JEDDAH CENTRAL PROJECT ESTIMATED COST: $20 BN
The project will promote entertainment, shopping, and commercial activities for the delight of residents and visitors. There are over 17,000 residential units planned to peer into the quite lovely homes of 58,000 new residents, besides 2,700 hotel rooms.
JEDDAH AIRPORT CITY: ESTIMATED COST: $5BN
Airport City is divided into four zones, adjoined by the central spine of the master plan and interconnected by a green circuit with a low-speed tramway. The total built-up area is 1.91 million m2, divided among the following zones:
- Entertainment Zone (Zone 1): Exhibition area of about 72,000 m2, including seating capacity for 20,000 people.
- Business Centre (Zone 2): Also split into two zones of 80,000 m2 and 120,000 m2.
- The Lifestyle Centre (Zone 3): Land area of 250,000 m2.
- Accommodation (Zone 4): Apartments and hotels of 3-star, 4-star, and 5-star categories comprising approximately 1,700 rooms.
These represent just some of the very interesting projects that are currently in development to revive Jeddah and the Western Province. If your company is well-versed in sustainable building practices, modern technologies, or mass transit infrastructure, then Jeddah will be your playground.
CHOOSING THE RIGHT LEGAL STRUCTURE FOR YOUR CIVIL ENGINEERING FIRM IN JEDDAH
In establishing your civil engineering firm in Jeddah, it is very important to choose an appropriate legal structure. We will discuss below three typical choices in terms of ownership, liability, and plans for growth. Additionally, we’ll provide insights into why a Limited Liability Company (LLC) often stands out as the preferred choice for foreign investors in Saudi Arabia:
BRANCH OF A CIVIL ENGINEERING FIRM:
A branch of a civil engineering firm is set up as a subsidiary or as an extension of the main company, situated in a different geographical area. It is operated under the name and standard management principles of the parent company but functions independently in a particular region or for a specific set of clients. This way, the main firm can extend its geographical presence to a local market. Through such arrangements, services such as structural design, construction management, infrastructure development, and environmental engineering can be offered closer to where the projects are. While the branch has the strength of the parent firm in terms of expertise and resources, it does so while considering local needs and regulations.
LIMITED LIABILITY COMPANY (LLC) AS AN EXTENSION OF A CIVIL ENGINEERING FIRM:
A Limited Liability Company (LLC) is, in legal terms, separate from its owners, called members, thereby offering limited liability protection. In other words, the LLC limits the members’ liability with regard to its debts and liabilities to the amount of their investment in the company.
- LIMITED LIABILITY STRUCTURE: The LLC structure allows considerable protection concerning the owners’ finances. They are not held personally responsible for the debts or legal claims of the company, which makes it quite attractive for foreign investors looking to mitigate financial risk.
- FLEXIBILITY: Compared to a traditional branch, an LLC is far more flexible with respect to its management structure and profit sharing. Members may agree on how the company should be managed, either by themselves or by appointed managers, while profits can be carried back to the members in accordance with what best suits them and their investment and involvement.
- GROWTH POTENTIAL: LLCs provide a suitable environment for growth. They are able to attract more investment due to their structured yet flexible nature. This facilitates scaling operations and entering new markets, which enhances the overall growth potential of the civil engineering firm.
- MINIMUM CAPITAL REQUIREMENT: The establishment of an LLC demands some minimum capital, which currently amounts to SAR 30,000.
Potential benefits from forming an LLC as an extension of a civil engineering firm include limited liability, management flexibility, and expansion opportunities. On the downside, it demands a substantial initial capital injection.
A JOINT-STOCK COMPANY (JSC) AS AN EXTENSION OF A CIVIL ENGINEERING FIRM:
A Joint-Stock Company (JSC) consists of business units that divide their ownership into shares, which can be sold to the public or private buyers. Civil engineering companies find this business structure optimal because it enables them to secure the large financial resources needed for their extensive construction projects.
- SHAREHOLDER STRUCTURE: Stock ownership in a JSC belongs to shareholders who acquire company shares through stock purchases. Multiple investors can provide essential capital through this arrangement, which enables financing the extensive projects that are standard in civil engineering. The JSC structure provides shareholders with the same limited liability protection as LLCs. The concept of limited liability means shareholders face no financial risk beyond their investment in shares because it safeguards their personal assets.
- TRANSFERABILITY OF SHARES: The shares of a JSC can move freely among owners, which gives investors both liquidity and flexibility. The open market for shares makes it easier to attract institutional investors who help the company secure more capital.
- ACCESS TO CAPITAL: A JSC can raise very large amounts of capital through the sale of shares. This is very beneficial to civil engineering firms whose projects need heavy investment in infrastructure projects, research, and development.
- CREDIBILITY: Having started and existing as a JSC increases the public image of the firm. One can also say that being a publicly traded company would speak well in favour of a firm, given that it is a strong and well-structured organisation. This will also be advantageous when bidding for large projects or negotiating with partners and clients.
WHY A LIMITED LIABILITY COMPANY (LLC) IS OFTEN PREFERRED FOR CIVIL ENGINEERING FIRMS
For most foreign civil engineering firms entering the Saudi market, setting up the company as a Limited Liability Company would provide the best strategic edge:
- Limited Liability Protection: LLC formation protects the personal assets of the owners, thus reducing risk from a financial standpoint.
- Flexibility: LLCs offer much more flexibility in terms of management and profit-sharing arrangements.
- Simpler Setup: Forming an LLC is far less cumbersome and time-consuming than forming a JSC. An LLC is most suitable for future growth and attracting additional investment if desired.
MISA PROFESSIONAL SERVICES LICENSE:
The Ministry of Investment of Saudi Arabia (MISA) plays a vital role in business registration. While no singularly named “civil engineering” license exists, foreign professionals can obtain a MISA Professional License to perform certain engineering-related activities. This usually entails a partnership with a local Saudi company having expertise in the engineering category in question.
Here is an overview of the MISA Professional License requirements for foreign engineering firms, including two main avenues for foreigners wanting to undertake activities in Saudi Arabia by way of registration of a MISA Professional License:
- PARTNERSHIP WITH A LOCAL SAUDI COMPANY: This used to be the most common option. Your firm partners with a local Saudi engineering firm, which already holds a MISA Professional License for the particular engineering activities you intend to carry out. The local partner must have a minimum of 25% ownership and be actively engaged in the said field.
- FULLY FOREIGN-OWNED ENTITY: An engineering consultancy can be established by a foreign firm in a 100% ownership capacity and comes with the following requirements:
- At least 4 branches operating across countries.
- SAR 10 million as a minimal share capital in any one of the branches.
- At least 7 years of documented experience in the respective engineering field.
ACTIVITIES PERMITTED UNDER THE PROFESSIONAL LICENSE:
MISA uses activity codes to categorise businesses. To ensure your business is registered successfully, you need to ensure you ascertain the right MISA code for your firm, which corresponds to your provided engineering services. When registering your business, it is just as important to ascertain the ISIC code for your engineering services. Your civil engineering business can undertake a lot of different forms of activities in Jeddah. Here are some examples:
