NEW COMPANIES LAW

HIGHLIGHTS OF THE NEW COMPANIES LAW

The new law regulates commercial companies, public benefit companies and professional companies. It allows investors to establish any of the following types of companies:

• Limited Liability Company (LLC).
• Regional Headquarters (RHQ).
• Joint Stock Company (JSC).
• Branch of a foreign company.
• Simplified Closed Joint Stock Companies (SJSC), which is a new type of corporate structure introduced in the Law.

The new Companies Law in Saudi Arabia introduced a new type of company known as the Simplified Joint Stock Company (SJSC). The SJSC is designed to provide entrepreneurs and Small and Medium-sized Enterprises (SMEs) with a flexible and simplified legal structure that allows for easier access to capital markets and reduces the administrative burden of setting up and operating a company. Some of the key features of the SJSC under the new Saudi Companies Law include:

• An entity with one or more shareholders.
• No minimum capital requirement.
• Administered and managed by a manager or more, board of directors or others.
• Possibility of issuing multiple types and classes of shares with different rights, obligations, and restrictions.
• It does not require the existence of general meetings; however, shareholders exercise these powers and have the right to determine who takes them.
• The company’s system determines the basis for the required number of participants for the general meeting to be valid and for issuing the decision.
• According to Article 142 of the New Law, the SJSC company may be managed by one or more presidents or managers or by the board of directors or any other form of management. The company’s Articles Of Association shall specify the manner of appointing and removing whoever is tasked with managing the company as well as the powers, authorities, and work procedures thereof. If the company’s Articles Of Association do not provide for any provisions in this regard, such provisions shall be determined by shareholders.

ISSUER OF THE NEW COMPANIES LAW

The issuer of the new Companies Law in Saudi Arabia is the Saudi Arabian government. Specifically, the law was issued by the Council of Ministers of Saudi Arabia, which is the highest executive authority in the country. The new Companies Law, which came into effect on May 2, 2021, replaced the previous Companies Law and introduced several significant changes to the legal framework governing businesses and corporate entities in Saudi Arabia.

WHO IS SUBJECT TO THE ‘NEW COMPANIES LAW’?

The “New Companies Law” in Saudi Arabia applies to a wide range of entities conducting business activities within the country. This law governs various types of business structures and applies to:

• Limited Liability Companies (LLCs).
• Joint Stock Companies (JSCs).
• Partnerships.
• Sole Proprietorships.
• Foreign Companies.
• Any other legal business entity.