The implementation of the new corporate system and its executive regulations commenced on 19th January 2023, as part of the efforts to stimulate and develop the commercial system. The system is characterized by its high flexibility aimed at protecting companies and enabling the private sector to significantly contribute towards achieving the goals of Vision 2030 of the Kingdom.
The system simplifies the establishment process of companies and enhances their sustainability and expansion, while encouraging bold investments. The system also addresses multiple challenges faced by family businesses and entrepreneurs, contributing to achieving a thriving business environment.
The new corporate system organizes all laws related to commercial, non-profit, and professional companies in an integrated legislative document. It provides significant flexibility to companies by easing restrictions throughout all stages of establishment, operation, and exit, including company names and share trading. The system allows partners or shareholders to provide shares or stakes in the company in exchange for services or work beneficial to the company, and allows for quarterly or annual distribution of profits to partners and shareholders. The system also enables the division of shares or their fragmentation into shares of lower nominal value, and their consolidation to represent shares of higher nominal value.
The system introduced a new form of companies under the name "Simplified Joint-Stock Company" to meet the needs of entrepreneurs, suiting small and medium enterprises and bold capital. Simplified joint-stock companies are among the latest companies globally. The system allowed family companies to draft a family charter to organize family ownership in the company and its governance, management, employment policy for family members, profit distribution, disposition of stakes or shares, and mechanism for dispute or conflict resolution, ensuring the sustainability of such companies. The system gave special attention to non-profit companies due to their importance in economic and social development, organizing this vital sector to ensure its empowerment and sustainability. The system developed provisions for transformation and merger among companies, allowed the division of the company into two or more companies, and allowed the emerging companies from the division to take any form of companies.
In line with technological advancement, the system allows the submission of establishment applications and attendance of assemblies and voting on decisions electronically using modern technology. The system provided greater flexibility to micro and small companies by exempting the requirement of appointing an auditor along with stating the related controls and provisions, as an incentive for entrepreneurs. The system provided means for dispute and conflict resolution through arbitration or other alternative means, developed provisions for liquidation of companies, and facilitated its procedures, in line with the provisions of the bankruptcy system..
October 14, 2023
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