The Kingdom of Saudi Arabia has undergone a tremendous transformation in recent years, driven by Vision 2030.  Recent economic and legislative changes in Saudi Arabia have attracted many foreign investors and businesses, including UAE-based companies, to invest and do business in the Kingdom. UAE companies have a competitive advantage in expanding to the KSA market due to their proximity and cultural similarities between UAE and KSA.

However, expanding a business to a new jurisdiction is a significant decision that requires preparation and consideration. Understanding the rules and regulations and legal processes in the new target market is a crucial step for the successful establishment of the business.

If you are a UAE company and thinking of expanding to KSA, comprehending the legal requirements and procedures within both jurisdictions holds paramount importance for smooth company setup in KSA and meeting compliance standards in each country. Non-consideration of requirements in both jurisdictions can result in legal complications, longer process, or even failure in the company registration process.

Legal Requirements to Setup in KSA

First of all, UAE companies can set up their presence in KSA only by way of establishing their branch, rep office, or subsidiary company with full ownership or in partnership with a Saudi national. Another crucial requirement is that the UAE company has to be existent for at least one year and provide an audited financial statement for the previous financial year.

In terms of documentation, the basic requirements to establish a branch or subsidiary in KSA, the UAE company has to prepare the following documents:

1. Company Incorporation Documents (Trade License, Commercial Registry etc.)
2. Memorandum of Association
3. Financial audit report for last financial year
4. Power of Attorney

Documents may slightly vary based on where the UAE company is registered (i.e. free zone or mainland). For instance, a Certificate of Incorporation or Registration, Share Certificate or Certificate of Incumbency, or Good Standing Certificate would be required if a company is registered in one of the free zones in the UAE. All the above documents have to be certified by the issuing authority (unless they are electronically issued), and attested by the UAE Ministry of Foreign Affairs (MOFA) and the Saudi Embassy in the UAE before sending to KSA for further processing.

There are other general requirements in terms of capital, required investment, or turnover based on the company’s legal structure and license type.

For instance, the Saudi Ministry of Investment of Saudi Arabia (MISA) has prescribed minimum investment requirements for specific licenses:

• Commercial license with a minimum 25% Saudi partner: SAR 7 million and a minimum contribution from the foreign shareholder of SAR 20 million and
• Commercial license with 100% foreign ownership: SAR 30 million and commitment to invest at least SAR 200 million over the first 5 years.
• Service/property investment: project value SAR 30 million
• Service/property financing projects: SAR 200 million with 40 percent Saudi shareholding
• Service/Transport (with minimum 30% Saudi partner): SAR 500,000
• Service/other transport (100% foreign): SAR 10 million
• Contracting: SAR 500,000 (but have revenue/asset value requirements)

The Ministry of Investment of Saudi Arabia (MISA) may request additional requirements or approvals for company incorporation.

Shareholding structure and paid-up capital requirements will differ depending on business activity and the legal form.

Company Registration Process in KSA

UAE companies need to be aware that, unlike in UAE where company registration involves only one or two government departments, the company setup process in KSA involves registration in several governmental departments and thus takes a longer time.

In brief, there are mainly 6 steps to set up your business in KSA:

1. Registration and approval from the Ministry of Investment (MISA)
2. Commercial registration from the Ministry of Commerce
3. Registration with the Ministry of Labor, General Organization for Social Insurance (GOSI), Ministry of Interior
4. Registration of local mailing address and office space
5. Obtaining a work permit, residency visa, and insurance for a General Manager
6. Opening the company’s bank account

KSA Corporate Laws and Legislation:

Saudi Arabia has issued several laws in order to be able to get along with its growing economic progress. That’s why KSA has many laws regarding companies such as:

• The 2022 Companies Law
• Trade Names Law
• Law of Commercial Agencies
• Commercial Papers law
• Bankruptcy Law
• Franchise Law
• The Law of Commercial Register
• The Chambers of Commerce Law
• The Law of Commercial Data
• The Law on The Authorities of The Ministry of Commerce
• Anti-Money Laundering Law (AML)

KSA Companies Law

The Saudi Council of Ministers approved the new KSA Companies Law 2022 (which replaces the previous 2015 Companies Law) in Saudi Arabia. This new regulation aligns with the kingdom’s vision of 2030, for it aims to attract foreign investment, boost flexibility, and strengthen the private sector in the Kingdom.

The Saudi Arabian companies law offers guidelines that govern the company’s establishment, operation, and dissolution. It outlines different types of companies which are mentioned in Article 4 of the new Law of 2022:

• General Partnership
• Limited Partnership
• Joint-stock company
• Simplified Joint Stock Companies
• Limited liability company

KSA company law requires companies to have strong governance structures and meet specific reporting rules because it stresses the importance of transparency, accountability, and protecting shareholders’ rights. Additionally, the law includes articles that make foreign investments easier and more simplified, although there are some conditions to follow.

How can CorpLex help?

The decision to expand your UAE business to KSA is a crucial step, however, it requires knowledge and experience in both jurisdictions for the successful setup of your business in KSA. The process of setting up starts with preparing correct documentation from the UAE and taking the correct steps in the KSA. Non-consideration of requirements in both jurisdictions can result in legal complications, longer process, or even failure in the company registration process. At CorpLex, we offer specialized expertise to guide you through the registration of your UAE company’s branch or subsidiary in KSA.