Saudi Arabia is changing fast. The country wants to attract more businesses and investors. As part of this plan, it has updated many laws to support growth.
The Commercial Companies Law is the primary legislation governing the establishment and operation of businesses in the Kingdom. It tells you how to start a company, manage it, follow the rules, and close it if needed.
The Ministry of Commerce handles company registration and general rules. The Ministry of Investment (MISA) helps foreign investors. Other government bodies give licenses, approve contracts, and check if companies follow the law.
These changes are part of Vision 2030—Saudi Arabia’s big plan to grow its economy, support private business, and welcome global partners. The law now allows 100% foreign ownership in many areas and gives more options for how companies are managed.
This blog is a part of General Corporate and Compliance Services.
This guide is for:
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- Founders and entrepreneurs,
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- In-house legal teams,
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- Business consultants and advisors,
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- Investors who want to enter the Saudi market.
We will take you through each step:
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- Choosing a company type,
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- Registering and getting licenses,
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- Writing agreements and managing the business,
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- Meeting tax and reporting rules,
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- Handling problems and resolving disputes,
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- And closing or selling a company when needed.
Legal Forms of Companies in Saudi Arabia
The Commercial Companies Law in Saudi Arabia allows different types of legal entities, each suited to a specific kind of business or ownership structure. Choosing the right one is the first step when starting a company in the Kingdom.
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- A Sole Proprietorship is the simplest form, owned by one person who is fully responsible for the business.
- A Limited Liability Company (LLC) is the most common type, especially for small and medium-sized businesses, and limits the personal liability of its partners.
- A Joint Stock Company (JSC) is designed for larger businesses and can offer shares to the public or private investors. For more flexible needs, the law now allows a Simplified Joint Stock Company (SJSC), which suits startups and single investors who still want the benefits of a corporate structure.
- General Partnerships and Limited Partnerships are used when two or more people join together, sharing profits and responsibilities in different ways.
- Professional Companies are formed by licensed professionals, such as lawyers, doctors, or engineers, who want to work under a shared company name. Lastly, Holding Companies are formed to own shares in other companies and help manage group structures.
Each company type has its own rules and benefits. We will explore these in more detail in the cluster articles.
Incorporation of Companies
Starting a company in Saudi Arabia involves a few key steps. You’ll need to choose your company type, prepare documents, and register with the right government authorities.
The process begins with reserving a name and drafting your company’s Articles of Association. Depending on the business, you may need special licenses from ministries or local authorities. Foreign investors often need approval from MISA, while all companies must register with the Ministry of Commerce to get their Commercial Registration (CR).
Most of the steps can now be done online, thanks to platforms like Meras, Qiwa, and GOSI. The process is smoother than before, but it’s still important to follow the legal steps carefully.
In our detailed article on how to incorporate a company in Saudi Arabia, we break down each step, explain timelines, and list the documents you’ll need.
Capital Requirements and Shareholding Rules
Every company in Saudi Arabia must meet certain capital requirements when it is formed. These requirements depend on the type of company you choose. For example, Joint Stock Companies must have a higher minimum capital compared to Limited Liability Companies, which can often be started with a smaller investment.
The law also defines who can be a shareholder and how many shareholders a company can have. An LLC can have between 1 and 50 partners, while a JSC must have at least two shareholders. Some companies, like Simplified JSCs, allow more flexible ownership models, which are especially useful for startups and investors.
The recent reforms of Saudi Arabia state that, foreign investors can now own 100% of many types of companies without needing a local partner. However, some sectors are still restricted or require special licenses through MISA. Understanding which business activities are open to full foreign ownership is key before planning your investment.
It’s also important to understand how capital contributions work—whether in cash, assets, or services—and how they affect voting rights, profit distribution, and liability. In some companies, you can issue different types of shares with special rights, such as preferred shares or non-voting shares.
Company Management and Governance
Once a company is formed in Saudi Arabia, it must be managed according to the rules set out in the Commercial Companies Law and its founding documents. This includes how decisions are made, who has authority, and how the company is supervised.
