SAUDI ARABIA: New Companies Law to Promote Investment and SMEs

Saudi Arabia issued a new Companies Law on 4 July 2022, following approval by the Saudi Cabinet on 28 June 2022, replacing the previous law of 2016. It covers all types of company, whether commercial, professional or non-profit. Under the new law, small or micro companies are exempted from audit requirements, while entrepreneurs are allowed to create a family charter to operate. The new law permits the issuance of various types of shares in a range of categories, with varying rights, restrictions and privileges. Also permitted is the distribution of profits temporarily or yearly, while ensuring the company’s creditors obtain their rights.

Significantly, the new legislation now allows a new form of company called a Simplified Joint Stock Company, which aims to meet the needs of entrepreneurs and attract venture capital. The new variant will also serve as an investment arm for non-profit firms, enabling them to generate returns and finance non-profit projects. Several restrictions in the usual incorporation, practice and exit phases, as well as restrictions related to company names have been removed.