Companies law in Saudi Arabia
Companies Law in Saudi Arabia plays a vital role in shaping the business arena within the country. Saudi Companies Law, enacted to regulate commercial entities in the Kingdom of Saudi Arabia, provides a comprehensive framework for companies’ formation, management, and dissolution.
As Saudi Arabia continues to pursue its Vision 2030 initiative, the changes in the legal framework surrounding companies seek to enhance transparency, protect investors’ rights, and align local practices with international standards. The significant reforms aim to foster a more dynamic and attractive investment environment in the Kingdom.
The new Company Law of Saudi Arabia, which occurred on January 19, 2023, replaced the 2015 and 2019 Professional Company Law. The new law applies to all entities formed or incorporated after January 19, 2023, though the existing entities have a two-year grace period to comply.
The new Companies Law Saudi Arabia modernizes the regulatory framework for commercial entities, introducing greater flexibility in company formation and management. It aims to promote foreign investment and enhance corporate governance to support the Kingdom’s Vision 2030.
Business-friendly reforms of Saudi Arabia
The reforms have greatly facilitated business set-up in Saudi Arabia and extensively promoted foreign investment in Saudi Arabia. Among the significant reforms contributing to excellent foreign investment is allowing 100% foreign ownership of the companies without needing a local partner.
It has permitted greater control of the company by the foreign investor.
The reforms have permitted foreign investors to choose different types of business entities/structures to start their companies in Saudi Arabia. As part of the reforms launched in the wake of Vision 2030, Saudi Arabia’s business regulations have been liberalized, making it easier for foreigners and locals to form a company.
The salient features of the new company law are the following:
- Streamlined company formation: The new law makes it easier to form a company.
- Improved Corporate Governance: Improvement in the corporate governance practice is one of the aims of the new law.
- Protection of minority shareholders: The new law aims to protect minority shareholders and to reduce the conflicts in Saudi Arabia’s corporate sector.
- Foreign Investments: Facilitating foreign investment is among the aims of the new law.
- Modernized insolvency procedures: The new law aims to modernize insolvency procedures
- New Corporate forms: New corporate forms, such as Simple Joint Stock Companies (SJSC), are permitted.
- Flexibility: The new law aims to protect corporate rights and empower the private sector.
- Greater clarity in regulations regarding conversion, merger and division of corporations as well as the rights and obligations of interested parties.
Types of companies in Saudi Arabia
Choosing the proper business structure for your company is vital. The chosen company should have an in-depth structure permitting adaptability, flexibility and growth in the long run. It is also essential that your company establish long-term business growth plans.
The New Companies Regulation of Saudi makes these business entities available for local and foreign business people. Foreigners can have 100% ownership of their company.
Foreigners can choose from a variety of business structures, including:
- Limited liability Company
- Branch of a Foreign Company
- Regional Headquarters (RHQ)
- Technical and Scientific Services Office (TSSO)
- Establishment/sole proprietorship
- limited partnership company
- Joint venture
- Joint stock company
The most common form of legal entity is a limited liability Company in Saudi Arabia that a single shareholder can register. This business form may have 50 shareholders and require capital depending on the business activity imposed by the local authorities.
To sum up, the new Companies Law in Saudi Arabia has provided greater flexibility in the formation and operation of the companies in Saudi Arabia. This has, in turn, promoted foreign investment in the country, contributing to the Kingdom’s economic development.
Role of Helpline Group, Saudi Arabia
Helpline Group, backed by a strong and experienced team of 300+, brings over 25 years of expertise in company formation and services like attestation.
Our seasoned professionals possess in-depth knowledge of the latest Company Laws, rules and regulations, ensuring compliance and efficiency and offering clients a seamless, hassle-free experience.
With a global presence, a tailored approach, and a thorough knowledge of the provisions of the Company law, we ensure that your requirement for company formation is handled with precision and professionalism.
