In 2025, Saudi Arabia is undertaking substantial reforms to its commercial laws, with a primary focus on company formation, operational procedures, and corporate governance. These new companies law regulations are designed to streamline business establishment processes, strengthen governance frameworks, and enhance the overall investment climate, thereby fostering both domestic and foreign investments in alignment with the Kingdom's Vision 2030 objectives.
Key Changes in the New Companies Law
The New Companies Law, which came into effect in 2023, introduced a comprehensive legal framework governing the incorporation and management of businesses operating under Saudi jurisdiction. This legislation modernizes corporate structures, offering greater flexibility and efficiency regarding the process of company incorporation. In addition to, the law has introduced the Simplified Joint-Stock Company (SJSC), a new corporate entity designed to facilitate business incorporation with fewer regulatory complexities. The SJSC structure provides an adaptable and investor-friendly option, particularly for entrepreneurs and small to medium-sized enterprises (SMEs), further reinforcing Saudi Arabia's commitment to economic diversification and private sector growth.
Simplified Joint Stock Company (SJSC)
The Simplified Joint Stock Company (SJSC) is an alternative to the traditional Joint Stock Company (JSC). While both structures provide businesses with legal recognition and investment opportunities, they differ in capital requirements, governance, flexibility, and regulatory obligations.
JSC vs. SJSC: Capital and Governance
One of the most significant differences between a Joint Stock Company (JSC) and a Simplified Joint Stock Company (SJSC) lies in their capital requirements. An SJSC has no minimum capital requirement while a JSC requires a minimum capital of 500 thousand SAR as an issued capital and 125 thousand SAR (25%) as a paid-up capital.
A key distinction between JSCs and SJSCs is their governance structure. Article 67 stipulated that a JSC must have a Board of Directors with at least three members and shall conclude at least 4 meetings per year; In contrast, an SJSC does not require a formal Board of Directors, offering a highly flexible governance structure that can be customized according to the shareholders' agreement in their Article of Association as mentioned in Article 138/2,3,4.
Article 142 of the New Law, the SJSC may be managed by one or more presidents or managers or by the board of directors or any other form of management. The company's Articles of Association shall specify the manner of appointing and removing whoever is tasked with managing the company as well as the powers, authorities, and work procedures thereof. If the company's Articles of Association do not provide for any provisions in this regard, such provisions shall be determined by shareholders.
JSC vs. SJSC: Structure
A JSC is the only corporate structure that can be publicly listed on Tadawul (the Saudi Stock Exchange), allowing companies to raise capital through public share offerings. This makes it the preferred choice for large businesses and corporations seeking substantial external investment. On the other hand, an SJSC cannot be publicly listed, meaning its shares can only be transferred privately among shareholders. While this limits access to public capital markets, it also provides greater control and flexibility over ownership changes. This feature is particularly beneficial for family businesses, private equity firms, and venture-backed startups that want to retain control over their shares without being subject to public market fluctuations.
Implications for Investors and Business Owners
Saudi Arabia's New Companies Law represents a transformative step in modernizing the Kingdom's corporate landscape, fostering a more business-friendly environment, and enhancing investment opportunities. These reforms are a direct reflection of Saudi Arabia's Vision 2030, which aims to create a diverse, innovative, and competitive economy. By offering flexible corporate structures that cater to businesses of all sizes, the Kingdom is strengthening its position as a leading global investment hub. The enhanced corporate governance, transparency, and efficiency introduced by the New Companies Law will undoubtedly contribute to a more dynamic and sustainable business ecosystem, attracting both domestic and foreign investors in the years to come.
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