LEGAL REQUIREMENTS FOR UAE COMPANIES TO ENTER SAUDI MARKET
In recent years, the Kingdom of Saudi Arabia has experienced a remarkable transformation, fueled by Vision 2030. The recent economic and legislative changes in Saudi Arabia have caught the attention of numerous foreign investors and businesses, including companies based in the UAE, who are now eager to invest and engage in business activities within the Kingdom. Companies based in the UAE have a distinct advantage when it comes to expanding into the market of Saudi Arabia. This advantage stems from their close proximity to Saudi Arabia and the cultural similarities that exist between the two countries.
Expanding a business to a new jurisdiction is a major decision that necessitates careful planning and thought. Having a clear grasp of the rules, regulations, and legal processes in the new target market is absolutely essential for ensuring the smooth and successful establishment of the business.
If you are a UAE company considering expanding to KSA, it is crucial to understand the legal requirements and procedures in both jurisdictions. This understanding is essential for a seamless company setup in KSA and ensuring compliance with the standards in each country. Failure to take into account the requirements in both jurisdictions can lead to legal complications, a lengthier process, or even a failure in the company registration process.
The Saudi Arabian Companies Law provides regulations that control the formation, management, and dissolution of the firm. It lists the many categories of businesses that are covered by Article 4 of the new Law of 2022:
If you are a UAE company considering expanding to KSA, it is crucial to understand the legal requirements and procedures in both jurisdictions. This understanding is essential for a seamless company setup in KSA and ensuring compliance with the standards in each country. Failure to take into account the requirements in both jurisdictions can lead to legal complications, a lengthier process, or even a failure in the company registration process.
Legal Requirements to Setup in KSA
Additionally, UAE companies can only do business in KSA by opening a branch, rep office, or sister company, either on their own or with the help of a Saudi citizen. Another important condition is that the UAE company must have been around for at least one year and show an audited financial statement for the previous year. In terms of paperwork, the UAE company needs to make the following items in order to open a branch or business in KSA:- Papers that form the basis of a business (trade license, commercial registry, etc.)
- The Articles of Association
- Report on the financial audit for the previous fiscal year
- Authorization to Act
- Forms may be a little different depending on where in the UAE the business is established (free zone or mainland).
- A commercial license requiring a minimum contribution of SAR 20 million from the foreign shareholder and a minimum 25% Saudi partner: SAR 7 million.
- 100% foreign ownership commercial license: SAR 30 million with a minimum investment of SAR 200 million over the first five years.
- Investment in services and/or real estate: SAR 30 million
- Financing initiatives for services and real estate: SAR 200 million, with 40% Saudi ownership
- Service/Transport: SAR 500,000 (with a minimum of 30% Saudi partner)
- 100% international service/other transport: SAR 10 million
- Contracting: SAR 500,000 (with conditions for income and asset value) For the purpose of incorporating a firm, the Ministry of Investment of Saudi Arabia (MISA) may ask for further conditions or permissions. Depending on the business activity and legal form, different criteria will apply to the paid-up capital and shareholding structure.
Company Registration Process in KSA
It is important for UAE companies to understand that the process of setting up a company in KSA is different from the process in UAE. Unlike in UAE where company registration involves only one or two government departments, in KSA it requires registration in multiple governmental departments, which can result in a longer timeframe.Here's a quick overview of the 6 steps to establish your business in KSA:
- Registration and approval from the Ministry of Investment (MISA)
- Registration from the Ministry of Commerce
- Registering with the Ministry of Labor, General Organization for Social Insurance (GOSI), and Ministry of Interior is required.
- Registering a local mailing address and office space
- Acquiring the necessary documents for a General Manager
- Establishing the company's bank account
KSA Corporate Laws and Legislation:
Saudi Arabia has put into place a range of laws to coincide with its growing economic progress. KSA has an extensive range of laws that address different aspects of companies. Some of the laws that are relevant to this topic are the 2022 Companies Law, Trade Names Law, Law of Commercial Agencies, Commercial Papers Law, Bankruptcy Law, Franchise Law, Law of Commercial Register, Chambers of Commerce Law, Law of Commercial Data, Law on The Authorities of The Ministry of Commerce, and Anti-Money Laundering Law (AML).KSA Companies Law
The KSA Companies Law 2022, which takes the place of the 2015 Companies Law in Saudi Arabia, was adopted by the Council of Ministers. This new law is in line with the kingdom's 2030 goal, as it seeks to fortify the private sector in the Kingdom, increase flexibility, and draw in foreign investment.The Saudi Arabian Companies Law provides regulations that control the formation, management, and dissolution of the firm. It lists the many categories of businesses that are covered by Article 4 of the new Law of 2022:
- Joint-stock companies,
- limited partnerships,
- general partnerships,
- simplified joint-stock companies,
- limited liability companies
