Saudi Arabia replaced its company law framework with a single modern statute. The Companies Law issued by Royal Decree No. M/132 dated 1/12/1443H (30 June 2022) was published in the Official Gazette (Umm Al-Qura, issue 4940) on 23/12/1443H (22 July 2022) and entered into force 180 days after publication, on 26/6/1444H (19 January 2023). Its 281 articles supersede the previous Companies Law promulgated by Royal Decree No. M/3 dated 28/1/1437H and the Professional Companies Law promulgated by Royal Decree No. M/17 dated 26/1/1441H, and repeal every conflicting provision. The law introduces the simplified joint-stock company, relaxes capital and governance requirements, rewrites merger and conversion mechanics, and backs the regime with penalties of up to SAR 5 million. This guide reads the law from the official Arabic text and the official English translation of the Bureau of Experts at the Council of Ministers, and explains what it means for founders, investors and existing companies. We advise on Saudi company law from our office in Kuwait, in cooperation with our partners in Saudi Arabia.
The company forms the law recognizes
A company under the law is a legal entity incorporated under articles of incorporation or articles of association by which two or more persons undertake to participate in a for-profit enterprise by contributing property or work, or both, to share profit and loss; as an exception, a company may be incorporated by a single person, and a company incorporated under the law has Saudi nationality with its headquarters in the Kingdom (Articles 2 and 3). Article 4 lists five forms: the general partnership, the limited partnership, the joint-stock company, the simplified joint-stock company and the limited liability company. Two further categories sit on top of these forms: the non-profit company (Part 7), which may take the form of a joint-stock, simplified joint-stock or limited liability company and channels its profits to its non-profit purposes rather than distributing them, and the professional company (Part 8), through which licensed professionals practice, governed by the rules of the form it takes with the specific safeguards of Articles 197 to 215, including malpractice liability and insurance.
Incorporation, registration and legal personality
Incorporation is document-driven and digital. The founders submit an incorporation application with the articles of incorporation or association through the electronic platform of the competent authority, and the incorporation documents are registered with the Commercial Register (Articles 6 to 8). The company acquires legal personality upon registration; during the incorporation period it has personality only to the extent necessary to complete incorporation, and registration transfers to the company the rights and obligations arising from the founders' incorporation acts (Article 9). The law also allows incorporators, partners and shareholders to conclude partnership agreements and a family charter organizing family ownership, governance, succession and dispute settlement; these are optional to conclude but binding once adopted, provided they do not violate the law or the company's articles (Article 11).
Duties, liability and oversight
Part 1 sets the behavioral spine for every form. Managers, officers and board members owe the company a duty of care and a duty of loyalty (Article 26); conflicts of interest, competition with the company and exploitation of its assets are regulated (Article 27); and management is liable to the company, the partners and third parties for violations of the law, the company's documents or its management contract, and for errors in performing its functions (Article 28). The company, and any partner or shareholder, may bring the liability action, and the law adopts a business judgment rule: no liability attaches to a decision taken within the manager's authority, in good faith and on an informed basis without personal interest (Articles 29 to 32). Every company must appoint an auditor, but micro and small companies are exempt unless their articles require one, they are listed in the capital market, they issue debt instruments, traded financing sukuk, preferred stock or redeemable stock, other laws require the appointment of an auditor, they are a foreign company, or they own another company or are a subsidiary of another company (unless the micro or small company description applies to all of them) (Articles 18 and 19).
General and limited partnerships
The general partnership (Articles 35 to 50) is the persons company: partners are jointly and severally liable for its debts, partner decisions follow the articles or the unanimity or majority they require, a non-managing partner may not interfere in management but may inspect the company's business, and the partnership does not terminate on a partner's death, interdiction, removal or withdrawal, or on the initiation of any liquidation proceedings under the Bankruptcy Law against him, unless the articles stipulate otherwise; in those cases the partnership continues between the other partners, and the partner or his heirs have only his interests in the company's assets (Article 50). The limited partnership (Articles 51 to 57) splits partners into general partners, who carry the partnership's liabilities like partners in a general partnership, and limited partners, whose liability is limited to their contributions and who may not do management work vis-a-vis third parties; it has a general assembly of partners and decisions are taken as its articles provide.
The joint-stock company
The joint-stock company (Articles 58 to 137) remains the capital-market form. Its issued capital may not be less than SAR 500,000, and at least one quarter must be paid up on incorporation (Article 59); the articles may create an authorized capital within which the board may increase the issued capital once it is fully paid (Article 60). Shareholders exercise their will through assemblies: the ordinary general assembly is valid only with shareholders representing at least one quarter of the voting shares, or a higher percentage up to one half if the articles so provide, with a second call valid regardless of quorum (Article 92), and the extraordinary general assembly requires at least one half, or up to two thirds if the articles provide, with a second call at one quarter and a third call valid regardless of quorum (Article 93). A joint-stock company may be incorporated by a single person, who then holds the powers of the assemblies and decides in writing (Article 98).
