Company Law in Saudi Arabia 2026: Complete Guide to Corporate Structure, Types, Licensing, and Governance

Introduction: What is a Company in Saudi Law?

A company in the Saudi system is a legal entity established according to the provisions of the Companies Law based on an articles of association or bylaws whereby two or more persons commit to contribute to a profit-seeking project by providing a share of money or work or both to share the resulting profits or losses. Under the new system, a company may be established by a single person's will in what is known as a Single Person Company.

The Kingdom of Saudi Arabia has witnessed a legislative revolution in the field of companies in line with Vision 2030, where the new Companies Law came into effect on January 19, 2023. This system aims to enhance the investment environment, facilitate procedures for entrepreneurs and investors, and provide greater flexibility to meet global market requirements. There are currently more than 1.2 million registered commercial establishments in the Kingdom, and this number is continuously growing.

Difference Between Establishment and Company

Many people confuse establishments and companies despite fundamental differences between them from legal and administrative perspectives.

Sole Establishment

An establishment is an individual commercial activity where there is no separation between the owner's personal funds and business funds, placing full legal and financial responsibility on the owner. The establishment owner is personally and unlimitedly responsible for all debts and obligations. An establishment does not require partners and can be established and managed entirely by one person.

Company

A company is an independent legal entity with a separate legal personality from partners or shareholders. The company acquires its legal personality upon registration in the Commercial Register and can conduct all buying, selling, and contracting operations in its name. In most types of companies, partners' liability is limited to their shares in capital, providing protection for their personal funds.

When to Choose Establishment vs Company

Choose an establishment if you work alone, have a limited budget, don't need partners, and want simple procedures. Choose a company if you need partners or investors, want to protect your personal assets from business debts, plan to expand and grow, or want higher market credibility.

Types of Companies in the New Saudi System

The new Saudi Companies Law defines eight main types of companies, each with its own characteristics and requirements.

General Partnership Company

A company consisting of two or more partners who are jointly liable with all their assets for company debts and obligations. All partners acquire merchant status. The company name consists of all partners' names or one or more with the addition of "and Partners." Registration fees are 800 SAR plus publication and chamber of commerce fees. Suitable for family businesses and partnerships built on personal trust.

Limited Partnership Company

Consists of two groups of partners. The first group includes one or more general partners who are liable with all their assets for company debts. The second group includes one or more limited partners who are only liable up to their share in capital. The limited partner does not acquire merchant status and may not interfere in company management. Suitable when you need an investor without direct management.

Joint Stock Company

A company established by one or more natural or legal persons with capital divided into tradable shares. The company alone bears responsibility for debts and obligations, and shareholder liability is limited to the value of subscribed shares. Issued capital must not be less than 500,000 SAR with at least one quarter (125,000 SAR) paid at incorporation. Registration fees are 1,600 SAR. Suitable for large companies planning to list on the financial market.

Simplified Joint Stock Company

This new type is one of the most important additions to the new Companies Law, representing a qualitative development suitable for startups and tech companies. Can be established by one or more persons with no minimum capital requirement. Does not require forming general assemblies or a board of directors necessarily. Allows issuing different classes of shares with various rights. Complete flexibility in organizing the relationship between partners in the bylaws. Easy capital modification without complex procedures. Registration fees are 1,600 SAR.

Limited Liability Company

The most common in the Saudi market, consisting of one or more persons up to a maximum of 50 partners. Each partner's liability is limited to their share in capital. No minimum capital in the new system. Registration fees are 1,200 SAR. Provides legal protection for investors from debts and financial risks. Suitable for small and medium enterprises.

Public Non-Profit Company

A company that takes the form of a joint stock company and may not take any other legal form. Profits are spent on non-profit public purposes serving society. The Ministry of Commerce, in coordination with the National Center for Non-Profit Sector Development, determines these purposes and fields.

Professional Company

A company established by one or more persons licensed to practice one or more free professions. Includes free professions such as law, accounting, and engineering and medical consulting. Partners can be professionals only or professionals with others. The company's purpose is to practice those free professions.

Holding Company

A joint stock, simplified joint stock, or limited liability company that establishes companies or owns shares in existing companies that become subsidiaries. Aims to control subsidiary management and organize investments. Allows managing a group of companies in different sectors under one umbrella.

Corporate Administrative Structure

Understanding the administrative structure is essential for anyone wanting to establish, work in, or invest in a company.

General Assembly of Shareholders or Partners

The highest authority in the company, consisting of all shareholders or partners. Responsible for making critical decisions affecting the company's future. Divided into an Ordinary General Assembly meeting at least once annually and an Extraordinary General Assembly meeting when needed for fundamental decisions such as amending bylaws or increasing capital.

Board of Directors

The highest supervisory body in the company, consisting of members elected by shareholders. Responsible for setting the company's strategic direction and approving financial and expansion plans. Adopts human resources and risk policies and monitors overall performance. A board member may not serve on more than five joint stock companies simultaneously. Members must have professional competence, experience, knowledge, and skills.

