Start Your Business the Right Way: Understand Company Types and Saudi Corporate Laws

Before starting a business, it's essential to understand the types of companies available and the laws that regulate them in the country where you intend to operate. In Saudi Arabia, this means obtaining the proper licenses from the General Authority for Investment to ensure your business is 100% legal.

Saudi Arabia’s Vision and Legal Reforms

In alignment with global economic trends and Vision 2030, Saudi Arabia has implemented numerous economic reforms to attract investment by simplifying procedures and issuing a new corporate law. These reforms aim to create a more business-friendly environment and encourage both local and foreign investors..

What You’ll Learn in This Article

In this guide, you will discover:

• The structure of the new Saudi corporate law
  
  

• The most important types of companies and their advantages
  
  

• Legal responsibilities and termination conditions for each company type
  
  

1. General Partnership 

Definition: A company formed by two or more natural persons who are jointly and personally liable for all the company's debts and obligations.

Key Requirements:

• The company name must include the names of all partners or some of them with “& Partners” or similar.
  
  

• Inclusion of a non-partner’s name makes them equally liable if done knowingly.
  
  

• A partner may not transfer their share without the approval of other partners.
  
  

• Partner shares cannot be represented by negotiable instruments.
  
  

Termination Cases:

• Death, incapacity, bankruptcy, or withdrawal of any partner.
  
  

2. Silent Partnership 

Definition: A secret company not registered in the commercial registry and without legal personality. It's formed through a private agreement among partners.

Main Rules:

• Can be proven by any means of evidence.
  
  

• Contract must define purpose, rights, obligations, profit-sharing, etc.
  
  

• New partners require unanimous approval.
  
  

• Cannot issue tradable securities.
  
  

• Third parties can only claim against the partner they dealt with.
  
  

Termination:

• Partner’s death, incapacity, bankruptcy, or withdrawal.
  
  

3. Limited Partnership 

Definition: Consists of at least one general partner (personally liable) and one limited partner (liable only up to their share).

Notable Features:

• Company name includes general partner(s) only.
  
  

• Limited partners cannot engage in external management.
  
  

• Share transfer to non-partners requires approval from all general and majority limited partners.
  
  

Termination Conditions:

• Same as General Partnership: death, bankruptcy, withdrawal, or incapacity of a partner.
  
  

4. Limited Liability Company

Definition: Founded by one or more persons (up to 50). It is a legal entity separate from its shareholders and is solely liable for its obligations.

Key Conditions:

• Owners are not personally liable.
  
  

• If shareholders exceed 50, the company must convert into a joint-stock company within a year.
  
  

• LLCs cannot engage in banking, financing, or insurance.
  
  

• Public offerings and tradable securities are prohibited.
  
  

5. Holding Company 

Definition: A company—either joint-stock or LLC—that controls subsidiary companies by owning over 50% of their capital or board voting rights.

Main Objectives:

• Manage subsidiaries and provide operational support.
  
  

• Invest in securities.
  
  

• Own necessary assets and real estate.
  
  

• Lend to subsidiaries.
  
  

• Own and lease intellectual property rights.
  
  

• Engage in any legal business activity.
  
  

6. Foreign Companies in Saudi Arabia

In alignment with Vision 2030, Saudi Arabia supports foreign investment through favorable legal frameworks. Non-Saudis can establish foreign companies or branches with ease.

Requirements:

• Obtain a license from the General Authority for Investment (SAGIA).
  
  

• Comply with regulations of the relevant sector authority.
  
  

• Cannot issue or offer securities without Capital Market Authority approval.
  
  

• Must include Arabic details on official documents (name, agent, address).
  
  

• The branch is considered a legal domicile in the Kingdom.

Foreign Company Setup Steps:

1. Submit an official investment request to SAGIA.
   
   

2. Provide a notarized and embassy-certified company formation document.
   
   

3. Include full company details: capital, name, activities, general manager info.
   
   

4. Reserve the company name via the Ministry of Commerce.
   
   

5. Legalize company documents with a notary public and publish in the official gazette.
   
   

6. Register with the Chamber of Commerce, GOSI, Passports, and Interior Ministry.
   
   

Need Help Setting Up a Company in Saudi Arabia?

Sidrahub offers full legal and administrative support to establish or expand your company in Saudi Arabia — including setting up a foreign branch in just 7 days.
Contact us for a free consultation.