Compulsory registration requirements in Saudi Arabia (Economy Insights)

After deciding on the?business form?that will represent the?company?operating in this country, the investors?setting up a company in Saudi Arabia?are required to?register the company’s trading name?with the?Ministry of Commerce and Industry. The procedure can also be completed on the institution’s website and the respective reservation is available for two months. The following step will be completed with the same institution, by submitting the?company’s statutory documents.?

More specifically, the documents?are to be filed with the?Companies Department working under the?Ministry of Commerce and Industry. Further on, the investors will need to personally collect the?company’s documents?and then sign them in front of a?public notary in Saudi Arabia.?

Another requirement is to publish the?company’s trading name?and a summary of the?company’s statutory documents?in the?Official Gazette in Saudi Arabia, after the payment of a specific fee.?

A foreign citizen interested in immigration to Saudi Arabia needs a working visa with a residence permit to work in Saudi Arabia. The residency card obtained after arrival will also contain the work authorization, the candidate must hold a direct, one-year work contract with the Saudi Arabian company to qualify for a residence permit.

The trading name reservation After choosing the most appropriate business form, the trading name reservation is the first step to registeringa company in Saudi Arabia. The selected name must be unique and to ensure this requirement is met, one can propose three names for reservation (the desired one must be the first name on the list). Also, for enhanced protection, after obtaining the reservation, the name can be registered as a trademark.

Documents to prepare to start a company in Saudi Arabia

The papers that need to be submitted when?setting up a business in Saudi Arabia?are represented by the Articles of Association which are the documents proving the decision to open the company. These must be filed alongside the details of the shareholders and directors, but also the proof of depositing the share capital. A bank statement indicating the amount of money required for the respective type of entity.

Share capital requirements for Saudi businesses

Compared to other jurisdictions,?registering a company in Saudi Arabia?has strict rules about the?share capital requirements?for each type of entity as follows:

????? The minimum amount required for a limited liability company is 100,000 SAR.

????? In the case of a public company, at least 10M SAR is required.

??In the case of a private company, the minimum share capital is set at 2M SAR.

????? For a general partnership company, at least 500,000 SAR is imposed on the 2 partners.

??For a partnership limited by shares, a minimum capital of 2M SAR is required.

The only business form that does not require a minimum share capital is the sole proprietorship.

Opening a corporate bank account in Saudi Arabia?

The?Saudi Arabian company formation?stipulates that a?newly formed legal entity?has to?set up a corporate bank account?for depositing the minimum share capital. Once the local authorities issue the?certificate of registration, the?bank account?will be activated.?

The?legal entity?should also be registered with the?Chamber of Commerce,?Ministry of Finance, and?Ministry of Labor.?

Why start a business in Saudi Arabia

Doing Business in Saudi Arabia is similar to operating in Western countries which is why it presents many benefits to foreign entrepreneurs. Moreover, from an economic:

??Saudi Arabia was ranked 62nd?in terms of ease of doing business in the World Bank’s 2020 report,

??In 2020 it also entered the top 10 global business climate improvers,

??The creation of a company can be completed in around 11 days,

??The cost of registering a company is only 5.4% of the per capita income of an entrepreneur.

Saudi Arabia Economy Overview:

Saudi Arabia, as the largest economy in the Gulf Cooperation Council (GCC), has undergone significant transformation and diversification efforts over the past decade.

The economy historically relied heavily on oil revenues, but recent initiatives aimed to reduce dependence on oil and foster sustainable economic growth.

Key Developments:

?Economic Diversification:

Vision 2030: Introduced in 2016, Vision 2030 aims to diversify the economy away from oil dependency and promote private sector growth.

Non-Oil Sector Growth: Non-oil sectors such as manufacturing, tourism, and entertainment have seen considerable development and investment.

?Infrastructure Investment:

Mega Projects: Saudi Arabia has invested in mega projects such as NEOM, Qiddiya, and the Red Sea Project to boost infrastructure, tourism, and entertainment.

Riyadh Metro: Significant investment in transportation infrastructure, including the Riyadh Metro, enhances connectivity and facilitates economic activities.

Foreign Investment:

Ease of Doing Business: Reforms aimed at improving the business environment have attracted foreign investment and promoted entrepreneurship.

Privatization Initiatives: Privatization of state-owned enterprises and sectors has encouraged foreign investment and enhanced efficiency.

Economic Reforms:

Fiscal Reforms: Implementation of subsidy cuts, introduction of value-added tax (VAT), and rationalization of government spending aimed at improving fiscal sustainability.

Economic Diversification Funds: Establishment of funds to support diversification efforts and encourage innovation and entrepreneurship.

Human Capital Development:

Education and Training: Investment in education and vocational training programs to develop a skilled workforce aligned with the needs of a diversified economy.

Saudi Youth Employment: Initiatives to increase employment opportunities for Saudi youth and reduce reliance on expatriate labor.

?Key Figures:

GDP Growth: Average annual GDP growth rate of around 2-3% over the last decade.

Oil Dependency: Oil still accounts for a significant portion of government revenue, but efforts to diversify the economy have shown promising results.

Foreign Direct Investment (FDI): FDI inflows have increased steadily, reflecting growing investor confidence in Saudi Arabia's economic prospects.

Unemployment Rate: Efforts to tackle unemployment have resulted in a gradual decline in the unemployment rate, particularly among Saudi nationals.

The Saudi Arabian economy has undergone significant transformation and diversification efforts over the past decade, driven by Vision 2030 and ambitious economic reforms.