Shares may be ordinary, preferred or redeemable, and the articles may create classes with different rights (Article 108); shares may not be issued below nominal value but may be issued above it, the premium going to a separate item within shareholders' equity (Article 106). Statutory reserves are now optional: the articles may provide for a reserve from net profit, and the ordinary assembly may create further reserves (Article 123). Dividends are set by the general assembly after deducting any reserves (Article 125). If losses reach half of the issued capital, the board must announce the losses and its recommendations within 60 days of learning of them and must call an extraordinary general assembly within 180 days to decide on continuation with corrective measures or dissolution (Article 132). The law also creates a buy-out rule: any person who, alone or in agreement with others, reaches 90% or more of the voting shares must disclose this, and any shareholder may within 90 days of the disclosure require the controlling holder to offer to purchase his shares; conversely, the holder of 90% or more may call on the remaining shareholders to sell (Article 230).
The simplified joint-stock company
The simplified joint-stock company (Articles 138 to 155) is the law's flagship innovation, designed for startups, venture structures and family businesses that want share capital without the full JSC machinery. The minimum capital requirement of the joint-stock company does not apply; the articles specify the issued and paid-up capital and may create an authorized capital (Article 139). Management is flexible: one or more managers or a board, as the articles provide (Article 142). Shareholder meetings replace the JSC's assembly tiers, decisions may be taken by circulation (Article 149), and a single person may incorporate a simplified joint-stock company (Article 150). The articles may restrict the disposition of shares for up to 10 years from issuance, extendable by unanimous approval, and may require company or shareholder approval for transfers, with violating dispositions null and void (Article 151); the articles may even oblige a shareholder to assign his shares in stated cases (Article 152).
The limited liability company
The limited liability company (Articles 156 to 184) is the workhorse for operating businesses. It may be incorporated by one or more natural or legal persons; its assets and liabilities are separate from those of its partners, who are liable only up to their interests in the capital (Article 156), and a single-person LLC is expressly permitted with the owner holding the powers of the manager, the board of managers and the general assembly (Article 157). There is no statutory minimum capital: the partners determine the capital in the articles, divided into indivisible and untradeable interests of equal value (Article 174). Management rests with one or more managers, who represent the company and are liable for their acts (Articles 160 to 164). Transfers are controlled: a partner assigning an interest to a non-partner must notify the other partners through the manager, and each partner has a right of first refusal exercisable within 30 days of notification of the agreed price, with the company itself able to buy (Article 178). If losses reach half of the capital, the manager must call the partners within 60 days to decide on continuation with corrective measures or dissolution (Article 182). Continuity is the default: the LLC does not terminate on a partner's death, interdiction, withdrawal, insolvency or bankruptcy proceedings, unless the articles provide otherwise (Article 184).
Holding companies, conversion, merger and division
Part 9 legitimizes the holding structure: a holding company is a joint-stock, simplified joint-stock or limited liability company whose purpose is to control other companies by holding a majority or control-conferring interests, and a subsidiary may not acquire interests or shares in its holding company, with limited regulated exceptions (Articles 216 to 218). Part 10 rewrites corporate mobility. A company may convert into another form by the decision required to amend its articles, after meeting the incorporation, registration and publication conditions of the target form; conversion into a simplified joint-stock company requires unanimous shareholder approval, and conversion does not create a new legal person (Articles 220 and 223). Mergers follow a creditor-protection track: each company party to a merger must announce it at least 30 days before the decision date, any creditor of a merged company may object within 15 days of the announcement, and the company must pay a due debt, secure an undue one, or let the competent judicial authority decide; the merger decision takes effect upon registration in the Commercial Register, and the merged company's rights, liabilities, assets and contracts pass to the surviving or new company (Articles 225 to 229). Division distributes a company's assets and obligations among resulting companies under Articles 231 to 234.
Foreign companies in the Kingdom
The law applies to foreign companies operating in the Kingdom, excluding its incorporation provisions (Article 235). A foreign company operates through a branch, a representative office, or another form, in accordance with the investment law and related statutory provisions (Article 236); its branch finances must be presented as the regulations require, its documents must state its home registration details, and it is answerable for violations committed by its establishments in the Kingdom (Articles 237 to 240). In practice this route pairs with an investment registration from the Ministry of Investment, which we handle together with the Companies Law analysis from our office in Kuwait, in cooperation with our partners in Saudi Arabia.
