DLA Piper Guide To Going Global Corporate Saudi Arabia

GUIDE TO
GOING GLOBAL
CORPORATE
Saudi Arabia
Downloaded: 15 Dec 2021

INTRODUCTION
GUIDE TO GOING GLOBAL | CORPORATE
INTRODUCTION
Welcome to the 2021 edition of DLA Piper’s Guide to Going Global – Corporate.
GUIDE TO GOING GLOBAL SERIES
To compete and be successful today, companies need to develop and scale their businesses globally. Each country
presents its own set of unique laws, rules and regulations and business practices that companies must understand
to be successful. In order to help clients meet the opportunities and challenges of expanding internationally, we
have created a handy set of global guides that cover the basics companies need to know when going into and doing
business in new countries. The Guide to Going Global series reviews business-relevant corporate, employment,
intellectual property and technology, executive compensation, and tax laws in key jurisdictions around the world.
CORPORATE
The Guide to Going Global – Corporate has been created based on our research, our experience and feedback we
have received from clients in both established and emerging businesses that have expanded internationally. We
hope it will be a helpful resource for you.
The Guide to Going Global – Corporate covers corporate basics in 54 key jurisdictions across the Americas, Asia
Pacific, Europe and the Middle East. We touch on a wide range of corporate issues for companies expanding
internationally, including establishing a corporate presence and choice of entity, liability considerations, tax
presence and tax filings, capital requirements, the formation process, director, officer and shareholder
requirements, registration processes, office lease processes and possible exit strategies.
With more than 600 lawyers, DLA Piper’s global Corporate group is one of the largest in the world, with one of
the widest geographical footprints of any global law firm and experience across the legal areas companies need as
they expand internationally. With both global experience and local knowledge, we partner with our clients
wherever they do business to find solutions and manage their risk in relation to their challenges and objectives.
While this guide provides high-level guidance, it is not a substitute for legal advice, and we encourage you to seek
advice regarding the specific matters that concern you. If you wish to speak to any of our contributors, you may
find their contact details at the end of the guide.
We hope you find this guide valuable, and we welcome your feedback.
2 | DLA Piper Guide to Going Global | Corporate | www.dlapiperintelligence.com/goingglobal/

This publication is provided to you as a courtesy, and it does not establish a client relationship between
DLA Piper and you, or any other person or entity that receives it.
This is a general reference document and should not be relied upon as legal advice. The application and
effect of any law or regulation upon a particular situation can vary depending upon the specific facts and
circumstances, and so you should consult with a lawyer regarding the impact of any of these regimes in any
particular instance.
DLA Piper and any contributing law firms accept no liability for errors or omissions appearing in this
publication and, in addition, DLA Piper accepts no liability at all for the content provided by the other
contributing law firms. Please note that corporate law is dynamic, and the legal regime in the countries
surveyed could change.
No part of this publication may be reproduced or transmitted in any form without the prior consent of
DLA Piper.
SAUDI
3 | DLA PiperARABIA
Guide to Going Global | Corporate | www.dlapiperintelligence.com/goingglobal/
SAUDI ARABIA
Last modified 20 May 2020
FORM OF ENTITY
Limited liability company
A limited liability company is a popular corporate vehicle among foreign investors in Saudi Arabia. The personal
liability for each of the partners/shareholders is limited to the individual partner's contribution to the company's
share capital.
ENTITY SET UP
Limited liability company (LLC)
LLC is 1 of the most common forms of legal entity chosen by foreign investors in the Kingdom of Saudi
Arabia (KSA)
Establishing an LLC is a multistep process. Incorporating an LLC may take several months from the date of
submission of application to the Saudi Arabia General Investment Authority (SAGIA)
The Ministry of Commerce and Investment (MOCI) subsequently issues a commercial registration
certificate before the LLC is considered fully registered in KSA
After the incorporation, various governmental files and documents must be applied for in order for the
LLC to be fully operational. This post-incorporation phase can take a couple to several months
Branch of a foreign company
Foreign investors may also choose to establish a branch instead of an LLC to do business in the KSA
A branch operates on behalf of the parent company (foreign registered company) and has no separate legal
existence in KSA
Registration of a branch in relation to issuance of the foreign investment license by SAGIA and the
commercial registration certificate by MOCI follows the same general procedure as that of an LLC
4 | DLA Piper Guide to Going Global | Corporate | Saudi Arabia | www.dlapiperintelligence.com/goingglobal/

