Saudi Arabia: Recent updates on the New Companies Law

In 2022, the Kingdom of Saudi Arabia (KSA) issued a new Companies Law (the New Companies Law) which governs all forms of entities in the KSA market, whether commercial, non-profit, family operated entities, and/or professional, under one comprehensive single law.

The New Companies Law came into effect on the 19 January 2023 (the Effective Date), and its Implementing Regulations (the Implementing Regulations) were formally issued by Ministry of Commerce (MoC) and came into force on the 18 January 2023. The New Companies Law replaces the previous companies law issued pursuant to the Royal Decree No. M/3 dated 10 November 2015. We issued an article outlining the key changes under the New Companies Law in comparison with the previous companies law.

Since the Effective Date of the New Companies Law, there have been essential developments made by the relevant KSA regulatory authorities. We summarise these developments below.

Key Developments 

The respective KSA authorities have formally granted a compliance grace period of two years (the Grace Period) for entities to implement the required changes to their corporate documents and or restructure their operations in accordance with the New Companies Law. The following considerations should also be noted: 

1. Entities which will be incorporated and entering the KSA market post the Effective Date shall fully comply with the provisions of the New Companies Law.
2. Continued provisions which were carried on from the previous 2015 companies law and reflected under the New Companies Law shall apply to all entities regardless of the Grace Period.
3. The provisions under the New Companies Law relating to crimes, offences, and the penalties shall be applied to all entities as of the Effective Date regardless of the Grace Period.
4. The provisions which introduced procedural requirements on entities and their management shall comply with the requirements under the New Companies Law. 
5. Further guidance is expected to be issued by the MoC, the Capital Market Authority (CMA), and other relevant KSA government authorities in relation to the drafting of the main corporate documents for entities, mainly the bylaws and articles of association (the Corporate Documents). Until then, the MoC and CMA have made an announcement to note that any amendments to the Corporate Documents during the Grace Period require the entity to conduct full amendment of its Corporate Documents and comply with the provisions of the New Companies Law. 
6. Despite the Grace Period, the MoC and CMA have also announced that certain provisions of the New Companies Law shall apply starting from the Effective Date on all entities regardless of any contradictions with their current Corporate Documents. We have provided below a table outlining the main provisions which are to be applied to all entities as of the Effective Date of the New Companies Law:

Next Steps 

Further instructions are expected to be issued in due course by the relevant KSA government authorities. In the meantime, all entities must take into consideration the requirements of the New Companies Law, its Implementing Regulations, and all the subsequent guidelines when preparing their Corporate Documents and conducting their business. 

For additional details, please contact Alain Sfeir, Shahd Makhafah or Meshael AlShubaily who can support you in adopting the most suitable regulatory plan ensuring overall compliance as of the Effective Date and up until the elapse of the Grace Period.