Termination and liquidation
Beyond the reasons specific to each form, a company terminates on the expiry of its term unless extended, by agreement of the partners or shareholders, or by a final judgment of dissolution or annulment (Article 243). Liquidation follows the company's documents or a partner or shareholder decision, with a liquidator appointed, registered and published; the liquidation period may not exceed three years except by order of the competent judicial authority (Articles 244 to 248). The liquidator inventories assets and liabilities, pays debts in legal order, and distributes the remainder; if the assets are insufficient to pay the debts, the liquidator must seek the competent judicial authority's route under the Bankruptcy Law where its conditions are met (Articles 252 to 255). An action against the company's liquidator is time-barred five years from the company's deregistration from the commercial register, except in cases of forgery and fraud (Article 259). A liability action against a manager or board member is time-barred five years from the end of the financial year in which the harmful act occurred, or three years from the end of the manager's or the member's tenure, whichever is later, except in cases of forgery and fraud (Article 30(2)).
Penalties and enforcement
Part 13 gives the law teeth in three tiers. Serious offences, including intentionally misleading financial statements, false capital-decrease statements and distributions in bad faith, carry imprisonment of up to three years and a fine of up to SAR 5 million, or either penalty (Article 260). A second tier, including an auditor's failure to report suspected criminal violations, carries up to one year and a fine of up to SAR 1 million, or either (Article 261). A third tier of violations, including impeding assembly meetings or voting rights, carries a fine of up to SAR 500,000 (Article 262). The Public Prosecution investigates and prosecutes the offences, a Violation Review Committee handles regulatory violations, and criminal detection officers document breaches (Articles 265 to 268).
What existing companies must do
The law took effect on 19 January 2023, and the Ministry of Commerce required existing companies to amend their articles of incorporation or association to conform with it, calling on companies through the Business Platform and announcing regulatory action against non-compliant companies. Implementing regulations issued by the competent authority supply the operational detail, including electronic incorporation, register procedures and reporting. Companies that have not yet conformed their documents, or that operate on pre-2022 articles, should treat the alignment as a live compliance obligation, not a historical footnote.
How we can help
Hind Bin Al Sheikh & Partners advises on every aspect of the Saudi Companies Law: choosing and incorporating the right form (LLC, joint-stock, simplified joint-stock, holding or professional company), drafting and amending articles of incorporation and association, governance frameworks and director and officer liability, capital increases and decreases, conversions, mergers and divisions with creditor-objection management, branch and representative office structures for foreign companies, liquidations, and defending or pursuing derivative and penalty proceedings. We act on Saudi company law matters from our office in Kuwait, in cooperation with our partners in Saudi Arabia.
Read also: Company Formation in Saudi Arabia for Foreign Investors: MISA Registration, Entity Choice and Incorporation Steps (2026) | Corporate Compliance in Saudi Arabia under the New Companies Law: Governance Duties, Financial Statements and Penalties after Royal Decree M/132 (2026) | Mergers and Acquisitions in Saudi Arabia under the New Companies Law: Merger Forms, Creditor and Shareholder Protection and Group Structuring (2026)
Frequently asked questions
When did the new Saudi Companies Law take effect, and what did it replace?
The law was issued by Royal Decree No. M/132 dated 1/12/1443H (30 June 2022), published in Umm Al-Qura (issue 4940) on 23/12/1443H (22 July 2022) and entered into force 180 days after publication, on 26/6/1444H (19 January 2023). It superseded the Companies Law of Royal Decree No. M/3 (1437H) and the Professional Companies Law of Royal Decree No. M/17 (1441H).
What company forms exist under the new law?
Article 4 recognizes five forms: general partnership, limited partnership, joint-stock company, simplified joint-stock company and limited liability company. The law also regulates the non-profit company and the professional company, each built on one of those forms, and permits single-person companies across the joint-stock, simplified joint-stock and LLC forms.
Is there a minimum capital for a Saudi company?
Only the joint-stock company has a statutory minimum: SAR 500,000 of issued capital, with at least one quarter paid up on incorporation. The simplified joint-stock company is expressly free of that minimum, and in an LLC the partners set the capital in the articles with no statutory floor.
What happens if a company's losses reach half of its capital?
In a joint-stock company, the board must announce the losses and its recommendations within 60 days of learning of them and call an extraordinary general assembly within 180 days to decide on continuation with corrective measures or dissolution. In an LLC, the manager must call the partners within 60 days for the same decision.
How are mergers protected for creditors?
Each merging company must announce the merger at least 30 days before the decision date. Any creditor of a merged company may object within 15 days of the announcement; the company must pay a due debt or secure an undue one, failing which the competent judicial authority decides. The merger takes effect upon registration in the Commercial Register.
Can Hind Bin Al Sheikh & Partners act on Saudi company law matters?
Yes. We incorporate and restructure companies under the M/132 law, draft and conform articles, run conversions, mergers and divisions, advise foreign companies on branch structures, and handle governance, liquidation and penalty matters, from our office in Kuwait, in cooperation with our partners in Saudi Arabia.