Corporate Law at Saudi Arabia
Here's a detailed overview of Corporate Law in Saudi Arabia:
Corporate Law in Saudi Arabia
1. Legal Framework
The primary source is the Saudi Companies Law, last updated in 2015, governing the formation, operation, and dissolution of companies.
Other relevant regulations include the Capital Market Law (for listed companies), the Foreign Investment Law, and various ministerial resolutions.
The law is influenced by Sharia principles, alongside modern commercial regulations.
The Saudi Arabian General Investment Authority (SAGIA) regulates foreign investment.
2. Types of Companies
Saudi law recognizes several types of business entities, with the most important being:
a. Limited Liability Company (LLC)
Most common form for small to medium-sized enterprises.
Requires a minimum of 2 shareholders and maximum 50.
Capital requirement: No minimum fixed by law but practically depends on business type.
Shareholders’ liability is limited to their capital contribution.
Flexible management and fewer formalities than joint-stock companies.
b. Joint-Stock Company (JSC)
Suitable for larger enterprises, can be publicly listed.
Minimum capital requirement: SAR 500,000 (approx. USD 133,000).
Ownership divided into transferable shares.
Requires a board of directors and an audit committee.
Must comply with the Capital Market Authority (CMA) rules if listed.
c. Partnerships
General Partnership: Partners jointly liable.
Limited Partnership: Includes general and limited partners.
Less common for larger commercial activities.
d. Branch of a Foreign Company
Foreign companies can open branches subject to approval by SAGIA.
Must comply with Saudi regulations and appoint a local representative.
3. Foreign Investment and Ownership
Foreign investors can own up to 100% of many types of companies since the 2020 reforms, relaxing previous ownership restrictions.
Some sectors may still require a Saudi partner.
SAGIA issues licenses for foreign investors.
Foreign companies must appoint a local agent or establish a Saudi legal entity to conduct business.
4. Company Formation Process
Choose company type and name.
Obtain preliminary approval from Ministry of Commerce.
Prepare articles of association and other statutory documents.
Register with the Ministry of Commerce and Investment (MCI).
Obtain SAGIA license (for foreign investors).
Register with the Zakat, Tax and Customs Authority for tax and zakat purposes.
Register with General Organization for Social Insurance (GOSI) for employees.
5. Corporate Governance
Joint-stock companies have more stringent governance requirements, including boards of directors, audit committees, and annual general meetings.
Limited liability companies have simpler governance structures but must hold annual shareholder meetings.
Directors and managers owe fiduciary duties under the Companies Law.
6. Capital Requirements
| Company Type | Minimum Capital |
|---|---|
| LLC | No fixed minimum (practically varies) |
| Closed JSC | SAR 500,000 (USD ~133,000) |
| Public JSC | SAR 10 million (USD ~2.6 million) |
7. Taxation
Corporate income tax applies to non-Saudi/GCC shareholders at a rate of 20%.
Saudi/GCC nationals are subject to Zakat, a religious wealth tax.
Value Added Tax (VAT) at 15% applies to most goods and services.
Saudi Arabia has signed numerous double taxation treaties.
8. Compliance and Reporting
Companies must maintain proper accounting records under International Financial Reporting Standards (IFRS).
Annual financial statements must be audited by licensed auditors.
Filing of annual reports with the Ministry of Commerce.
Public joint-stock companies must disclose material information per Capital Market Authority rules.
Summary
| Feature | Details |
|---|---|
| Common company types | LLC, Joint-Stock Company |
| Minimum capital (LLC) | No fixed minimum |
| Minimum capital (JSC) | SAR 500,000 (closed), SAR 10 million (public) |
| Foreign ownership | Up to 100% allowed in most sectors |
| Taxation | 20% CIT for foreigners; Zakat for Saudis |
| Registration authority | Ministry of Commerce and Investment (MCI) |
| Corporate governance | Board of directors for JSC; annual meetings for LLC |
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