Business Registration
The Saudi company law recognizes four types of business entities: the limited liability company, the joint stock company (corporation), the partnership and the branch of aforeign company. To be shareholders, foreigners must however obtain a foreign capitalinvestment license from the Saudi Arabian General Investment Authority (SAGIA), whichin practice is seldom granted by this licensing authority. Consequently, we recommendour Clients to action the following alternatives:
I)register a branch of a company, incorporated in one of the countries members of the Gulf Cooperation Council, which areexempt from licensing requirements or II)sign an agency agreement with a local partner.
The Saudi Arabia limited liability company LLC:
The Saudi Arabia limited liability company (LLC)is the most commonly used type of business entity by local investors. An LLC must appoint at least 1 director and 1 shareholder who can be ofany nationality upon approval of a foreigncapital investment license by SAGIA. Theminimum paid-up share capital required tocomplete theincorporation process is theoretically US$1. However, SAGIA oftenimplements higher capital requirements,depending on the activities to beundertaken. In addition, there are different capital requirements for companiesengaged in manufacturing, trading, real estate, agricultural or industrial projects;
All LLCs must appoint a statutory auditor and the annual accounts must be auditedand submitted.
The Saudi Arabia agency agreement company:
We recommend our Clients who are not from the Gulf Cooperation Councilcountries to appoint commercial agent rather than form a company in KSA. Suchstrategy will allow them to legally avoid the need for an investment license. The commercial agent must be registered by the Ministry of Commerce and Industryand must sign a contract with our Client's company. We will assist our Clients withall procedures involved;
The commercial agent appointed is then responsible for representation, promotionand selling of goods and services under terms and conditions required by theparent company. However, this strategy is not optimal for our Clients willing torelocate to Saudi Arabia, as the commercial agent will only be allowed to hire Saudinationals.
The Saudi Arabia joint stock company:
The Saudi joint stock company must appoint a minimum of 2 shareholders and 3directors, whom can be of any nationality (same conditions apply for investmentby foreigners in JSCs and LLCs). The minimum share capital required is US$134,000(SAR500,000). Subject to the approval of the Ministry of Commerce and Industry, the share capital subscribed for in cash may be paid up in stages, provided that theamount payable per cash share upon subscription is not less than one quarter of itspar value;
The Saudi Arabia joint stock company must appoint an auditor and must submitaudited financial reports annually.
The Saudi Arabia limited partnership:
A Saudi Arabia limited partnership requires only one director and two partners of anynationality and residency for the registration process. Amongst partners, there must beone general/managing partner and one limited partner. There is no minimum capital forthe registration of a limited partnership.
The Saudi Arabia GCC branch company:
A 100% foreign owned Saudi Arabia branch office can only be established by anexisting GCC company. This entity requires the appointment of one shareholderand one director of GCC nationality;
The branch must appoint a legal representative resident in Saudi Arabia to carryout the branch's management and administration.