New Companies Law offers facilities to small businesses and entrepreneurs

29 Jan 2023


The New Companies Law and its implementing regulations have made it easier for small and microenterprises to meet all of their expansion and growth needs. The law has streamlined the incorporation process and given businesses more freedom to include special provisions and conditions in their articles of association or bylaws that take into account recent history and size as well as facilities for entrepreneurs. 

The law created a new business that has never existed before, called the "simplified shareholding company," to address the needs and requirements of entrepreneurship. A single shareholder can form such company without a board of directors and can run it as a manager. No general assemblies are required, besides, the bylaws determine the procedures for holding meetings and issuing decisions. 

The law exempted micro and small businesses from the need to appoint auditors and established three criteria, two of which are exempt from the need to appoint auditors. They are:  Annual income should not exceed 10 million riyals, its assets should not exceed 10 million riyals, and the company's size of workforce should not exceed 49 employees. 

The implementing regulations stipulate, "Upon filing the financial statements of the company, the director or chairman of the company shall attach a statement stating that the requirement to appoint the auditor shall not apply to the company, and that no partner or shareholder meeting the ratio set out in article (19) of the law shall request the appointment of an auditor.”

The law has made it feasible for entrepreneurs and owners of risk capital and private property to increase their contribution to the national economy's GDP. 

The implementing regulations also stipulate interim dividend rules for partners and shareholders "in all types of companies" in order to ensure the sustainability of these companies by emphasizing the importance of the company's reasonable liquidity and having dividends that can be distributed in accordance with the most recent financial statements sufficient to cover the profits proposed for distribution.

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Last Modified 31 Jan 2023