SAUDI ARABIAN HOLDING COMPANY – HOW DO THEY WORK & HOW TO STRUCTURE THEM?

This article has been researched and written by Thomas McNelliey and the team at Creation Business Consultants and has not used AI in generating this article.

Holding companies play a significant role in Saudi Arabia’s business landscape, often serving as Special Purpose Vehicles (SPVs) typically under the responsibility of, families, or large enterprises. The essential thought process in laying out these holding firms is to upgrade compelling corporate administration and protect assets. They are organised structures for the administration and overseeing of subsidiary businesses, guaranteeing productive tasks, risk relief, and monetary execution. Moreover, holding companies work with optimal responsibilities and financial preparation, supporting the conservation of assets and advance methodologies.

Saudi Arabian holding companies often adopt a long-term investment perspective, aiming to foster synergies and strategic alignment among their subsidiary businesses. This approach enables them to engage in local and global investments, thereby contributing to economic growth and diversification.

Perceiving the significance of holding companies in driving success and financial development, Saudi Arabia has executed guidelines and systems to help their establishment and processes. This proactive methodology further supports the country’s financial success and reliability.

HOW TO SET UP A HOLDING COMPANY IN SAUDI ARABIA

Setting up a holding company in Saudi Arabia includes a few critical stages and observations:

1. Having a strategy: Start by developing an extensive proven strategy that frames your holding company’s goals, design, and policies.
2. Legal Structure: Pick the appropriate legal structure for your holding company. The Saudi Arabia New Company Law 2023 states that a holding company is a joint-stock company, simplified joint-stock company, or limited liability company which incorporates companies or owns interests or shares in existing companies that become subsidiaries thereof.
3. Registration & Licensing:
   • Select an appropriate name for your holding company.
   • Register your holding company with the Ministry of Commerce and Investment (MOCI).
   • Submit the necessary permits for your operational requirements, bearing in mind that the application process with the Ministry of Investment in Saudi Arabia (MISA) may vary based on the specific activities of your holding company.
   • Decide the share capital requirements for your selected legal structure. Guarantee consistency with the least capital necessities.
   • Delegate a top managerial staff and guarantee that they meet the qualification standards set by the Ministry of Investment in Saudi Arabia (MISA).
   • Open a corporate bank account for your holding company.
   • Secure office premises in Saudi Arabia.
   • Carry out all administrative necessities, including those connected with tax assessment, and corporate administration.
   • On the likelihood that your holding company is organised as a JSC, you might need to have Saudi Arabian partners or investors.

ADVANTAGES OF A SAUDI ARABIAN HOLDING COMPANY

The numerous advantages of a Saudi Arabian holding company are as listed below:

• Diversification

Holding companies consider the broadening of ventures across numerous areas, reducing risk and upgrading the flexibility of the general portfolio.

• Tax Efficiency

Saudi Arabia provides attractive tax incentives for holding companies. Revenue generated from investments in subsidiaries may lead to reduced tax rates, with potential exemptions for earned profits.

• Financial Oversight

Holding companies possess the authority to make critical decisions for subsidiary businesses, ensuring alignment with the parent company’s goals and objectives.

• Distribution of Productive Capital

Capital may be properly allocated to various subsidiary businesses, enhancing asset utilisation, and improving overall production.

• Streamlined Management

The holding company structure facilitates efficient oversight of subsidiary operations.

• Wealth Transfer Planning

Holding companies facilitate seamless wealth and asset transfer, simplifying the process of passing on resources to future generations.

• Scale Economies

Holding companies can achieve economies of scale by combining assets and responsibilities, lowering costs, and expanding advantages.

• Market Entry

A Saudi holding company provides access to the thriving Middle Eastern and North African (MENA) markets, serving as an attractive base for regional and global expansion initiatives.

• Financial Investors

The holding company structure can appeal to external financial investors seeking participation in a diversified investment portfolio managed by experts.

• Asset Protection

Holding companies support Asset protection and long-term financial planning, allowing families and individuals to manage their resources.

These benefits make holding companies in Saudi Arabia an essential decision for people and organisations looking to unite and safeguard resources, differentiate speculations, and upgrade their financial designs while profiting from the country’s positive administrative environment.

TAKEAWAY/ HOW CAN WE HELP?

Establishing a holding company in Saudi Arabia is a thorough process that requires strict adherence to regulatory and legal procedures. Our team of experts will leverage our experience to help simplify the process while simultaneously providing you with all the details needed to set up your company in Saudi Arabia and the GCC. Contact a member of our team for your free expert consultation on your Saudi Arabia entity, email [email protected] or call Saudi Arabia +966 54 511 2494 UAE +971 4 878 6240 today.