Introduction
The new Saudi Companies Law was approved by Royal Decree No M/132 on 01/12/1443. The new legislation is part of a group of legal developments aimed at enacting structural reforms to the financial and economic sector in light of the Saudi Vision 2030, which includes a diversified and sustainable economy. Some of the notable changes are the following:
- The new law replaced the Joint Venture companies with the new Simple Joint Stock Company (SJSC) with its characteristics being laid out from section 138 to 155 in the new law. It can be established by one or more persons with no minimum capital requirements.
- The new law eases restrictions on establishing single-person companies, as the old law only allowed companies with a minimum capital of 5 million SAR to form Joint Stock Companies (JSCs), with the new law allowing both natural and legal persons to own a single-person JSC with a 500,000 SAR minimum capital requirement.
- Section 179 of new law finally allows Limited Liability Companies ( LLCs ) to issue security instruments with the necessary shareholders’ approval and subject to the Saudi Capital Market Authority Law.
- The new law repeals the Professional Companies Law of 1441H and eases some restrictions and allows the following:
- Partners in professional companies can own shares in other professional companies if the company’s articles permit it.
- Partners in professional companies can practice their profession in other professional companies subject to shareholders written approval or approval through the company’s general meeting
- A professional company can own real-estate assets and invest in financial instruments and other forms of investments, if it is to further the company’s purposes subject to practice directions.
- Under the new law, it is permitted to establish a professional company with multiple professions. It can be a sole practice of an individual certified to practice multiple professions, or it can be composed of multiple partners who are certified to practice more than one profession, subject to the regulation in the practice directions.
Conclusion:
The new legislation will transform the national Saudi market in line with Saudi Vision 2030 and introduce much-needed easements relating to founding and managing companies.
