shareholders stating that the company complies with the requirements of the new Law and a report prepared by an accredited valuer showing its fair value if there is any capital contribution in kind.

The procedures and process for setting up a business in Saudi Arabia can be complicated, particularly for foreigners who are not proficient in Arabic and need assistance communicating with the authorizing departments. Missing or insufficient documentation can result in delays or a rejected application. Having an expert can assist you avoid these challenges and streamline the application process. NASSAR CONSULTING OFFICE has connections with key government agencies in Saudi Arabia and can advise you through the process of business incorporation and liaise with all parties involved on your behalf. We will make sure that you and your business remain fully compliant with all regulations and laws in the Kingdom.