The company’s Articles of Association usually set out the management structure. In an LLC, the company is typically managed by one or more appointed managers, who may or may not be shareholders. In Joint Stock Companies (JSCs) and Simplified JSCs (SJSCs), management is more formal. A Board of Directors must be formed, and directors have specific duties and responsibilities under the law.
The law requires companies to have proper governance practices. For example, JSCs must hold General Assembly meetings, where shareholders vote on important matters such as approving financial statements, appointing auditors, or electing board members. Companies must keep records of these meetings and follow notice periods and quorum rules.
Managers and directors must always act in the company’s best interest. They must avoid conflicts of interest, disclose related-party transactions, and may be held personally liable if they act negligently or in bad faith.
Many foreign-owned companies also appoint a General Manager (GM) or CEO, who is given specific powers to represent the company before government authorities, banks, and courts. These powers must be clearly stated in official documents and may require notarization or registration.
Good governance helps build trust with partners, regulators, and investors. It also reduces the risk of disputes and penalties.
Contracts and Commercial Agreements
Contracts play a key role in how companies operate in Saudi Arabia. Whether you are starting a business, bringing in investors, hiring employees, or signing with suppliers, your agreements must be legally sound and properly executed.
The most important agreements begin with the Articles of Association (AoA) or Memorandum of Association (MoA). These documents define how the company will operate, who owns it, and how decisions are made. For foreign investors or business partners, a Shareholders’ Agreement is often added to clarify rights, roles, profit-sharing, and exit strategies.
All major contracts in Saudi Arabia must be in Arabic, or at least accompanied by a certified Arabic translation. While English is widely used in business, only Arabic documents are legally recognized by Saudi courts and government bodies.
Some contracts must also be notarized, registered, or approved by authorities—especially in sectors like real estate, franchising, or intellectual property. For example, commercial agencies, franchise agreements, and real estate leases may need to be filed with specific government bodies to take legal effect.
Saudi Arabia also accepts electronic contracts and e-signatures, especially through platforms approved by the Saudi Authority for Data and Artificial Intelligence (SDAIA). But for certain high-value transactions or shareholder decisions, wet signatures and official stamping may still be required.
Well-drafted contracts help avoid disputes and protect your rights. Poorly written or informal agreements can create serious legal problems—even if both parties agree in principle.
Regulatory Compliance and Reporting
After incorporation, every company in Saudi Arabia must follow ongoing rules and reporting duties. These requirements help the government track legal and financial activities and ensure that businesses operate responsibly.
All companies must file annual financial statements, usually audited by a licensed auditor. These must be submitted to the Ministry of Commerce or the Capital Market Authority (CMA), depending on the company type. Joint Stock Companies (JSCs) and large LLCs face stricter reporting obligations.
Companies must also keep proper records of General Assembly meetings, board resolutions, and major decisions. Certain changes—such as changes in capital, ownership, or management—must be reported and registered through the government portals.
Businesses in Saudi Arabia must comply with Zakat, Tax, and Customs Authority (ZATCA) rules. This includes:
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- Zakat or corporate income tax depending on ownership structure,
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- Value Added Tax (VAT) registration and monthly or quarterly filings,
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- E-invoicing (mandatory through FATOORA for eligible businesses).
In addition, all companies must follow Anti-Money Laundering (AML) and Know Your Customer (KYC) rules. This includes identifying and reporting the Ultimate Beneficial Owner (UBO) and updating their information on official records.
Non-compliance can lead to fines, license suspension, or even closure of the company. Fortunately, many of these processes are now digital and user-friendly, especially through platforms like Qiwa, ZATCA, Muqeem, and Meras.
Mergers, Acquisitions, and Restructuring
As companies grow or change, they may need to merge with other businesses, buy new ones, or restructure internally. Saudi Arabia’s company law allows these moves but sets clear legal steps that must be followed.
A merger happens when two or more companies combine into one. An acquisition is when one company buys another, either by purchasing its shares or assets. In both cases, proper contracts, approvals, and financial checks are required.
Before any deal is signed, parties usually conduct legal and financial due diligence. This means checking licenses, debts, contracts, and ownership records. Once both sides agree, the terms are documented in a merger or acquisition agreement, which may need to be approved by the Ministry of Commerce, MISA, or even the General Authority for Competition (GAC), depending on the size and impact of the deal.
