Ministry of Commerce, CMA seek public opinion on new draft companies law

Saudi Arabia's Ministry of Commerce and Investment (MCI) and the Capital Market Authority (CMA) are seeking public opinion on the new draft companies law.

The public should submit their opinions before August 13, 2020.

These amendments are aimed at upgrading the legislative regulations; facilitating regulatory requirements to stimulate business climate and boost investments; implementing fair corporate governance practices and supporting institutional business.

The new companies law will further maintain the sustainability of the economic entities, including family business; attract local and foreign investments; help provide sustainable sources of finance and enhance the growth of small and medium enterprises (SMEs).

The draft companies law introduces the limited joint stock company, reshapes limited partnerships. It also allows companies to extract their names from objectives or select different names. Articles of association and articles of incorporation will be included in a partnership agreement or a family business charter. Moreover, costs of corporate incorporation and registration will be reduced, including one person companies.

The draft also includes provisions on profit, losses, distribution of interim dividends to partners or shareholders, provisions related to mergers and acquisitions, and flexible terms for issuing and trading shares. It also allows the issuance of various types and classes of shares with different rights, without conditions for nominal value. The draft also organizes the issuance of debt instruments and sukuk, and allows limited liability companies to issue them, based on the Capital Market Law.

The new proposed law also exempted the micro and small enterprises from appointing an auditor; cancelled the reserve-allocation condition, and also amended the terms related to the company's termination when accumulated losses reach 50% of share capital.

The new companies law does not set certain conditions for the number of board directors, board remuneration, but set clear terms as regards duties and rights of the board members.