The New Companies Law (Royal Decree No. M/132 of 1443H), in force since 30 December 2022, marks a substantial evolution in Saudi Arabia’s corporate landscape. Replacing the 2015 Companies Law, the new legislation consolidates the rules applicable to commercial, professional, non-profit and family companies into a unified framework. The reform is closely aligned with Vision 2030 and aims to modernize the Kingdom’s corporate environment, improve governance, and enhance the attractiveness of Saudi Arabia as an investment destination.
This Client Alert summarizes the principal features of the New Companies Law and outlines its impact on foreign and local investors active in the Saudi market.
Regulatory Oversight and Digital Implementation
Responsibility for implementing the Law is shared among several authorities. The Ministry of Commerce (MoC) supervises incorporation, governance filings and dissolution; the Capital Market Authority (CMA) oversees listed joint stock companies and capital markets activity; the Ministry of Investment (MISA) regulates foreign ownership; while ZATCA and GOSI manage tax, zakat, and social security obligations.
A key development is the complete digitalization of corporate procedures. Incorporation, notarization, filings, and amendments are all processed electronically through platforms such as the Saudi Business Center, Meras, Qawaem, and Invest Saudi. This shift has reduced procedural delays and improved investor certainty.
Modernization of Governance
One of the Law’s most significant features is the strengthening of corporate governance standards. Articles 26 and 27 codify directors’ duties of care and loyalty, providing a clear statutory basis for accountability. Article 31 introduces a form of the Business Judgment Rule, under which directors acting in good faith and with reasonable care benefit from protection against personal liability in the event of commercial losses.
The Law also reinforces financial transparency. Article 17 requires companies to maintain accurate accounting records, while Article 17, 18 and 20 collectively require the preparation of audited annual financial statements. For listed companies, these rules operate concurrently with CMA’s Corporate Governance Regulations.
Reforms Supporting SMEs and Entrepreneurs
The Law reflects the government’s intention to enable entrepreneurship and strengthen the SME ecosystem. Minimum capital requirements for most company types have been removed, simplifying market entry. Under Article 19, micro and small companies are not obliged to appoint an external auditor unless this requirement is imposed by their Articles of Association or sector-specific regulations.
The introduction of the Simplified Joint Stock Company (SJSC) represents a further step towards flexibility. With no minimum capital requirements and the ability to customize governance structures, the SJSC has become particularly attractive for technology ventures, start-ups, and private equity structures.
Foreign Investment and Market Entry
Foreign investors continue to benefit from the alignment between the Companies Law and the Foreign Investment Law (Royal Decree No. M/1 of 1421H). Subject to MISA licensing and the negative list of restricted activities, foreign investors may own 100% of companies in most sectors.
The incorporation process has been fully standardized: investors first obtain a MISA license, reserve a trade name, issue electronically notarized Articles of Association (Arts. 7–8), receive a Commercial Registration, appoint management (Arts. 26-32 and 67-80), and complete ZATCA and GOSI registration. Additional approvals may be required for regulated industries such as financial services, energy, or telecommunications.
Family and Non-Profit Company Structures
The Law accommodates structures that historically lacked comprehensive treatment. Article 11 formally recognizes the Family Charter, enabling family-owned businesses to regulate succession, ownership rights and internal decision-making within a binding framework.
Non-profit companies are recognized comprehensively under Part 7 of the Law, permitting them to engage in commercial activities provided that any surpluses are reinvested in the organization’s stated objectives. This allows for a more modern and sustainable model of social impact and CSR-aligned activity.
Corporate Restructuring and Transformation
The Law modernizes corporate restructuring mechanisms and brings them in line with international practice. Companies may convert into other forms under Articles 220–224, merge under Articles 225–230, or divide into multiple entities under Articles 231–234. These statutory procedures allow investors to alter corporate structures without dissolving or re-licensing the company, thereby facilitating reorganizations, joint ventures and acquisitions.
Transitional Period and Compliance
Under the transitional provisions of the Royal Decree companies were granted a two-year grace period (ending 30 December 2024) to revise their constitutional documents and align their operations with the new Law. However, core obligations including directors’ duties, accounting records and annual audited financial statements applied immediately.
Non-compliance may result in administrative penalties, suspension of the Commercial Registration, or civil liability. Companies are therefore encouraged to update their Articles of Association and internal governance policies well before the end of the transitional period.
Conclusion
The New Companies Law introduces a modern, flexible and investor-friendly legal environment in the Kingdom of Saudi Arabia. By strengthening governance, simplifying incorporation procedures and enabling new corporate structures, the Law positions Saudi Arabia as a competitive jurisdiction for multinational companies, investors and emerging ventures alike.
Foreign and local investors should review their existing structures, assess compliance with the Law’s requirements, and take advantage of the new opportunities offered by the reformed corporate landscape.
If you would like more information about this topic then please contact us.
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JEDDAH | Sofana R. Dahlan Law Firm in association with AMERELLER | 2519 Ali Abu Al Ula Street, Jeddah, Saudi Arabia | T: +012-6063074
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