Some businesses may choose to restructure instead. This could mean changing the legal form of the company, bringing in new shareholders, or splitting a business into two. These changes require updated Articles of Association, board approvals, and filings with government bodies.
Each type of transaction has its own rules for tax, liability, employee rights, and reporting. For foreign businesses especially, it’s important to follow the correct procedure to avoid delays or legal issues.
Dispute Resolution and Legal Protections
Disputes can happen in any business—between partners, with customers, or with suppliers. Saudi Arabia provides clear legal paths to resolve such problems, and recent reforms have made the process more efficient and business-friendly.
Most commercial disputes are handled by the Commercial Courts, which are part of the Saudi judicial system. These courts hear cases related to contracts, company matters, and business transactions. Cases can now be filed and followed online through the Najiz portal, which helps speed up procedures.
Before going to court, parties can try to settle their issues through mediation or arbitration. Saudi Arabia supports alternative dispute resolution (ADR), and agreements often include a clause to use it. The Saudi Center for Commercial Arbitration (SCCA) is the main body that handles professional arbitration and mediation in the Kingdom.
Saudi law also protects business owners and shareholders. For example, if directors act against the company’s interests, shareholders can take legal action. Companies can also claim damages if a contract is broken or if there is fraud or negligence.
To protect yourself legally, it’s important to:
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- Have clear written contracts,
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- Keep company records, and
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- Act according to the Articles of Association and shareholder agreements.
Termination and Liquidation of Companies
Sometimes, companies need to close down. This could be because the business has ended, partners want to move on, or the company is merging with another. In Saudi Arabia, closing a company is called liquidation, and the law sets out a clear process to follow.
There are two main types of liquidation: voluntary and compulsory. Voluntary liquidation happens when the shareholders or partners decide to close the company. Compulsory liquidation happens when a court or government authority orders it—usually because of bankruptcy, legal violations, or non-compliance.
When a company is being liquidated, it must:
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- Appoint a liquidator,
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- Stop doing regular business,
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- Settle all debts and employee payments,
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- Sell company assets,
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- And file final reports with the Ministry of Commerce, ZATCA, and other authorities.
Only after completing all these steps can the company’s Commercial Registration (CR) be cancelled. Until then, the company is still legally responsible for its actions and liabilities.
Liquidation can take several months depending on the size and complexity of the business. It’s important to follow each step carefully to avoid fines or future legal issues.
Key Reforms and Future Outlook
Saudi Arabia’s company law has gone through major changes in recent years. The new Commercial Companies Law, introduced in 2022, brought more flexibility, stronger corporate governance, and greater support for innovation and foreign investment.
One of the biggest reforms is the allowance of 100% foreign ownership in many sectors. Investors can now open businesses without needing a local partner, as long as they meet licensing requirements through MISA. The law also introduced new company types like the Simplified Joint Stock Company (SJSC) to help startups and growing businesses.
Other key changes include:
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- Faster and easier online incorporation,
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- Clearer rules for shareholder rights and dispute resolution,
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- Stronger requirements for transparency, including Ultimate Beneficial Ownership (UBO) filings and e-invoicing,
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- Support for mergers, acquisitions, and restructuring.
These reforms are part of Vision 2030, Saudi Arabia’s national plan to diversify its economy, reduce dependence on oil, and make the Kingdom a global hub for trade, innovation, and investment.
More updates are expected in the coming years. Government platforms are becoming more connected, and many services—licensing, filings, and compliance—are moving fully online. New laws may also introduce more flexibility in capital markets, cross-border investments, and ESG reporting.
Running a business in Saudi Arabia starts with understanding the law. The Commercial Companies Law gives you the rules to follow—from choosing your company type and registering it, to managing it properly and closing it when needed.
This guide gives a broad overview of the full journey of a company in Saudi Arabia. We’ve introduced the main legal forms, explained how to incorporate, manage, comply with regulations, handle disputes, and if required, how to close a business the right way. We also looked at the key reforms that are shaping the future of doing business in the Kingdom.
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