With the status as the economic powerhouse of the Middle East, the Kingdom of Saudi Arabia (KSA) has long been synonymous with oil-driven prosperity. Nevertheless, in April 2016, the KSA Government unveiled a transformative vision for the future by issuing the Vision 2030 Plan, which outlines ambitious economic and social reforms aimed at diversifying the nation’s economy, reducing its dependence on oil revenue, and promoting sustainable development. This comprehensive strategy encompasses initiatives spanning various sectors, with a focus on enhancing infrastructure, stimulating private sector growth, and fostering innovation to propel the KSA towards a prosperous and resilient future.
A key pillar of Vision 2030 is creation of a business-friendly environment that attracts both domestic and international capital. To achieve this goal, the KSA has implemented a wide range of reforms aimed at streamlining regulations, enhancing transparency, and improving the ease of doing business.
These efforts have already begun to bear fruit, with the KSA consistently ranking among the top destinations for foreign direct investment (FDI) in the Middle East and attracting billions of dollars in investment across various sectors, including energy, infrastructure, technology, healthcare, and tourism. From startups and SMEs to multinational corporations, companies of all sizes and industries are increasingly turning their attention to the KSA as a key market for expansion and growth.
With this strategic vision, ambitious reforms, and abundant opportunities, the KSA offers entrepreneurs and investors a fertile ground for success and prosperity in the years to come. As the KSA economy continues to evolve and diversify, those who seize the opportunity to invest in this dynamic market stand to reap significant rewards.
Nevertheless, for opening a business in the KSA, irrespective if you are startup entrepreneur who is embarking on his maiden venture, or an established corporation who eyes expansion into this market, grasping the intricacies of company registration and business structuring is paramount.
In this respect, our objective is to furnish readers with a roadmap for establishing and structuring their businesses in the KSA, empowering them to harness the boundless potential of this dynamic and swiftly evolving market.
1.Key Regulations and Authorities
For opening a business in the KSA, entrepreneurs and investors must ensure strict adherence to the prevailing legislation governing business activities. Such approach shall help to mitigate risks and foster sustainable growth.
The main regulations applicable to the business sector are the Saudi Arabia Cabinet Decision No. 678/1443 on the Approval of the Companies Law (Companies Law) and the Corporate Market Authority Governance Regulations (CMA Rules).
The key authorities regulating and supervising corporate governance are:
- the Corporate Market Authority (CMA);
- the Saudi Central Bank (previously known as the Saudi Arabian Monetary Authority – SAMA);
- the Ministry of Commerce (MOC); and
- the Ministry of Investment of Saudi Arabia (MISA).
2.Establishment of a business
There are 5 (five) common strategies adopted by foreign investors and entrepreneurs seeking to engage in commercial activities in the KSA market:
- Fly in- fly out / operate from overseas– enables foreign companies to operate in the KSA remotely. However, certain business activities require special licenses and consents, and without a formal presence, companies may face challenges under the KSA Anti-Concealment Law, requiring the appointment of a local agent or distributor to comply with regulations and avoid penalties.
- Conduct the business through a local agent / distributor– enables foreign companies to bypass the KSA establishment, utilizing agent / distributor infrastructure and connections under the KSA Commercial Agencies Law, with lighter regulations than other GCC nations.
- Set up a local entity– can be done through establishment of a company or a branch. Choosing one of the two shall depend on the nature of the business activity that is to be carried out.
The types of companies permitted under the Companies Law are:
- General partnership company;
- Limited partnership company;
- Limited liability company (LLC).
- Joint stock company (JSC); and
- Simplified joint stock company (SJSC);
Selecting the appropriate type of company is a critical decision that can have long-lasting implications for a company’s operations and growth prospects in the KSA. Each type of company offers unique advantages and disadvantages in terms of liability, taxation, ownership, and governance. By carefully evaluating the specific needs and objectives of their business, entrepreneurs can choose the most suitable structure that aligns with their long-term strategic goals and regulatory requirements.
- Establish a joint venture (JV)– allows foreign companies to own a stake, manage their KSA entity, and benefit from a local partner’s resources.
- Acquire an existing local entity– allows foreign companies to acquire or invest in an existing KSA company.
3.Process and duration for establishment
The process of establishing a company or a branch typically involves 3 (three) phases:
Phase 1– Obtaining the MISA investment license. Generally, this process takes 5 to 10 working days from the date of submission of the application to MISA, together with all supporting documents.
Phase 2– Obtaining the Name Reservation and the Commercial Registration from the MOC. Generally, this process takes between 10 to 15 working days from the date of issuance of the MISA license.
Phase 3– Post Establishment Registrations and Approvals.
Very important to note is that all documents to be presented to any governmental authority in the KSA must be translated into Arabic.
In general, the estimated time to complete the entire process of applying and registering with the relevant authorities is between 12 to 15 weeks.
The process of registering a company in the KSA offers exciting opportunities for entrepreneurs and investors seeking to expand their global footprint. Depending on the nature of the business and the desired level of ownership and liability, entrepreneurs can choose from different legal structures. By understanding the nuances of each business structure and seeking expert guidance, entrepreneurs can navigate the registration process efficiently and ensure compliance with local laws and regulations. With careful planning, diligent execution, and a commitment to compliance, businesses can thrive and prosper in the dynamic and ever-evolving landscape of the Saudi market.
Authors
Dr Bader AlBusaiyes
Founder and Managing Partner
AlSuwaiket & AlBusaiyes Lawyers and Legal Consultants Co.
Al Khobar Saudi Arabia
Email: dr.bader@sbsaudilawyers.com
Mob: +966 50 5945306
In collaboration with
Dr. Lura Voda
Partner
Fichte & Co Legal
Dubai, United Arab Emirates
Email: laura.voda@fichtelegal.com
Mob: +971 50 5827667
