The new Saudi companies law
Last week, the Saudi Council of Ministers approved the new companies law, which contributes to the stimulation and development of the business system in the Kingdom and has the flexibility to protect companies and empower the private sector.
The new amended law aims to enhance corporate sustainability, support investment in small and medium enterprises by facilitating formal procedures and requirements, achieve greater market diversity by adding new corporate entities, increase flexibility in regulations, preserve consumers’ rights, reduce disputes and ensure fair treatment among the various stakeholders.
This new corporate law has been developed in the light of international best practices to address all challenges facing the business sector, in partnership with many public or private sectors, in addition to using and analyzing the views of professional bodies, international organizations and specialized advisory offices.
The new law will regulate all provisions related to companies, whether commercial, nonprofit or professional. It will ensure that these provisions are available in a single legislative document, where stakeholders will be able to adopt and take one of the companies’ forms, such as limited partnership company, joint stock company and limited liability company, in addition to other forms.
The new law enables conducting a family charter to regulate ownership in a family company, its governance, and management, business policy, employment of family members, distribution of profits, exits, etc., to ensure sustainability for these companies, in addition to exempting small-sized companies from the auditor’s requirement.
A new form of company called “simplified joint stock company” has been introduced. This form of company will meet the needs and requirements of entrepreneurship and bold capital growth. It will also serve as a possible investment arm for nonprofit companies to upgrade the third sector, stimulate social responsibility, and allow them to make a reasonable return on their business and spend it on nonprofit purposes.
The new law also reduces the regulatory requirements and procedures for SMEs and microenterprises, facilitates the requirements and procedures for establishing companies, gives flexibility in including special terms and conditions for corporate establishment contracts or articles of association, and creates possible mechanisms for entrepreneurs, capital holders and private property.
• Dimah Talal Alsharif is a Saudi lawyer and legal consultant.