Saudi Arabia: New Companies Law Approved
Saudi Gazette, 29 June 2022: Saudi Arabia’s Cabinet has approved a new Companies Law.
Among other things, it will provide more flexibility in protecting companies and enable the private sector to keep up with best international practices better.
It regulates all provisions related to commercial companies, non-profit companies and professional companies.
It enables a family charter to be concluded which regulates family ownership in family businesses, their governance and management, work policies, the employment of family members and the distribution of profits.
The aim is to make these companies more sustainable.
SMEs will also be exempt from the audit requirement.
A new type of company called the simplified joint stock company has been established.
This has been established to respond to the needs and requirements of entrepreneurs and venture capitalists.
It will enable non-profit companies to advance to the third sector, stimulate social responsibility and allow them to generate returns in their businesses and spend them on non-profit purposes.
The requirements and procedures for establishing companies are also simplified.
There is flexibility to include special terms and conditions in the contracts of incorporation of companies or their articles of association and create possible mechanisms for entrepreneurs, owners of venture capital and private ownership.
Various restrictions are removed.
These include restrictions on company names.
A limited liability company is allowed to issue debt instruments or negotiable financing instruments.
The provisions of transformation and merger between companies have been amended.
A company can now be divided into two or more companies and the owners of individual entities can transfer their assets to any types of companies.
Different types of shares with varying categories and rights, privileges or restrictions may be issued and shares may be allocated to employees to attract and motivate talent.
Profits may be distributed temporarily or annually without compromising the rights of creditors.
Electronic procedures may be implemented via remote means of communication.
This includes the submission of incorporation applications, general assembly attendance and votes.
Disputes and disagreements may be resolved by arbitration or other alternative means and there are new provisions on the liquidation of a company in line with the Bankruptcy Law.
It has been approved to stimulate and develop the Kingdom’s commercial system.
It aims to improve the sustainability of companies, support investment in SMEs through facilitating procedures and regulatory requirements and achieve greater market diversity by adding new corporate entities.
It also aims to preserve the rights of customers, reduce the numbers of disputes and ensure all stakeholders are treated fairly.
Also reported in Okaz on 28 June 2022. For full story, click here.
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