Requirements for Establishing a Saudi Joint-Stock Company
A joint-stock company is one of the most commonly established corporate forms in Saudi Arabia. To establish a Saudi joint-stock company, the requirements set forth under the New Companies Law (1443H) must be satisfied. In this article, Al-Salamah Law Firm and Legal Consultations outlines the requirements for establishing a joint-stock company in Saudi Arabia.
Table Of Content
Definition of a Public Joint-Stock Company
Article (58) of the Companies Law (1443H) defines a joint-stock company as follows:
A company established by one or more persons, whether natural or legal, whose capital is divided into tradable shares. The company alone is liable for its debts and obligations arising from its activities, and the liability of each shareholder is limited to the value of the shares subscribed by him.
Requirements for Establishing a Joint-Stock Company in Saudi Arabia
The New Companies Law (1443H) stipulates a set of requirements that must be met to establish a joint-stock company in Saudi Arabia, as follows:
- The issued capital of a joint-stock company must not be less than SAR 500,000, and the paid-up capital upon incorporation must not be less than one quarter (25%) thereof. Accordingly, full payment of the capital is not required at incorporation; at least 25% must be deposited, while the remaining amount constitutes a debt owed by shareholders to be paid at a later date.
- The company shall have an issued capital representing the subscribed shares, and the articles of association may specify an authorized capital.
- Issued Capital: the actual capital for which shares have been offered and subscribed (the amount shareholders have committed to pay).
- Authorized Capital: an upper limit determined in the articles of association, allowing the company to increase its capital up to that limit in the future without the need for complex procedures (such as convening an extraordinary general assembly).
Articles of Association
The company’s articles of association must be prepared and shall, in particular, include the following information:
- Company name.
- Registered office.
- Company objectives.
- Authorized capital (if any), issued capital, and paid-up capital.
- Number of shares, their types and classes (if any), nominal value, and rights attached to each type or class.
- Company term, if applicable.
- Company management and the number of board members.
- Commencement and end date of the fiscal year.
- Any other provisions, conditions, or information agreed upon by the founders or shareholders, provided they do not conflict with the Companies Law.
Documents to Be Attached to the Articles of Association Upon Submission of the Incorporation Application
- Names, addresses, and nationalities of the founders.
- A statement of the expected incorporation works and expenses.
- A declaration by the founders confirming subscription to all issued shares and the amount paid thereon.
- A bank certificate evidencing the deposit of the paid-up portion of the issued capital with a licensed bank in the Kingdom.
- A resolution by the founders appointing the members of the first board of directors, including their names, nationalities, addresses, and dates of birth, and appointing the first external auditor where required by law, if not already appointed in the articles of association.
- A declaration by the founders confirming compliance with all statutory requirements related to company incorporation.
- A report prepared by one or more accredited valuers specifying the fair value of any in-kind contributions, if any, together with a declaration by the remaining founders approving the consideration determined therefor.
Commercial Registration and Capital Deposit
- The company shall be registered in the Commercial Register and shall be deemed duly incorporated upon such registration.
- The paid-up value of the subscribed shares shall be deposited in the name of the company under incorporation with a licensed bank in the Kingdom, and no disposal thereof shall be made except by the board of directors after the company is registered in the Commercial Register.
In-Kind Contributions
If the contribution to the company is in kind, such contribution must be valued by one or more accredited valuers, who shall prepare a report specifying its fair value. The report shall be submitted to the founders or the extraordinary general assembly, as the case may be, for deliberation. Providers of in-kind contributions shall not participate in voting on the resolution relating to the valuation report. If the founders or the assembly decide to reduce the consideration assigned to the in-kind contributions, the consent of the contributors must be obtained.
Procedures for Establishing a Saudi Joint-Stock Company
The Ministry of Commerce provides an electronic service through the Saudi Business Center platform for establishing joint-stock companies. Through this service, the following can be completed:
- Issuance of the commercial registration and incorporation contract/articles of association.
- Publication of the contract in the Amali newspaper.
- Opening an establishment file with the Ministry of Human Resources and Social Development.
- Registration with the Zakat, Tax and Customs Authority.
- Registration with the General Organization for Social Insurance (GOSI).
- Subscription to the approved business address service with Saudi Post (SPL).
- Membership in the relevant Chamber of Commerce based on location.
Required Data Entry Through the Platform
- Company activities and objectives, including licensing details if applicable.
- Optional selection of e-commerce activity.
- Addition of partners/founders and their details, with verification of mobile numbers and email addresses.
- Selection of the trade name and fiscal year, and entry of contact and address details.
- Determination of the company term and decision to open branches.
- Determination of the type, value, and distribution of capital, with the option to include in-kind assets.
- Distribution of profits and losses, and determination of profit retention percentage (if any).
- Management of share data for joint-stock or simplified joint-stock companies.
- Selection of the management structure and appointment of managers.
- Determination of the board’s operating mechanism and assignment of authorities.
- Partners’ resolutions, notifications, and articles of association provisions (addition or amendment).
- Review of the application summary, creation of a draft contract, and submission after review.
- Approval of the application by all parties via the verification link sent to them.
- Payment and completion of the application.
Costs of Establishing a Joint-Stock Company
The cost of establishing a joint-stock company through the Saudi Business Center platform of the Ministry of Commerce is SAR 1,600 for the commercial registration, SAR 500 publication fee, plus 15% Value Added Tax (VAT).
Difference Between a Public Joint-Stock Company and a Simplified Joint-Stock Company
| Comparison Aspect | Public Joint-Stock Company | Simplified Joint-Stock Company |
| Capital | Minimum issued capital of SAR 500,000, with at least 25% paid up | No minimum capital; subject to shareholders’ discretion |
| Management | Governed by mandatory statutory rules for the board of directors | Governed by the arrangements agreed upon in the articles of association |
| General Assemblies | Subject to statutory regulation and quorum requirements | No requirement to hold general assemblies; shareholders exercise powers as specified in the articles |
Requirements for Conversion into a Public Joint-Stock Company
To convert an establishment or another type of company into a public joint-stock company, partners’ approval must be obtained, the articles of association must be updated, and all requirements stipulated under the Companies Law for the establishment of a public joint-stock company must be fulfilled. Accordingly, seeking professional legal assistance is essential. Al-Salamah Law Firm has more than ten years of experience in company conversions.
Questions and Answers
What is a joint-stock company in Saudi Arabia?
It is the most suitable legal form for companies with substantial capital exceeding SAR 500,000.
What are the requirements for establishing a joint-stock company in Saudi Arabia?
The applicant must be at least 18 years old; if the applicant is a minor, a guardianship instrument must be provided.
Partners must not be government employees.
The commercial registration must not be cancelled, suspended, or expired if one of the partners is a legal entity.
The issued capital must not be less than SAR 500,000, with at least 25% paid up.
What documents are required to establish a joint-stock company in Saudi Arabia?
A legal instrument if one of the partners is a government entity, non-profit organization, charitable association, or endowment authorizing participation or establishment of a company.
A license from the Saudi Central Bank, the Insurance Authority, or the Capital Market Authority if the activity so requires.
A bank certificate for cash contributions or an accredited valuer’s report for in-kind contributions.
Submission of a draft articles of association.
Do not risk the start of your company or the incorporation process. Contact us today to obtain a legal needs assessment, and we will assign the most suitable lawyer to ensure a sound and fully compliant launch under Saudi law.