Incorporation of a branch may take several months from the date of submission of application to SAGIA
(subject to any delays caused by government authorities)
The parent company of the branch has liability for the branch's activities that it undertakes in KSA
The paid-up capital for a branch does not confer limitation of liability as compared to an LLC. The capital in
a branch simply serves as a security for the Saudi market and
With regard to tax and a number of other matters, a permanent branch is treated in the same manner as a
100 percent foreign-owned LLC
After the registration, various governmental files and documents must be applied for in order for the
branch to be fully operational. This post-registration phase can take a couple to several months
For future consideration, please note that an LLC can add shareholders if the company intends to expand in KSA.
On the other hand, a branch cannot add shareholders as it is an extension of its foreign parent company.
MINIMUM CAPITAL REQUIREMENT

Although there is no statutory minimum capital requirement, in practice, SAGIA requires foreign LLCs to have a
capital of at least SAR500,000. In certain types of activities, specific minimum capital is prescribed by SAGIA:
Service/property investment project value SAR30 million
Service/property financing projects SAR200 million with 40 percent Saudi shareholding
Service/transport SAR500,000
Contracting: SAR500,000 (but have revenue/asset value requirements)
Commercial (with minimum 25 percent Saudi partner): SAR7 million and a minimum contribution from the
foreign shareholder of SAR20 million and
Commercial (100 percent foreign): SAR30 million and commitment to invest at least SAR200 million over
the first 5 years.
LEGAL LIABILITY
Shareholders of an LLC are generally not liable for the debts of a corporation aside from their financial
contribution to the corporation. Certain circumstances may pierce this limitation of liability.

TAX PRESENCE
As of January 1, 2018, 5 percent value-added tax (VAT) has been introduced on most goods and services.
INCORPORATION PROCESS
Foreign investors are required to obtain a foreign investment license from SAGIA and then complete the
incorporation process at MOCI and other government departments. Incorporation process also includes
notarization of the company's articles of association at the local notary public in Saudi Arabia. Specific licenses are
required for certain activities.
BUSINESS RECOGNITION
Well regarded and widely used.
SHAREHOLDER MEETING REQUIREMENTS

Required to hold at least 1 annual meeting for LLCs within 4 months after the closing date of the financial year of
the LLC.
BOARD OF DIRECTOR MEETING REQUIREMENTS

There is no requirement for a board of directors or with regard to the nationality of directors. The company may
be managed by a General Manager or by a Board of Directors. If a board of directors is formed, there is no
requirement for frequency of meetings.
ANNUAL COMPANY TAX RETURNS

Required to annually file tax returns at the General Authority of Taxes and Zakat.
BUSINESS REGISTRATION FILING REQUIREMENTS


LLCs have to renew their foreign investment license issued by SAGIA and their commercial registration certificate
issued by MOCI upon expiry, and renew subscription to chamber of commerce annually.
BUSINESS EXPANSION
An LLC cannot have more than 50 shareholders, in which case it will have to be converted into a joint-stock
company.
EXIT STRATEGY
Appointment of a liquidator either from shareholders or third parties to carryout dissolution.
ANNUAL CORPORATE MAINTENANCE REQUIREMENTS

A shareholder meeting shall be convened at least once a year. Managers of the company shall prepare company's
financial statements, a report on its operations and financial position, and their proposal for appropriation of net
profits within 3 months from the end of the financial year (Report). The managers shall also be prepared to submit
a copy of their report to MOCI within 1 month of the date of preparation of the Report.
DIRECTOR / OFFICER REQUIREMENTS

Shareholders may appoint a manager, executive managers and/or a board of directors.
For more information on directors’ duties, see our Global Guide to Directors’ Duties.
LOCAL CORPORATE SECRETARY REQUIREMENT

No local corporate secretary requirement.
LOCAL LEGAL OR ADMIN REPRESENTATIVE REQUIREMENT

None beyond the required managers or directors.
LOCAL OFFICE LEASE REQUIREMENT

A local office lease and local address is required.
OTHER PHYSICAL PRESENCE REQUIREMENTS

Not applicable for this jurisdiction.
SUFFICIENCY OF VIRTUAL OFFICE

A virtual office is not sufficient.
PROVISION OF LOCAL REGISTERED ADDRESS BY LAW FIRM OR THIRD-PARTY

SERVICE PROVIDER
Registered address must be an address where the office is leased by the company.
PROVISION OF LOCAL DIRECTOR OR CORPORATE SECRETARY BY LAW FIRM

OR THIRD-PARTY SERVICE PROVIDER
Use of local law firm for incorporation is common. Companies usually conduct their own secretarial functions
once established.
NATIONALITY OR RESIDENCY REQUIREMENTS FOR SHAREHOLDERS,

DIRECTORS AND OFFICERS
The general manager needs to be a resident in the KSA. Directors are not required to be nationals or residents.
There are specific requirements regarding the nationality of shareholders in certain activities such as:

