New Companies Law keep up to date with best international practices and addresses challenges faced by business entities and helps them grow and expand

28 Jun 2022


The new Companies Law, aiming to enhance the growth of the commercial ecosystem, has been approved today by the Council of Ministers.

The law's high flexibility will protect businesses while also empower the private sector.

The law aims to increase business sustainability, encourage investment in Small and Medium Enterprises (SMEs) by facilitating procedures and regulatory requirements. 

It achieves greater market diversity by introducing new corporate entities, increasing the level of regulatory flexibility, protecting customer rights, preventing disputes, and ensuring fair treatment of stakeholders.

Developed based on the best international practices, the law addresses all of the business sector's challenges and allows for collaboration with numerous public or private sector organizations, and seeks the opinions of professional associations, global organizations, and specialized advisory offices.

In order to guarantee that the provisions are available in a single legislative document, the new law regulates all provisions relating to companies, including commercial companies, non-profit organizations, and professional organizations, by taking one of the following forms: 

Joint-venture company;
Special limited partnership;
Joint-stock company; 
Simple joint-stock company; 
Limited-liability company   

It enables the creation of a family charter that governs family ownership in the family business, its governance and management, work policy, the employment of family members, dividends distribution, exiting, etc. It exempts micro or small businesses from the auditor requirement,

A new corporate structure, called a simple joint-stock company, was introduced to satisfy the demands of entrepreneurship and venture capital growth.  It will also serve as a potential investment arm for non-profit organizations in order to improve the third sector, promote social responsibility, and allow them to earn a profit and spend it on non-profit purposes.
The new law reduced statutory requirements and procedures for small, medium, and micro-enterprises. It facilitated company formation requirements and procedures, provided flexibility including special terms and conditions in company articles of association or bylaws. It created potential mechanisms for entrepreneurs, venture capitalists, and private ownership.

The law eliminated restrictions surrounding all stages (like incorporation, practice, and exiting), as well as limitations on company names. It made it possible for a limited-liability company to issue debt instruments or tradable financing instruments.

The law created provisions for corporate conversion and merger, permitted corporate division into two or more entities, and allowed individual enterprise owners to transfer assets to any of the corporate forms.

The law permitted the issuance of various share types with different categories and rights, privileges, or restrictions in order to attract investment. It also permitted the possibility of issuing shares allocated to employees in order to attract talent and motivate them. Finally, it permitted the distribution of dividends gradually or annually in a way that ensured the rights of the company's creditors.

The law also made it possible to conduct procedures electronically through contemporary forms of communication, i.e. remotely, such as submitting incorporation applications, attending general assembly meetings of shareholders or partners, and casting votes on resolutions.

In addition to developing the company's liquidation provisions and facilitating its procedures in accordance with the bankruptcy rules, the law provides a means of resolving disputes and conflicts by resorting to arbitration or other alternative means of settlement.

The Saudi Vision 2030 and its view of the private sector as a strategic partner, as well as its goals related to facilitating the work of businesses and enabling them to expand and grow, are all in line with the new law, which keeps pace with all economic developments in the business environment. It was approved six years after the previous law.

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Last Modified 04 Jul 2022