Companies Incorporation plays a vital role in the development of the economy and the promotion of sustainable growth in the Kingdom of Saudi Arabia. The Kingdom provides a conducive environment for company incorporation, as it has legislation and legal procedures that protect shareholders' rights and encourage investment.

Saudi Companies Incorporation contributes to providing employment opportunities for citizens and improving the services provided to the community. In order to achieve these goals, the Saudi government is keen to encourage both domestic and foreign investment by providing the necessary infrastructure and facilities, thus creating the best environment for setting up and managing these companies. This is done through the development of systems and legislation to enhance the business environment and provide better protection and benefits for investors.

company incorporation in the Kingdom of Saudi Arabia is considered a strategic partner in achieving the Saudi Vision 2030, which aims to diversify the economy. They are also a fundamental element in economic development, sustainable progress, and the promotion of investment while providing greater employment opportunities.

The Nature of a Company Incorporation and Its Forms

Article 2 of the Saudi Companies law, issued by the Council of Ministers' Decision No. 678 on 29/11/1443 H, stipulates that a company is a legal entity established in accordance with the provisions of the law based on an incorporation contract or a foundation system. It requires two or more persons to contribute, individually or jointly, with money, work, or both, to pursue a project aimed at making a profit and sharing the resulting profit or loss. However, the law allows for the establishment of a company by the sole will of one person, and non-profit companies can also be established according to the provisions of Chapter 7 of the law.

Companies’ incorporation in accordance with the provisions of the Companies Law is of Saudi nationality, and therefore, its headquarters must be located in the Kingdom of Saudi Arabia. It is worth mentioning that a company incorporation in accordance with the provisions of the Companies Law may take one of the following forms, as stated in Article 4:
1- General Partnership
2- Limited Partnership
3- Joint-Stock Company
4- Simplified Joint-Stock Company
5- Limited Liability Company

Saudi Arabia Company Incorporation
Many people are often unclear about the process and mechanism of establishing a company within the Kingdom. However, the regulatory authority has taken this into consideration to facilitate and encourage investment within the Kingdom, as previously mentioned. Founders are required to submit an application for the company incorporation and register it with the commercial register. They must also attach the articles of incorporation or the foundation system, as well as the necessary data and documents, according to the type of company.
Afterward, the commercial register reviews the application, ensuring that all the required data and documents are provided in accordance with the provisions of the Companies Law. If the application is rejected, the reasons for the rejection must be given. In this case, the founders have the right to appeal to the ministry within 60 days from the date of notification of the rejection of their application. If the appeal is also rejected or not decided upon within 30 days from the date of submission, the founders have the right to appeal to the competent judicial authority.
It should be noted that founders are considered those who actively participate in establishing the company and contribute to its capital with a cash or in-kind share. It is also worth noting some observations that should be taken into account when choosing the company name. Each company should have a trade name in Arabic or another language. The name can be derived from its purpose, distinctive, or one or more names of the current or former partners or shareholders, or a combination thereof, provided that the name does not violate the regulations of the commercial names and other applicable regulations within the Kingdom of Saudi Arabia.
Article 5 of the same regulation also stipulates that the consent of the partner or shareholder, or their heirs if deceased and did not give consent, must be obtained if the trade name includes any of the names of the former partners or shareholders in the company. The trade name should also indicate the form of the company.
Amending the trade name of the company is permissible according to the procedures stipulated for amending the company's articles of incorporation or its bylaws. It is important to note that such an amendment should not affect the rights, obligations, or regulatory procedures that were taken or carried out before the amendment.
In this context, it is necessary to differentiate between the articles of incorporation and the bylaws. The Saudi Companies Law addresses this matter in Article 7, stating that every company established according to the provisions of this law must have articles of incorporation, except for the joint-stock company, simplified joint-stock company, and single-owner limited liability company, which should have bylaws.
The articles of incorporation or the bylaws referred to must include the provisions, conditions, and data required by the law, in line with the form of the company. The articles of incorporation or the bylaws of the company must be in Arabic, and they may be accompanied by a translation into another language.

Article 8 of the mentioned law stipulates that the articles of incorporation or the bylaws, and any subsequent amendments, must be in written form. Otherwise, the articles or the bylaws, or any amendments made, would be considered void. It is also required that the articles of incorporation or the bylaws, as well as any amendments, be registered with the commercial register by the founders, partners, company directors, or members of its board of directors. Failure to comply with this requirement makes the responsible party jointly liable for compensating any damages incurred by the company, partners, shareholders, or third parties as a result of the failure to register.
It is worth noting that objections cannot be raised against third parties based on the company's articles of incorporation, its bylaws, or any subsequent amendments until they have been registered with the commercial register. Once the registration is completed before the commercial register, the company acquires legal personality to the extent necessary for its establishment, provided that the incorporation process is completed. Additionally, the registration of the company with the commercial register entails the transfer of all contracts and transactions conducted by the founders on its behalf to the company's liability. The company is also responsible for bearing all the expenses incurred by the founders in the process of establishing the company.
If the company does not fulfill the incorporation procedures as outlined, the individuals who have transacted or acted on behalf of the company or for its account will be personally liable for all their assets and jointly liable with respect to third parties for actions and transactions carried out by them during the incorporation period.

The share of a partner or shareholder
Article 13 of the Companies Law addresses the form of the share offered by a partner or shareholder. The law allows the share to be in cash or in kind, or a combination of both.
Furthermore, except for joint-stock companies and simplified joint-stock companies, a partner's share may be in the form of a percentage of profits determined by the company's articles of incorporation, and it cannot be based on the partner's reputation or influence.
Moreover, the founders, partners, or shareholders may offer shares or stocks in the company's capital to a person in exchange for their performance of work or services that benefit the company and achieve its objectives. This can be done without violating the provisions of the law.
Thus, each partner is obligated to provide the share they have committed to. If a partner delays in providing their share in the company's capital within the specified deadline, the company is entitled to demand the fulfillment of the commitment or suspend the exercise of the rights associated with their shares, such as the right to receive profits or the right to vote in the general assembly or on decisions made by the partners. The company retains the right to claim compensation for any resulting damages in all cases.

In conclusion, it is worth mentioning that companies’ incorporation plays a crucial and effective role in supporting both domestic and foreign investment and stimulating economic growth. If you are interested in any services related to companies, ALF Law Firm would be the ideal choice due to the extensive experience and knowledge of its legal advisors in the regulations and laws concerning companies.

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