Saudi Arabia: New Companies Law 2015 Approved

The Saudi government recently unveiled a comprehensive update to the Saudi Companies Law that has been some time in the making. The new law will come into effect 150 days from the date of publication in the official gazette (Um Al-qura) and, when effective, will entirely replace the current Companies Law issued by Royal Decree M/6 dated 22/3/1385 Hijri, and it will override all rules that conflict with the new law. Companies already existing as of the date of the coming into force of the new law are required to effect such changes as to comply with the new law within a one-year period (subject to any rules set out by the competent authorities for such period).

The new Companies Law represents a significant overhaul and modernization of the Saudi Companies Law, aligning it closer to global trends and developments in corporate law and governance. Some of the key aspects of the new law are discussed below.

Corporate Forms

The new law recognizes five corporate forms: (i) General Partnership, (ii) Limited Partnership, (iii) Joint Venture Company, (iv) Joint Stock Company ("JSC"), and (v) Limited Liability Company ("LLC"). Three of the corporate forms permitted by the current regime, namely Cooperative Companies, Partnerships Limited by Shares, and Variable Capital Companies, have been eliminated, and it will no longer be possible to establish such companies. Subject to narrow exceptions, the companies with the eliminated forms that do not adopt one of the approved forms will be void, and the respective partners will be jointly and severally liable for the obligations of the void company.

The new law contemplates that the Ministry of Commerce and Industry ("MOCI") will continue as the primary regulator of Saudi companies, although the Capital Markets Authority has been entrusted to oversee JSCs listed in the Saudi financial markets.

Number of Shareholders

In perhaps the most significant departure from the existing regime, the new law removes the two-shareholders minimum requirement for LLCs, and it is now possible to establish an LLC with a single shareholder. Certain restrictions apply; for instance, it is not possible for a natural person to establish more than one single-shareholder LLC, and a single-shareholder LLC may not in turn establish or own another single-shareholder LLC. While the law is not explicit in this regard, it appears possible for body corporates to establish one or more single-shareholder LLCs in the Kingdom, although it remains to be seen how flexibly the MOCI will administer this aspect.

JSCs now require a minimum of only two shareholders (down from five shareholders in the existing law). However, the government, juridical public entities, companies wholly owned by the government, and companies with a capital of more than 5 million Saudi Riyals will be able to establish a JSC with just a single shareholder under the new law.

Share Capital

There continues to be no minimum capitalization requirement for LLCs. The minimum capital to establish a JSC has been reduced from 2 million Saudi Riyals to 500,000 Saudi Riyals. As a practical matter, the Saudi Arabian General Investment Authority ("SAGIA"), which licenses all foreign investment into the Kingdom, may impose additional capital requirements for foreign investors above and beyond the minimum requirements of the Companies Law, depending on the nature of the envisaged commercial activity.

Electronic Publication

The law calls for various publications and proclamations to be made on the MOCI website electronically including the publication of Articles, Bylaws, and their amendments, thus potentially removing the requirement to publish such documents in the official gazette.

Joint Stock Companies/Corporate Governance

In the event that the chairperson and members of the board of directors of a JSC resign or if the General Assembly has been unable to constitute the board of directors by voting, the MOCI, or the Capital Markets Authority (in the case of listed companies), may step in and form a temporary committee to oversee the company with the appropriate experience, specialization, and number of members.

Enhanced corporate governance provisions impose new restrictions on the combining of the post of chairperson of the board with executive positions. Further, an audit committee is required to be established to oversee the JSC's business, and the members of the audit committee—consisting of between three and five members—may not be composed of executive members of the board (whether from the shareholders or not). In the matter of voting rights, cumulative voting is permitted for the election of the board of directors provided that the voting rights per share may not be used more than once.

The holding of general meetings of shareholders and the participation of the shareholders in the deliberations and voting on decisions may now be conducted through "modern technological means" in accordance with the regulations set out by the competent authority. A similar facility for limited liability companies does not seem to be contemplated.

The new law permits a JSC to issue debt instruments and financing instruments (Sukooks). A JSC may also purchase or pledge its own shares pursuant to the rules set out by the competent authority; however, the shares so purchased by the company may not be voted at shareholder meetings.

Concept of Holding Company Introduced

The new law introduces the concept of an LLC or JSC being used as a "holding company," which is essentially a company whose purpose is to control other LLCs or JSCs as subsidiaries through the possession of more than half of the capital of such companies or by controlling the formation of the board of directors.

Holding companies can be used for a variety of purposes including investing in stocks and other securities, owning its own real estate and movables, and holding intellectual property. A holding company is required to prepare annual consolidated financial statements using recognized accounting practices for covering all its subsidiaries.


If the losses of an LLC reach 50 percent of the capital, Art. 181 states that the manager must register this fact at the Commercial Register and call a general assembly of the shareholders within 90 days from the day of notifying them in order to consider whether to continue or dissolve the company. If the manager neglected to call the partners or if no action is taken by the partners to continue or dissolve the company, the company will be dissolved by force of law. In the existing law, the shareholders could have been jointly and severally liable if no decision were made as to whether to continue or dissolve the company.

If the losses of a JSC reach 50 percent of the paid capital at any time during the financial year, Art. 150 requires the board to call an extraordinary meeting of the shareholders within prescribed timelines in order to decide whether to increase or decrease the share capital of the JSC or to liquidate it. If the extraordinary meeting of the shareholders does not occur on a timely basis, or if the meeting takes place and no decision is made, or if a decision was made to increase the capital and the raising of funds was not completed within 90 days of the issuance of the decision of the shareholders' meeting to increase the capital, then the JSC will be dissolved by force of law.

Model Forms

The MOCI will publish on its website model forms of Articles and Bylaws for all types of companies within 120 days from the date of issuance of the law.


The possibility of setting up single-shareholder LLCs is a welcome development, particularly for foreign investors who have long struggled with the additional paperwork and administrative burdens induced by the two-shareholder minimum requirement. The easing of capital and shareholder rules for JSCs could make JSCs a viable option for many businesses that would have otherwise sought the benefits of a JSC (including higher visibility, enhanced corporate governance framework, ability to seek access to the public markets) but for the associated administrative and financial burdens. The enhancement of the LLC's limited liability status is also a positive development.

It remains to be seen how the new law will benefit foreign investors, given that all inbound foreign investment (including the establishment of companies in the Kingdom by non-GCC persons) is still subject to licensing pursuant to SAGIA rules. It will be interesting to see to what extent SAGIA updates its rules to accommodate the new Companies Law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions