The Saudi Companies Law (نظام الشركات) is the framework that governs how companies in the Kingdom are formed, run and wound up. The new Companies Law was issued by Royal Decree No. (M/132) dated 1/12/1443H and replaced the previous law. It brought significant changes in favour of entrepreneurs: simpler company forms, more flexibility on capital and management, and rules for family and non-profit companies. This guide covers what anyone setting up or running a company in Saudi Arabia most needs to know.
This is a general explanation. The reference is the official text of the law, its implementing regulations, and what the Ministry of Commerce issues.
Company forms under the new Companies Law
| Form | Key feature | Suits |
|---|---|---|
| Limited liability company (LLC) | Each partner is liable up to the amount of their share; can be formed by one person | Most small and medium-sized businesses |
| Simplified joint stock company (SJSC) | A new form with flexible management and share structure; can be formed by one person | Start-ups and attracting investors |
| Joint stock company | Capital divided into shares; managed by a board of directors and general assemblies | Large projects and public offerings |
| General partnership | Partners are jointly liable with all their assets | Small partnerships built on trust |
| Limited partnership | General partners plus limited partners whose liability is limited to their shares | One partner who manages and another who funds |
The main changes in the new law
- Simplified joint stock company: a new form designed for start-ups, with flexibility in management and issuing shares.
- Flexible capital: in a limited liability company, the partners set the capital to suit their business, within the applicable rules.
- Family companies: a "family charter" can be put in place to govern family ownership, management and the transfer of shares between generations.
- Non-profit companies: the law provides a form for companies that devote their profits to non-profit purposes.
- Professional companies: such as law, accounting and engineering firms, are now regulated within the Companies Law.
- Shareholder agreements: partners may govern their relationship through detailed agreements alongside the articles of association.
- Bringing existing companies into line: existing companies were required to adjust their position to the new law within a set grace period.
Setting up a company: the steps in brief
- Choose the legal form that suits the business and the number of partners.
- Reserve the trade name.
- Prepare the articles of association or by-laws, and a shareholder agreement if there is one.
- Register in the Commercial Register through the Saudi Business Center platform (المركز السعودي للأعمال).
- Complete the related registrations: zakat and tax, social insurance (GOSI), the Chamber of Commerce, and any licences specific to the activity.
For the details, read our guide to company formation in Saudi Arabia.
Articles of association and shareholder agreements: where most disputes start
Most disputes between partners come from a clause that was never written, not from one written badly. Pay attention to these points:
- Who manages the company, what their powers are, and when their decisions need the partners' approval.
- How profits are distributed, and whether part of them is retained.
- Selling shares, and the other partners' right of first refusal.
- A partner leaving, dying, or becoming unable to continue.
- How disputes are resolved: negotiation, then mediation, then arbitration or court.
Liability of managers and board members
A manager or board member is liable for damage arising from a breach of the law or of the company's articles, or from mismanagement. Recording important decisions in minutes and following governance rules protects the manager as much as the company. Read about our corporate governance service.
Frequently asked questions
Can one person set up a company?
Yes, as a limited liability company or a simplified joint stock company. A second partner is not required.
Do I need to amend my existing company's articles?
The law required existing companies to bring their position into line. If you have not reviewed your company's articles since the law was issued, review them with a lawyer to make sure they comply.
What is the difference between an LLC and a simplified joint stock company?
An LLC is simpler and suits most businesses. A simplified joint stock company is more flexible on share structure and bringing in investors, so it suits start-ups planning funding rounds.
Setting up a company, or facing a dispute between partners?
The team at Usus Law Firm handles company formation, drafting articles and shareholder agreements, and commercial cases including partner disputes, from its offices in Riyadh and Tabuk. Company documents and court filings in Saudi Arabia are in Arabic; we advise in English. See also our explanation of the Civil Transactions Law.
Read also: Corporate governance: a practical guide.
Read also: Setting up a company as a non-Saudi.
This article is general legal information and is not a substitute for advice on your specific case. Court proceedings in Saudi Arabia are in Arabic; the official Arabic text of each law prevails.
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