New draft corporate law is under discussion

A new draft corporate law is under review and discussion by the Ministry of Commerce and the Capital Market Authority (CMA aimed at facilitating the establishment of new private and foreign businesses, in particular small and medium-sized enterprises (SMEs).

Legislation governing the kingdom’s businesses has been radically reformed and modernized over the past five years as a corollary to the Vision 2030 plan to expand the local private sector at the forefront of diversifying the oil-dependent economy and to attract foreign investors to establish in-kingdom operations. A new Companies Law was issued in 2016, crucially setting out new definitions and respective legal requirements for limited liability companies (LLCs) and joint-stock companies, as well as clarifying regulatory oversight between the commerce ministry and the CMA. This was followed in 2018 by the enactment of the Bankruptcy Law, and in June 2020, the Professional Companies Law came into force, regulating providers of certain specialized services such as accounting, engineering consultancy, and legal assistance.

The latest law is designed to iron out some of the residual difficulties experienced by aspirant new businesses. A new legal corporate structure, the Limited Joint Stock Company, would be created and the form taken by a partnership company reorganized according to shareholdings. The costs of registering new corporates would be reduced, and companies below a certain size would be exempt from appointing an auditor or having a financial reserve. The ministry described the new law’s overarching aim as being to contribute to the sustainability of economic entities “including family companies”, attracting domestic and foreign investment, facilitating access to finance, and stimulating the growth of SMEs.

Source: The Economist