SEPTEMBER 30, 2013

COMPANY FORMATION
IN SAUDI ARABIA1
A Report Prepared for the Ministry of Justice of the Republic of Korea

INTRODUCTION

The requirements and process for forming a company in Saudi Arabia depend on several factors,
including the specific activity to be conducted in Saudi Arabia and the nationality of the owners of the
company, specifically whether any owner is to be a national of a country other than Saudi Arabia or
another member of the Gulf Cooperation Council (GCC) (being Bahrain, Kuwait, Oman, Qatar, Saudi
Arabia and the United Arab Emirates). For example, there are numerous references in this report to the
Saudi Arabian General Investment Authority (SAGIA). SAGIA is the gatekeeper for foreign direct
investment into Saudi Arabia other than for direct investment by nationals of GCC countries and direct
investment in professional companies. Accordingly, references in this report to SAGIA should be
understood only to apply in situations in which SAGIA approval is required. SAGIA approval is
documented by the issuance of a foreign investment license, as described further in Exhibit 1.
Activities may be divided into four general groups: providing commercial services, providing professional
services, conducting trading (the purchase and resale of products, including by means of importation and
sale) and conducting manufacturing activities. A companys authorized activities are set forth in its
articles of association, its commercial registration (CR) and, if applicable, its SAGIA license.
This report discusses the types of companies that may be created and the process for creating commercial
companies, with specific focus on the most common form of commercial company (the limited liability
company). It also addresses other specific issues, such as whether there is a national ownership
requirement (i.e., is foreign investment permitted and is a Saudi partner required) and capital
requirements.
Generally, foreign investment is permitted other than in activities on the negative list referenced below,
and no Saudi partner is required for performing commercial services or manufacturing. Professional
services and trading require one or more Saudi partners to own 25% or more of the company.
Apart from formation of the company itself, many other Saudi Arabian laws, regulations and practices are
relevant to how a company conducts business, including those related to taxes, immigration, labor and
employment, leasing, contracting, banking, trademarks and other intellectual property, dispute resolution,
and cultural matters. Also, the foreign company will be subject to laws and regulations of its home
jurisdiction and possibly other jurisdictions that affect the conduct of the foreign companys business in
Saudi Arabia. This report does not address non-Saudi laws and regulations or those Saudi laws and
regulations beyond the formation of the company.
A company must be registered in a city or area, e.g., Riyadh, Jeddah, Yanbu, Al Khobar or Jubail. To
perform projects or open offices in other locations, the company should open a branch there. A
companys CR is tied to particular authorized premises. Each business must have a place of business that
has been approved by the authorities, including at the municipal or equivalent level and potentially by the
labor office.

1 Prepared by Mohammed Al-Ghamdi Law Firm In Association with Fulbright & Jaworski LLP. Fulbright & Jaworski
LLP is a member of Norton Rose Fulbright, a Swiss Verein.

The application of laws, regulations and policies in Saudi Arabia is not always uniform, and those laws,
regulations and policies may change without advance notice, as has been happening with the policies
related to employment of Saudi nationals and applications for new foreign investment licenses. There
may be exceptions to laws and practices described in this memorandum. This memorandum is intended
as general guidance to orient the reader to the formation of companies in Saudi Arabia, not as legal advice
for any particular activity.
II

PERMITTED ACTIVITIES

Specific activity requirement

A company registered in Saudi Arabia is permitted to engage only in the activities specifically mentioned
in its CR and in activities incidental to such activities. The CR will reflect what has been approved by
SAGIA in the foreign investment license for those companies or branches that require SAGIA approval.
For a company, the specific activities are also set forth in the articles of association. Activities are also
known as objects. For a manufacturing company the activities are expressed as the right to
manufacture and sell specific products in accordance with annual volumes. This means the company
must amend its SAGIA foreign investment license, CR and articles of association to add or delete a
product or to increase production volume. Other than for professional services or investments by
nationals of Saudi Arabia and the other GCC countries, SAGIA is the gatekeeper to determine what
activities will be set forth in the CR, the foreign investment license and the articles of association.
Mixing activities
Some activities cannot be mixed. Engineering and construction cannot be mixed, which has made it
difficult to obtain a license for EPC activities. Manufacturing and trading other products not made by
the manufacturer cannot be mixed, nor can manufacturing and providing services for goods not
manufactured by the manufacturer. Example: A company sells products from overseas into Saudi
Arabia and sets up a plant in Saudi to make one line of products. The company operating that plant can
sell in Saudi Arabia and export what it makes and can service what it makes, but it cannot obtain a trading
license to import and sell other products or to service other products. However, the foreign company
could always sell the other products into Saudi Arabia through an agent or distributor or form a separate
trading company with a Saudi partner.
The negative list
In principle foreign direct investment is permitted for any activity that is not on the negative list. The
negative list is maintained by the SAGIA. The current list is attached at Exhibit 2.
National ownership requirements
Certain activities require one or more Saudi partners holding not less than 25% of the company. Those
include trading and the provision of professional services. Other activities such as manufacturing and
commercial services may be conducted through wholly foreign-owned branches or companies.
Professional services include architecture, engineering, accounting and may be interpreted to include
some services related to architecture and engineering such as project management or construction
management. So-called sleeping partner arrangements through which the local partner purports to give
up rights to vote, participate in profits, and examine the books of the company are not enforceable and
raise exposure for violation of the Saudi anti-concealment law. That law criminalizes hiding a foreign
operation behind a Saudi front. Therefore, it is not appropriate to agree that the Saudi partner will accept
only a fixed annual fee in lieu of profits.

