Here’s what you need to know about new Companies Law

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Saudi Arabia’s Ministry of Commerce stated that the new Companies Law approved by the Cabinet today, June 28, contributes to stimulating and developing the commercial system, as it is characterized by high flexibility to protect companies and empower the private sector.

In a statement, the ministry added that the law aims to enhance the sustainability of companies, support investment in small and medium-sized enterprises (SMEs) through facilitating procedures and regulatory requirements. In addition, it achieves greater diversity in the market through adding new entities to companies, boosting the level of flexibility in the laws, preserving the rights of customers, limiting disputes and ensuring fair treatment between shareholders.

The legislation regulates all the provisions related to companies, whether commercial, non-profit or professional. It also allows the issuance of a family charter regulating ownership in family business, as well as its governance, management, work policy, employment of family members, cash dividends, to ensure the sustainability for such companies.  

The act provided for a new form of companies called "Simplified Joint Stock Company" that meets the needs of entrepreneurship and venture capital growth. It also reduced SMEs statutory requirements and procedures, and facilitated the procedures for establishing companies.

Under the law, several restrictions at the stages of incorporation, exercise and exit, as well as restrictions on company names were removed. In addition, the limited liability companies were allowed to issue debt instruments or tradable financing instruments.

The law allowed implementing procedures electronically, such as submitting incorporation applications, attending general assemblies and voting on decisions. It also provided means for resolving disputes by resorting to arbitration, in addition to developing provisions for company liquidation, in line with the bankruptcy law.

The act keeps pace with all economic developments in the business environment. It comes six years after the adoption of the previous law, in line with Vision 2030.