1. OVERVIEW OF THE COMPANY STRUCTURE OPTIONS IN THE KSA
The registration and functioning process of the legal entities in the KSA is regulated by Saudi Arabia New Companies Regulations (NCR). The four main forms of companies which can be established in KSA are:
- Limited Liability Company (LLC)
- Regional Headquarter (RHQ)
- Joint Stock Company (JSC)
- Branch of a company
The differentiation of Saudi Arabia companies is based on their structure ownership (GCC-nationals owned, non-GCC nationals owned), as it defines not only the regulatory authorities or a process of incorporation, but a taxation norm applicable to the respectful business.
In addition, the NCR permits foreign companies to establish branches or representative offices in Saudi Arabia. Foreign investment in Saudi Arabia is also regulated by the Foreign Investment Law of 2000 and its Implementation Regulations of 2013 (as amended), which prohibits foreign investors from engaging in certain activities in the industrial and service sectors and requires foreign investors to obtain an investment license from the Ministry of Investment in Saudi Arabia (MISA) before establishing any type of corporate structure in KSA.
2. REQUIREMENTS AND BENEFITS OF A LIMITED LIABILITY COMPANY, REGIONAL HEADQUARTERS, JOINT STOCK COMPANY, AND BRANCH IN THE KSA
- LIMITED LIABILITY COMPANY (LLC): It is the most common legal entity preferred by investors for setting up an entity in Saudi Arabia. A LLC allows a minimum of one shareholder but not more than fifty shareholders. The LLC entity can fully engage in the activities listed on the commercial registration, participate in public or private sector contracts, sponsor foreign employees for residency, obtain a corporate bank account, invoice customers, and pay suppliers etc.
- REGIONAL HEADQUARTERS (HQ): The RHQ program is a ‘Vision 2030’ initiative jointly developed by the MISA and the Royal Commission for Riyadh City (RCRC), with the objective of inviting global companies to establish and relocate their regional headquarters in the KSA. The current position of the authorities defines RHQ as the only legal entity complaint to participate in governmental tenders. The holding that establishes their RHQ in Saudi Arabia must not have less than three (3) establishments / offices around the globe. Saudi government provides a significant amount of support to the foreign business RHQ, but also enforces a fair amount of compliance requirements to this type of establishments.
- JOINT STOCK COMPANY (JSC): A JSC can have one of the two types: Closed JSC, that are unlisted on the Saudi Stock Exchange (Tadawul) and Public JSC that are listed on the Saudi Stock Exchange (Tadawul). In case the number of shareholders in an LLC is above 50, the company must be converted to a JSC. Your JSC can participate in public or private sector contracts, sponsor foreign employees for residency, obtain a corporate bank account, invoice customers, and pay suppliers etc.
- BRANCH COMPANY: A company must have a trading record for 3+ years and branch business activities must match the parent company activities. Also, one should note that a branch is not permitted to trade in KSA.
Not having the correct structure in place can affect the operation and running of your business. For example, you will not be able to contract with Saudi government unless your company is registered as an RHQ. If you attempt to set up a branch of your foreign company and do not have a 3+ year trading history, the application will automatically be rejected and set you back by months to re-do the company documents and applications.
WHAT ARE THE DIFFERENCES BETWEEN LLC & JSC?
JSC should have a minimum of 2 shareholders and there is no limitation of maximum number of shareholders with at least 3 directors appointed to JSC. Also, the shareholder register must be lodged with the Ministry of Commerce (MoC). The minimum share capital requirement starts from SR 500,000 for JSC. Whereas, a KSA LCC has no minimum share capital requirement.
DOCUMENTS REQUIRED TO SETUP A SAUDI ARABIA COMPANY
The list of documents required for the KSA company incorporation process is heavily influenced by the form of ownership and the nationality of the beneficiaries of the business. Nonetheless, there are some mandatory documents that are common for most incorporations. We recommend our clients to start the process of documents preparation with the legal authorizations asap including but not limited to Power of Attorney (POA), resolution, and the international attestation of the parent company statute documents. Considering the lengthy process of the international documents ‘attestation, it becomes crucially important to draft the above-mentioned documents required and to be accepted by Saudi Arabia authorities.
Hence it is important you engage an expert registered corporate service provider to complete this part. Not having the correct wording within the POA and resolution can set you back months, delay your company setup and cost hundreds of dollars on re-drafting and attest these documents. This is not ideal if you are looking to contract, invoice and operate your business in KSA.
WHAT TO DO NEXT?
There are various procedures and requirements that you need to prepare and take into consideration for your Saudi Arabia commercial registration. From selecting the right structure for your company, to drafting the correct documentation, to office registration, visa services, banking support, accounting, bookkeeping, payroll, and tax services, Creation Business Consultants will help you throughout the entire process. Our team of experts will leverage our experience to help simplify the process while simultaneously providing you with all the details needed to set up your company in Saudi Arabia and the GCC. Contact a member of our team for your free expert consultation on your Saudi Arabia entity, email email@example.com or call Saudi Arabia +966 54 995 2676 UAE +971 4 878 6240 today.