Trading activities: Saudi partner to own at least 25 percent of shareholding (unless the foreign investor
meets the qualification to set up a 100 percent foreign owned trading company)
Services/transport Saudi shareholding requirements – bus 30 percent / metro 25 percent
Property financing projects 40 percent
Communications value added – 30 percent Saudi shareholding requirement
Insurance and reinsurance – 40 percent Saudi shareholding requirement
Engineering design and professional consultancy: Saudi partner to own at least 25 percent of shareholding
There are certain types of activities that are reserved for Saudi nationals only. The list is issued by SAGIA and
amended from time to time.
RESTRICTIONS REGARDING APPOINTMENT OF NOMINEE SHAREHOLDERS OR

DIRECTORS
Restrictions apply as described in Nationality or residency requirements.
SUMMARY OF DIRECTOR'S, OFFICER'S AND SHAREHOLDER'S AUTHORITY

AND LIMITATIONS THEREOF
Directors are appointed by shareholders, either in the company's Articles of Association or a separate contract.
Directors have the required authority to run day-to-day operations to the extent granted to them by the
shareholders in a shareholders resolution or the Articles of Association.
PUBLIC DISCLOSURE OF IDENTITY OF DIRECTORS, OFFICERS AND

SHAREHOLDERS
There is no requirement to publicly disclose the identity of directors and shareholders.
MINIMUM AND MAXIMUM NUMBER OF DIRECTORS AND SHAREHOLDERS

At least 1 shareholder is required in an LLC pursuant to the new Companies Law (effective as on May 2, 2016).
Previously, a minimum of 2 shareholders were required to set up an LLC.

MINIMUM NUMBER OF SHAREHOLDERS REQUIRED

Directors: There is no minimum or maximum requirement.
REMOVAL OF DIRECTORS OR OFFICERS

Company may remove directors appointed in the Articles of Association or a separate contract without prejudice
to the officers' right to compensation if required.
REQUIRED AND OPTIONAL OFFICERS

Not applicable for this jurisdiction.
BOARD MEETING REQUIREMENTS

If a board of directors was formed, requirements will be as provided in the Articles of Association of the company.
QUORUM REQUIREMENTS FOR SHAREHOLDER AND BOARD MEETINGS

Quorum requirements will be as provided in the Articles of Association of the company.
MUST A BANK ACCOUNT BE OPENED PRIOR TO INCORPORATION, AND MUST

THE BANK ACCOUNT BE LOCAL?
Opening a local bank account to deposit the capital is a requirement for incorporation.
AUDITING OF LOCAL FINANCIALS. IF SO, MUST THE AUDITOR BE LOCATED

IN LOCAL JURISDICTION, AND MUST THE COMPANY'S BOOKS BE KEPT
LOCALLY?

Company's accounts must be audited by an auditor licensed to operate in KSA.
REQUIREMENT REGARDING PAR VALUE OF STOCK

Shares have to be equal in value.
INCREASING OF CAPITALIZATION IF NEEDED

Effectuated by amending the Articles of Association and the SAGIA license. A unanimous consent of shareholders
is required.
SUMMARY OF HOW FUNDS CAN BE REPATRIATED FROM YOUR JURISDICTION

(IE DIVIDENDS OR REDEMPTION)
Funds to be taken as dividends, subject to statutory requirements to maintain a reserve, and local tax.
RESTRICTIONS ON TRANSFERABILITY OF SHARES

There is a statutory right of first refusal on the transfer of shares to parties other than the shareholders.
OBTAINING A NAME AND NAMING REQUIREMENTS

LLC should have "limited liability" at the end of its name, which shall be derived from its purpose. The proposed
name must be approved by MOCI.
SUMMARY OF "KNOW YOUR CLIENT" REQUIREMENTS

Not required by law.
APPROVAL REQUIREMENTS FOR AMENDING CHARTER DOCUMENT

Amendments have to be approved by a majority of shareholders representing at least 3/4 of the capital. However,
amending the company's nationality and increasing shareholders financial obligations need a unanimous vote from
all shareholders.
LICENSES REQUIRED TO CONDUCT BUSINESS IN JURISDICTION

Foreign companies or companies with foreign shareholders must obtain a license from SAGIA. Certain types of
activities require specific licensing from the relevant government departments. For example, pharmaceutical
companies require a license from the Saudi Food and Drug Association.
PROCESS OF PURCHASING AND UTILIZING A SHELF COMPANY

Shelf companies are not common in Saudi Arabia due to the difficulty and time consuming purchasing process.
KEY CONTACTS
Tim Sunar
Partner
DLA Piper
tim.sunar@dlapiper.com
T: +966 13 813 9966
View bio

Disclaimer
DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of
these entities can be found at www.dlapiper.com.
This publication is intended as a general overview and discussion of the subjects dealt with, and does not create a
lawyer-client relationship. It is not intended to be, and should not be used as, a substitute for taking legal advice in
any specific situation. DLA Piper will accept no responsibility for any actions taken or not taken on the basis of this
publication.
This may qualify as 'Lawyer Advertising' requiring notice in some jurisdictions. Prior results do not guarantee a
similar outcome.
Copyright © 2021 DLA Piper. All rights reserved.

