Aqid ERPThe law, and the deadline that has passed
The Companies Law of 1443H took effect on 19 January 2023 and repealed the Companies Law of 1437H and the Professional Companies Law. Companies that already existed had two years to bring their articles of association into line; the Ministry of Commerce set that deadline at 18 January 2025 and has said it acts against companies that did not. A company formed today follows the new law from the first day.
The five forms (Article 4)
A company formed under the law must take one of these forms:
| General partnership (شركة التضامن) | Two or more partners, personally and jointly liable for its debts |
|---|---|
| Limited partnership (شركة التوصية البسيطة) | At least one general partner, fully liable, and one limited partner, liable up to their share |
| Joint stock company (شركة المساهمة) | One or more shareholders; capital in tradable shares; liability limited to the shares |
| Simplified joint stock company (شركة المساهمة المبسطة) | New in 2022: one or more shareholders, no legal minimum capital, management set by its bylaws |
| Limited liability company (الشركة ذات المسؤولية المحدودة) | One or more partners; the company alone is liable for its debts, each partner up to their share |
What separates them
- Liability. In the two partnerships, the general partners answer for the company's debts with everything they own. In the joint stock company, the simplified joint stock company and the LLC, an owner risks only what they put in.
- One owner. A joint stock company, a simplified joint stock company and an LLC can each be formed by a single person. The partnerships need at least two.
- Capital. Article 59 sets the joint stock company's issued capital at no less than SAR 500,000, at least a quarter paid up on incorporation. That minimum does not apply to the simplified joint stock company. An LLC's capital is stated in its bylaws.
- Management. A joint stock company has a board of at least three members. A simplified joint stock company is run as its bylaws say: a president, a manager or a board, and a single shareholder can run it as manager with no board and no general assemblies. An LLC is run by one or more managers, partners or not. The partners manage a partnership themselves or appoint managers.
- Shares. Only the two joint stock forms divide their capital into tradable shares; an LLC partner's share is transferred under the rules of its bylaws and the law.
What is no longer on the list
The joint venture (شركة المحاصة), a partnership hidden from third parties with no legal personality, was one of the forms of the 1437H law and is not one of the five forms of the 2022 law. The partnership limited by shares (شركة التوصية بالأسهم) is often said to have been abolished in 2022; it had in fact already gone from the 1437H law, as had the cooperative company. Both belonged to the Companies Law of 1385H.
Other companies the law covers
- Non-profit companies: public ones take the joint stock form; private ones can be an LLC, a joint stock or a simplified joint stock company. Profits go to the company's purposes, not to its members.
- Professional companies: formed by people licensed in a profession, such as accountants, lawyers or engineers, to practise it. They can take any of the five forms, and they may not carry on commercial business.
- Holding companies: a joint stock company, simplified joint stock company or LLC that owns enough of other companies to control them as subsidiaries.
- Family companies: partners can sign a family charter that sets how the family owns, governs and passes on the company, and it binds them.
Foreign owners: registration, not a licence
Under the updated Investment Law (Royal Decree M/19, 1446H), which repealed the Foreign Investment Law, a foreign investor registers with the Ministry of Investment before investing, instead of applying for a licence. With the investment registration certificate, the company is then incorporated with the Ministry of Commerce, in any of the five forms, or a branch of a foreign company is opened. Some activities still need the Ministry of Investment's approval in advance.
The commercial register no longer expires
The Commercial Register Law (Royal Decree M/83, 1446H), in force since 3 April 2025, replaced the renewable registration with one that does not expire. Instead, the registration is confirmed electronically once a year; a registration not confirmed for 90 days is suspended, and struck off a year after that. A business now holds one commercial registration for the whole Kingdom, and branch registrations are abolished.
What it means for the books
- Every form keeps commercial books and prepares financial statements; the zakat and income tax return is built on them.
- The owners' equity is shown by form: partners' capital accounts in a partnership, share capital in a joint stock company, the partners' capital in an LLC.
- Micro and small companies can be exempt from appointing an auditor under the law, unless their articles require one or they are listed or issue debt instruments; the size criteria are in the regulations.
- A group of companies, such as a holding and its subsidiaries, is easiest to run with one set of books per company and a consolidation on top.