Chairman of the Board

The head of supervisory authority within the company with a strategic and oversight role rather than daily executive duties. Main responsibilities include leading the board and organizing meetings, setting the company's long-term vision. Supervises and holds the CEO accountable, approves major strategies and policies. Represents and protects shareholders' interests, makes critical decisions like expansion, merger, and changing senior management. The Chairman is responsible for where the company is heading, not how it's managed daily.

Chief Executive Officer (CEO)

The highest executive officer in the company, responsible for daily operational management. Responsibilities include implementing the strategy approved by the board and supervising daily operations. Leads the executive team, makes daily operational and investment decisions. Responsible for achieving financial and operational goals and representing the company to clients and partners. CEO salary in Saudi Arabia ranges between 30,000 and 80,000 SAR monthly, potentially higher in large companies. The CEO is responsible for how the company works today and achieves tangible results.

Main Departments and Divisions

Companies typically include several main departments including the Finance Department responsible for accounting, financial reports, and budgets. Human Resources Department responsible for recruitment, salaries, and employee affairs. Marketing and Sales Department responsible for promotion and client acquisition. Operations Department responsible for daily work execution. Internal Audit Department responsible for monitoring performance and compliance. Compliance Department responsible for ensuring company compliance with regulations.

Corporate Governance in Saudi Arabia

Corporate governance is an administrative and regulatory framework applied within companies to ensure smooth operations and achieve transparency and fairness principles.

Five Governance Principles

Transparency and clarity requiring disclosure of governance policies and procedures to stakeholders. Fairness requiring equity among all stakeholders including investors, shareholders, clients, and employees. Accountability meaning board and executive management responsibility for their decisions. Responsibility toward society and environment. Sustainability ensuring company continuity long-term.

Governance Committees

The board typically has specialized committees including the Audit Committee responsible for monitoring financial statements and auditing. Risk Committee responsible for identifying and managing company risks. Remuneration Committee responsible for determining board and executive management compensation. Nominations Committee responsible for selecting board membership candidates.

Duties of Company Manager and Board Member

Article 26 of the Companies Law requires managers or members to commit to care and loyalty duties including exercising duties within prescribed authorities and working for company interest and success. Making decisions and voting independently, exercising reasonable and expected care, attention, diligence, and skill. Disclosing any direct or indirect interest in company business and contracts.

General Assemblies and Board Meetings

Organized meetings are the foundation of sound governance and decision-making in companies.

Ordinary General Assembly

Meets at least once a year within six months of the fiscal year end. Attendance quorum ranges between one quarter and half according to company bylaws. Responsible for discussing board and auditor reports and approving the budget. Determines board member compensation, appoints auditors, and approves profit distribution.

Extraordinary General Assembly

Meets when needed for fundamental decisions affecting company future. Attendance quorum is at least 50% of capital. Fundamental decisions require approval of three quarters of attendees. Responsible for amending bylaws, increasing or decreasing capital, dissolving the company before term expiry, and merging with other companies.

Board Meetings

The board meets upon chairman's invitation or at the request of at least two members. The board must meet at least four times during the fiscal year. Meetings may be held via modern technology means. All decisions must be recorded in signed official minutes. If a member misses three consecutive meetings or five non-consecutive without excuse, membership may be terminated.

Electronic Voting

The new system allows electronic voting in general assembly meetings. The board must establish procedures to verify the identity of electronically voting shareholders. Electronic voters' votes count toward the quorum required for valid meetings.

Company Incorporation Fees and Licensing

Fees vary according to company type and required procedures.

Commercial Registration Fees

Sole establishment 200 SAR annually for main registration and 100 SAR for branch. General and limited partnership 800 SAR annually. Limited liability company 1,200 SAR annually. Joint stock and simplified joint stock 1,600 SAR annually. All fees plus 15% VAT.

Additional Fees

Official gazette publication fees 500 SAR. Chamber of commerce fees range from 500 to 10,000 SAR depending on activity and category. Trade name reservation fees range from 200 to 2,000 SAR. Bylaws amendment fees 1,500 SAR plus 15% VAT. Contract amendment fees 100 SAR plus publication fees.

Foreign Investment Fees

MISA license application fees are 2,000 SAR non-refundable. Annual license fees start from 7,500 SAR for professional and consulting activities, increasing based on activity and size.

Other Costs

Lawyer fees for contract preparation range from 5,000 to 15,000 SAR. Auditor fees for annual audit are mandatory for limited liability and joint stock companies. Office rental costs vary by location.

Converting from Establishment to Company

Establishment owners can convert to companies to benefit from company system advantages.

Conversion Benefits

Acquiring independent legal personality and protecting personal assets from business debts. Ability to bring in new partners and investors and increase market credibility. Easier access to bank financing and ability to expand and grow.

Conversion Requirements

Commercial registration must be active and not suspended. Issue electronic articles of association or bylaws. Provide copy of current commercial registration. Pay all required fees. Partners must be at least 18 years old.

Conversion Procedures

All procedures are completed electronically via the Ministry of Commerce platform and Najiz without visiting branches. Steps include logging into Ministry of Commerce website via National Access, selecting conversion service. Specifying target company type, entering partner and capital data. Authenticating articles via Najiz platform and paying required fees. Receiving new commercial registration electronically.