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GUIDE TO

Downloaded: 15 Dec 2021

GUIDE TO GOING GLOBAL SERIES

2 | DLA Piper Guide to Going Global | Corporate | www.dlapiperintelligence.com/goingglobal/

Last modified 20 May 2020

Branch of a foreign company

4 | DLA Piper Guide to Going Global | Corporate | Saudi Arabia | www.dlapiperintelligence.com/goingglobal/

MINIMUM CAPITAL REQUIREMENT

Service/property investment project value SAR30 million

Service/property financing projects SAR200 million with 40 percent Saudi shareholding

Contracting: SAR500,000 (but have revenue/asset value requirements)

5 | DLA Piper Guide to Going Global | Corporate | Saudi Arabia | www.dlapiperintelligence.com/goingglobal/

Well regarded and widely used.

SHAREHOLDER MEETING REQUIREMENTS

BOARD OF DIRECTOR MEETING REQUIREMENTS

ANNUAL COMPANY TAX RETURNS

BUSINESS REGISTRATION FILING REQUIREMENTS

6 | DLA Piper Guide to Going Global | Corporate | Saudi Arabia | www.dlapiperintelligence.com/goingglobal/

Appointment of a liquidator either from shareholders or third parties to carryout dissolution.

ANNUAL CORPORATE MAINTENANCE REQUIREMENTS

DIRECTOR / OFFICER REQUIREMENTS

Shareholders may appoint a manager, executive managers and/or a board of directors.

LOCAL CORPORATE SECRETARY REQUIREMENT

No local corporate secretary requirement.

LOCAL LEGAL OR ADMIN REPRESENTATIVE REQUIREMENT

7 | DLA Piper Guide to Going Global | Corporate | Saudi Arabia | www.dlapiperintelligence.com/goingglobal/

Limited liability company

None beyond the required managers or directors.

LOCAL OFFICE LEASE REQUIREMENT

A local office lease and local address is required.

OTHER PHYSICAL PRESENCE REQUIREMENTS

Not applicable for this jurisdiction.

SUFFICIENCY OF VIRTUAL OFFICE

A virtual office is not sufficient.

PROVISION OF LOCAL REGISTERED ADDRESS BY LAW FIRM OR THIRD-PARTY

PROVISION OF LOCAL DIRECTOR OR CORPORATE SECRETARY BY LAW FIRM

NATIONALITY OR RESIDENCY REQUIREMENTS FOR SHAREHOLDERS,

8 | DLA Piper Guide to Going Global | Corporate | Saudi Arabia | www.dlapiperintelligence.com/goingglobal/

Services/transport Saudi shareholding requirements – bus 30 percent / metro 25 percent

Property financing projects 40 percent

Communications value added – 30 percent Saudi shareholding requirement

Insurance and reinsurance – 40 percent Saudi shareholding requirement

RESTRICTIONS REGARDING APPOINTMENT OF NOMINEE SHAREHOLDERS OR

Restrictions apply as described in Nationality or residency requirements.

SUMMARY OF DIRECTOR'S, OFFICER'S AND SHAREHOLDER'S AUTHORITY

PUBLIC DISCLOSURE OF IDENTITY OF DIRECTORS, OFFICERS AND

There is no requirement to publicly disclose the identity of directors and shareholders.

MINIMUM AND MAXIMUM NUMBER OF DIRECTORS AND SHAREHOLDERS

9 | DLA Piper Guide to Going Global | Corporate | Saudi Arabia | www.dlapiperintelligence.com/goingglobal/

MINIMUM NUMBER OF SHAREHOLDERS REQUIRED

Directors: There is no minimum or maximum requirement.

REMOVAL OF DIRECTORS OR OFFICERS

REQUIRED AND OPTIONAL OFFICERS

Not applicable for this jurisdiction.

BOARD MEETING REQUIREMENTS

QUORUM REQUIREMENTS FOR SHAREHOLDER AND BOARD MEETINGS

Quorum requirements will be as provided in the Articles of Association of the company.

MUST A BANK ACCOUNT BE OPENED PRIOR TO INCORPORATION, AND MUST

AUDITING OF LOCAL FINANCIALS. IF SO, MUST THE AUDITOR BE LOCATED