Andersen

2022/08/13

The Ministry of Commerce issued the new KSA Companies Law on July 4, 2022. The new law consisting of 281 articles was published in the Official Gazette (Umm Al Qura) and comes into effectiveness 180 days following its publication (corresponding to December 30, 2022).

The awaited law in line with Saudi Vision 2030 aims to build and support sustainable economic, validate basic principles of corporate governance such as accountability, transparency, fairness, and responsibility, and improve business performance and commercial integrity. It also facilitates business regulations and improve regulatory requirements to support small and medium sized companies’ investments, attract capitals and raise Saudi Indicators of international competitiveness.

The new law introduces new changes, provisions and amendments in compliance with the most advanced international experience and practices, and empowering business growth.

Under the law, a new form of company has been created called the ‘simplified joint stock company’ that meets the needs and requirements of entrepreneurship and venture capital growth. It will also serve as an investment arm that enables non-profit companies to advance to the third sector, stimulate social responsibility, and allow them to generate returns in their businesses and spend them on non-profit purposes.

The new law brings down the statutory requirements and procedures for small, medium and micro companies, in addition to simplifying the requirements and procedures for establishing companies. It gives flexibility to include special terms and conditions in the contracts of incorporation of companies or their articles of association, and created possible mechanisms for entrepreneurs, owners of venture capital and private ownership.

The law removes many restrictions at all stages including establishment, engage in business and exiting the market as well as restrictions on company names, and allowed the limited liability company to issue debt instruments or negotiable financing instruments. The law modified the provisions of transformation and merger between companies, permitting the company to be divided into two or more companies, and allowing the owners of individual entities to transfer their assets to any types of companies

With regard to attract investment, the law allowed the issuance of different types of shares with varying categories and rights, privileges or restrictions, and the possibility of issuing shares allocated to employees to attract and motivate talent. It also allowed the distribution of profits temporarily or annually with governance that ensures that the company’s creditors obtain their rights.

The law also made it possible to implement procedures electronically through remote means of communication, including submitting incorporation applications, attending general assemblies of shareholders or partners, and voting on decisions. It provides means for resolving disputes and disagreements by resorting to arbitration or other alternative means to settle them, in addition to developing provisions for the liquidation of the company and facilitating its procedures, in line with the provisions of the bankruptcy law.

The new law keeps pace with all economic developments in the business environment as it comes six years after the adoption of the previous law in 2016. The law is in line with the Kingdom’s Vision 2030 and its view of the private sector as a strategic partner, as well as its objectives related to facilitating the work of companies and enabling them to maintain the momentum of expansion and growth.