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posted 2 months ago
Previously, Saudi Arabia required international companies to have at least 25% ownership. However, the Saudi General Investment Authority (SAGIA), now known as the Ministry of Investment in Saudi Arabia (MISA), issued a “decree” on September 6, 2015, allowing foreigners to maintain 100%-owned retail and retail businesses in Saudi Arabia in line with Vision 2030’s goals to attract foreign direct investment (FDI).
This is a significant increase from the 75% foreign ownership limit before the decree.
In 2016, the Saudi government officially approved the licensing rules and regulations for the establishment of 100% foreign limited liability companies (LLCs) in the wholesale and retail sectors. The approval was published in the Official Gazette on July 1, 2016.
Officially, On June 14, 2016, Saudi Arabia raised the upper limit of foreign investment in wholesale and retail trade from 75% to 100%. However, other terms and conditions will apply. Let’s analyze these terms and conditions in this article.
Requirements for Obtaining a 100% Foreign Trade License:
Companies applying to the Authority to obtain a foreign trade license are 100% committed to achieving the following objectives when applying for a renewal after the license expires
The company is committed to achieving the following standards within the first five years: The company is committed to achieving the level of employment of Saudis as determined by the Ministry of Labor and Social Development and to formulating and implementing a plan to elect them within the first five years.
Assume leadership positions and ensure that they remain in office.
The company is committed to training (30) Saudi employees each year.
The company undertakes to choose one of the following options:
Option 1: The company intends to invest no less than 300 million Saudi Riyals within (5) years from the date of obtaining the investment license, including 30 million rials Capital of the company.
Option 2: In addition to meeting one or more requirements assumed in the first five years the company undertakes to invest no less than SAR 200 million over (5) years from the date of obtaining the license. This investment includes SAR 30 million Er (company money).
If one of the two criteria and one of the above methods is not met, the institution is not entitled to apply for renewal.
MISA requires minimum capital requirements for certain types of businesses:
According to the regulations of the Ministry of Investment of Saudi Arabia (MISA), establishing a 100% foreign limited liability company (LLC) in Saudi Arabia requires foreign investors to have a minimum share capital of SAR 500,000.
Property investment sector: SAR 30 million
Contracting businesses: SAR 500,000 (along with other asset
value)
Commercial sector: SAR 30 million and a commitment to invest at least SAR 200 million in the first 5 years to establish a 100% limited liability company in Saudi Arabia.
To establish a 100% foreign LLC in Saudi Arabia, certain documents must be prepared, including:
In addition, some businesses may require a license from the appropriate government agency; For example, pharmaceutical companies must obtain a license from the Saudi Food and Drug Association (SFDA).
To establish a 100% foreign debt company in Saudi Arabia, certain additional requirements must be met, including:
Annual General Meeting (AGM): The company is required to hold an AGM once a year for at least the last four months. of the United Nations General Assembly for the fiscal year. At this meeting, financial statements and performance reports are prepared for submission to the Ministry of Commerce and Industry (MOCI).
Board of Directors: Although a board of directors is optional, a limited liability company in Saudi Arabia can be managed by a general manager (GM) or a board of directors. If a board of directors is established, it need not hold ordinary meetings other than the annual general meeting.
Residence of the General Manager: The General Manager must be a Saudi resident who holds an Iqama (residence permit), while other managers are not subject to specific residency or nationality requirements depending on their role.
Confidentiality of business information: Public disclosure of the identities of the company’s directors and shareholders is not required.
Restrictions on shareholders and directors: According to the new Saudi Companies Law of 2022, a limited liability company must have at least one shareholder and 50 shareholders. There is no limit to the number of directors. A limited liability company may add shareholders, but the maximum number will not exceed 50.
Holding company status: A limited liability company may operate as a holding company, but its subsidiaries may not own shares of the holding company.
Inclusion of “Limited Liability Company” in the Company Name: The company name must contain “Limited Liability Company” for the purposes approved by the MOCI.
Residence support for employees: A limited liability company has the right to finance the residence of its employees in Saudi Arabia.
We conclude that 100% foreign ownership is allowed across most sectors with minor restricted activities. This makes it easier for foreign investors to start and run a business.
Allowing 100% ownership by foreign investors can remove barriers and make the country more attractive for international financing. This increases foreign investment. Furthermore, foreigners have full control over their businesses.
This means faster decisions, better use of resources, and the ability to implement plans without the constraints of ownership, thereby promoting economic growth, job creation, and the development of various industries, increasing overall prosperity.
Foreign investors often bring advanced technologies and new business methods. This helps local businesses grow faster and encourages innovation. Finally, a positive experience with full ownership by foreign investors can lead to long-term economic and diplomatic relationships. This encourages greater cooperation and investment.
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