Conversion Fees

Commercial registration amendment fees 200 SAR. Electronic publication and new registration fees 500 SAR. Chamber of commerce fees according to activity type and service years. 15% VAT on all fees.

Violations and Penalties in Company Law

The new Companies Law specifies strict penalties to ensure compliance and protect partners', shareholders', and third parties' rights.

Minor Violations and Penalties

Punishable by fine up to 500,000 SAR for several violations including obstructing general assembly invitation or meeting. Preventing a shareholder or partner from participating in assemblies or voting. Failing to invite general assembly within prescribed period. Obtaining benefits in exchange for voting in ways harming company interests. Auditor failing to report criminal violations discovered.

Less Serious Crimes

Punishable by imprisonment up to one year and fine up to one million SAR or either for several crimes including intentionally recording false data in company documents. Misleading advertising about registering an incomplete company. Disclosing company secrets to unauthorized parties. Distributing profits in bad faith violating the law. Liquidator using company funds against its interests.

Serious Crimes

Punishable by imprisonment up to five years and fine up to five million SAR for manager or member using authority against company interests for personal purposes. Recording false data in financial statements to misrepresent financial position.

Board Responsibility

The law holds managers or board personally responsible for damages resulting from mismanagement or gross negligence. Responsibility is personal or joint depending on decision nature. Absence from meeting does not exempt from responsibility unless member's unawareness of decision is proven.

Steps to Establish a Company in Saudi Arabia

Here are detailed steps to successfully establish your company.

Step One: Determine Company Type

Study available company types and choose the one suitable for your activity and goals. Consider number of partners, available capital, and acceptable risk level. Consult a specialized lawyer if necessary.

Step Two: Reserve Trade Name

Access Ministry of Commerce website and reserve a suitable trade name. Ensure the name is available and not used by another company. Fees range from 200 to 2,000 SAR depending on name type.

Step Three: Prepare Articles of Association or Bylaws

The contract includes company name, type, headquarters, and purposes. Specifies capital, partner shares, and company duration. Clarifies management method and profit and loss distribution. Recommended to use a lawyer for proper drafting.

Step Four: Authenticate Contract

Articles of association are authenticated electronically via Najiz platform. All partners sign electronically via National Access.

Step Five: Obtain Commercial Registration

Submit registration application via Ministry of Commerce website. Attach required documents and pay fees. Registration is issued electronically within 1-3 business days.

Step Six: Open Bank Account

Visit bank with commercial registration and articles of association. Open account in company name and deposit required capital. Duration ranges from 7 to 14 business days.

Step Seven: Complete Licensing

Obtain municipal license from Baladi platform if activity requires. Register with chamber of commerce, social insurance, and Zakat, Tax and Customs Authority. Obtain any activity-specific licenses from relevant authorities.

Important Tips for Entrepreneurs

Choose the Right Legal Structure

Don't rush the choice and study each company type carefully. The right structure saves you many problems in the future.

Document Everything

Keep copies of all contracts, minutes, and decisions. Good documentation protects you in case of disputes.

Commit to Governance from the Start

Even if your company is small, apply basic governance principles. This facilitates expansion and obtaining financing later.

Engage Specialists

Don't skimp on lawyer and accountant fees initially. Legal and financial mistakes can cost multiples later.

Follow Regulatory Updates

The Companies Law evolves continuously, so follow updates and amendments to stay compliant.

Frequently Asked Questions

What is the difference between Chairman and CEO?

The Chairman is a strategic supervisory position responsible for vision and oversight, while the CEO is an executive position responsible for daily operations and achieving results.

How much does it cost to establish an LLC?

Commercial registration fees are 1,200 SAR annually plus publication fees of 500 SAR, chamber of commerce fees varying by activity, and 15% VAT. Total ranges approximately 2,500 to 5,000 SAR excluding lawyer fees.

Can a company be established by one person?

Yes, the new system allows establishing a single person company whether limited liability or simplified joint stock.

What is the minimum company capital?

No minimum for limited liability and simplified joint stock companies. Joint stock company requires minimum 500,000 SAR.

How long does company establishment take?

A company can be established electronically within 1-3 business days. Completing all procedures including bank account and licenses may take 10-20 days.

Can foreigners establish a company in Saudi Arabia?

Yes, the system allows foreigners to own 100% of companies in most sectors with MISA license.

What is the penalty for not holding general assembly?

Fine up to 500,000 SAR depending on violation severity and circumstances.

Conclusion

The new Saudi Companies Law represents a qualitative leap in the Kingdom's business environment, providing a flexible legislative framework that keeps pace with best global practices and supports Vision 2030. The system offers multiple company types suitable for various needs from small startups to large companies listed on the financial market. Understanding the corporate administrative structure and each position's duties from Chairman to CEO is essential for successful management. Commitment to governance and transparency principles enhances investor and partner confidence and ensures company sustainability. Whether considering establishing a new company or converting your existing establishment to a company, procedures have become easier than ever thanks to electronic services. Invest time in understanding the system, choosing the appropriate structure, and engaging specialists when needed to build a strong foundation for your company's success.