1 Nov 2025

How Are Investor Rights Legally Protected in Startups?

With the evolution of legal systems in the Kingdom of Saudi Arabia—particularly those related to the economic and commercial sectors—the Saudi legislator has introduced several modern legal frameworks designed to protect both foreign and local investors. These include the New Companies Law and its Implementing Regulations, the Updated Investment Law and its Regulations, as well as other relevant laws and bylaws.
In this article, we at Al-Salamah Law Firm explain how these legal frameworks safeguard investor rights in startups.

1. Protection of Investor Rights Under the Companies Law

Reviewing the Articles of Association and the Bylaws

Article 7 of the Companies Law mandates that every company established under the law must have Articles of Association, except for joint stock companies, simplified joint stock companies, and single-member limited liability companies, which must have corporate Bylaws instead. These documents must contain all relevant details and be drafted in Arabic (with optional translation).
Investors are advised to carefully review the Articles or Bylaws before investing. In the case of family-owned companies, investors should also examine the shareholders’ agreement and family charter, as these govern the internal relationships and serve as complementary legal documents.

Commercial Registration

A company does not acquire legal personality in Saudi Arabia until it is officially registered with the Commercial Register.
According to Article 9 of the Companies Law, once a company is registered, all contracts and activities undertaken by the founders on its behalf are transferred to the company’s responsibility, including the expenses incurred in its formation.
Therefore, investors must verify the company’s registration through the Ministry of Commerce’s official channels before proceeding with any investment.

Reviewing Financial Statements

Article 16 of the Companies Law defines the financial year of a company as 12 months, as stated in the Articles or Bylaws. The first financial year may range between 6 to 18 months from the date of registration.
Under Article 17, companies are required to maintain accounting records and supporting documentation at the company’s headquarters or any other designated location, and to prepare financial statements annually. These must be filed within six months of the financial year’s end.
Hence, reviewing a company’s financials is essential for investors to assess its financial position.

2. Protection of Investor Rights Under the Updated Investment Law

The Updated Investment Law outlines several legal guarantees for both foreign and local investors in startups, including:

Comprehensive Legal Guarantees

Article 4 sets forth key investor rights, including equal treatment, fairness, and property protection—ensuring that property cannot be expropriated or confiscated without a final court ruling and fair compensation.
Investors are entitled to freely transfer profits and capital in and out of the Kingdom, manage their investments, and own the necessary assets. Other rights include intellectual property protection and administrative support from relevant authorities. These provisions underscore the Kingdom’s commitment to creating a fair and competitive investment climate.

Registration and Transparency

Article 7 emphasizes transparency and administrative organization by establishing a national investment registry managed by the Ministry. This registry holds confidential investment data.
The law requires foreign investors to register before engaging in any investment activity (excluding securities), enhancing regulatory oversight and communication with authorities.
Moreover, investors can submit applications through the Unified Service Center, and the Ministry must coordinate with other agencies to streamline regulatory requirements and reduce administrative burdens.

Effective Dispute Resolution Alternatives

Article 10 ensures legal protection in case of disputes—whether with a government entity or another party—by allowing investors to file claims before competent courts.
It also recognizes alternative dispute resolution methods, such as arbitration, mediation, and conciliation.
This flexibility is especially beneficial in cross-border investments and reflects the system’s dedication to swift and efficient justice while avoiding lengthy litigation.

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3. Investor Rights Under the Corporate Governance Regulations

According to Article 5 of the Corporate Governance Regulations, shareholders enjoy a wide range of rights, including:

Receiving their share of distributed profits in cash or stock
Claiming their portion of company assets upon liquidation
Attending general or special shareholder assemblies, participating in deliberations, and voting
Disposing of shares according to the Companies Law and Capital Market Law and their respective regulations
Requesting access to company books and records, including strategic and operational data, as long as it does not harm the company’s interest
Monitoring the company’s performance and the actions of the Board of Directors
Holding board members accountable and filing liability claims, as well as challenging shareholder decisions in accordance with legal conditions
Exercising preemptive rights in subscribing to new shares, unless waived by an extraordinary general assembly
Having shares registered in the shareholders’ register
Requesting a copy of the Articles of Association and Bylaws (unless published on the company’s website)
Nominating and electing board members

Protecting investor rights in startups is not merely a legal obligation—it is a strategic necessity for building trust and attracting capital.
Engaging an experienced corporate and investment law firm is vital.
At Al-Salamah Law Firm, we bring over a decade of experience advising foreign and local investors and startup founders. Our specialized team combines deep knowledge of corporate, investment, and capital market regulations to serve your interests and ensure business continuity.

Don’t hesitate to contact us—we are here to protect your investment.