Saudi Arabia: The New Companies Law
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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.
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:
Article Number |
Subject/Title of the Article Under the New Companies Law |
Paragraphs 1 & 2 of Article 17 |
Accounting Records and Financial Statements |
Paragraph 2 of Article 20 |
Auditor Obligations |
26 |
Duty of Care and Duty of Loyalty |
27 |
Conflict of Interest, Competition, and Exploitation of Assets |
31 |
Business Judgment Rule |
Paragraph 5 of Article 68 |
Election of Board Members |
69 |
Expiration of the Term of Board of Directors or Resignation of its Members |
71 |
Disclosure of Interest in Transactions and Contracts |
75 |
Sale of Company Assets |
80 |
Meetings of Board of Directors |
81 |
Attending Meetings by Proxy and Effectiveness of Board Decisions |
88 |
Ordinary General Assembly Meetings |
90 |
General and Special Assemblies |
91 |
Call for Assembly Meetings |
92 |
Quorum of Ordinary General Assembly Meetings |
93 |
Quorum of Extraordinary General Assembly Meetings |
94 |
Effectiveness of General Assembly Decisions |
96 |
Agenda of General Assembly |
Paragraph 2 of Article 112 |
Shareholder Register |
122 |
Providing Shareholders with Financial Statements and Deposit Thereof |
132 |
Company Losses |
134 |
Issuance of a Capital Decrease Decision |
163 |
Vacancy of Manager's Position |
164 |
Removal of Manager |
182 |
Company Losses |
216 |
Holding Company |
217 |
Subsidiary Company |
218 |
Acquiring Interests or Shares in Holding Companies |
244 |
Liquidation of Company |
248 |
Liquidator Appointment Decision |
254 |
Insufficiency of Assets |
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.
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