Saudi Ministry of Commerce implements the new Corporate Law.
On 28 June 2022, the Saudi Council of Ministers in the Kingdom of Saudi Arabia approved the new companies’ law (“New Law”) replacing its predecessor, the companies’ law issued by Royal Decree no. (M/3) dated 28/01/1437H corresponding to 09/11/2015G (the “Previous Law”).
The New Law was published on 4 July 2022 in the official Saudi gazette (Um Al Qura) and entered into effect after one hundred eighty (180) days from the date of publishing.
The New Law is expected to enhance the regulatory landscape for companies operating in the Kingdom in several key areas, as well as to address the need for an advanced corporate framework compatible with a more complex business environment
Below mentioned an abstract of the key features of this updated regulation in KSA for the LLC(s) and JSC(s):
Exempting micro and small companies from the requirement to appoint an external auditor.
Removing ownership restrictions on single shareholders’ limited liability companies; (iii) removing naming restrictions on corporate entities (under the New Law, it is allowed to have the family name as the legal commercial name of the entity); (iv) simplifying the liquidation procedures in line with the KSA Bankruptcy Law.
Observing international standards:
Recognizing tag along and drag along rights; it is not possible for shareholders representing (90%) of the capital of the company to force the minority shareholders to accept an offer from a buyer, and vise-versa, the minority shareholders can now force the majority shareholders to sell their respective shares on the same conditions as the majority shareholders.
Allowing the issuance of several classes of shares
Introducing not-for-profit companies
Introducing the concept of corporate social responsibility
Allowing the issuance of shares as part of employees’ incentive schemes
Introducing insurance coverage for company managers that cover any liabilities or claims that may arise against the managers in the course of their appointment.
Introducing elaborated merger provisions to be more convenient to the Saudi growing business environment.
Introducing a simplified structure for Joint Stock Companies