III

PROFESSIONAL COMPANIES

Only a professional company may perform professional services, such as accounting, certain types of
project management consultancy, engineering, and architecture. The Saudi Professional Companies Law2
regulates such companies. One or more Saudi individuals must be partners holding in the aggregate at
least 25% of the equity, and the Saudi partners must hold the relevant professional license and not be a
shareholder in any other professional company. The partners are jointly and severally liable for the
liabilities of the company. There is a statutory exclusivity requirement to the effect that the partners
should not compete with each other. After the partnership arrangements are agreed, the parties obtain
the approval of the Ministry of Commerce and Industry (MoCI) and the relevant licensing authority for
the particular profession, then execute the partnership agreement in front of the notary public, deposit
the capital, publish the agreement, and obtain the CR.
To obtain the preliminary approval of the MoCI, the Saudi partner(s) must submit evidence to confirm
he(they) hold the relevant professional license and are in good standing with the relevant professional
regulator and the foreign professionals must submit a completed application form to MoCI together with
several supporting documents including: (i) a certificate from a professional body in their jurisdiction of
registration indicating that it has been a professionally licensed company/partnership for at least ten (10)
consecutive years during which it engaged in its activities without interruption; (ii) a certificate issued by
the competent foreign authorities indicating the number and date of the companys/partnerships
professional license; (iii) an undertaking from the foreign partner that it will assist in the training of Saudis
in its licensed field; (iv) an appointment of a qualified representative in Saudi Arabia who undertakes to
reside in Saudi Arabia at least nine (9) months per year to ensure training of Saudi professionals occurs;
and (v) the draft partnership agreement.
Once approval is given by the MOCI they would forward the draft partnership agreement to the Notary
for signing, which subsequent to signing would need to be published. The next step in the formation and
registration process is obtaining the license from the MoCI. Several additional documents are required in
order to secure the license, including, but not limited to: (i) a certificate of capital from a Saudi Arabian
bank certifying that the entire share capital has been deposited into a blocked account in Saudi Arabia; (ii)
the unanimous written consent or resolution of the partners (as appropriate according to the partners
agreement) appointing the general manager and/or board of managers; and (iii) a copy of the initial office
lease. Upon the issuance of the license, the company would be fully authorized to engage in the activities
set out in its articles of association. This part of the process can take another week or so to complete.
The share capital that was deposited in the blocked bank account is unblocked by the relevant bank
upon presentation of a copy of the license. Although the company has been formed and licensed upon
issuance of its license, it also must make several administrative filings and pursue other formalities
including applying for membership at the Chamber of Commerce, opening a 700 File and a Labor File
at the Labor Office, registering with the Department of Zakat and Income Tax (DZIT) and the General
Organization of Social Insurance (GOSI) and obtaining a Municipality License for the premises. Due to
the increased emphasis on Saudiization, it is recommended that, as part of the early business planning, the
shareholders address hiring Saudi personnel.
The requirements of each professional licensing authority may vary. Foreign parties should expect that it
would take no less than two to three months to form a professional services company from the time they
have reached their own agreement on terms.
IV

COMMERCIAL COMPANIES

All activities other than professional services can be conducted through commercial companies. The
Companies Regulations3 do not require a local Saudi partner to form a commercial company. The
requirement for Saudi equity participation is based on activity. For example, one or more Saudi nationals

The Professional Companies Law, as issued by Royal Decree No. M/4 dated 18/2/1412H, as amended.
The Companies Regulations, as issued by Royal Decree No. M/6 dated 22/3/1385, as amended.

must own in the aggregate not less than 25% of the capital of a company that will engage in trading (the
buying and selling of goods).
A company not wholly-owned by nationals of Saudi Arabia or other GCC countries must obtain a foreign
investment license from SAGIA to invest in a commercial company in Saudi Arabia. SAGIA has
discretion to grant, deny or condition the issuance of the license. Details concerning such licenses are set
forth in Exhibit 1 and the Appendices to that Exhibit.
LLCs
The most common type of commercial company is the limited liability company (LLC), which requires at
least two partners but may not have more than fifty partners.4 Natural persons and corporate entities
may be partners. The partners have limited liability for the liabilities of the company, up to the value of
their shares. LLCs have articles of association, but no bylaws.
Capital requirements. Legal capital requirements for an LLC depend on activities and for service
activities are relatively low, typically SAR 500,000 (approximately USD 133,333) has been sufficient.
Capital for manufacturing depends upon the business plan and, if a SAGIA license is required, will be
related based on SAGIAs perception of what is required. Capital for trading is straightforward, but high
if there is foreign (non-GCC investment): the foreign partner must invest not less than SAR 20 million
(approximately USD 5.333 million) no matter whether it holds the maximum permitted 75% of capital or
some lesser amount.
Capital contributions must be made in cash or tangible property that is valued by a Saudi audit
firm. Intellectual property has not been acceptable. Subject to issues such as taxable gain on sale of
assets to be contributed, it is better from a purely Saudi perspective to contribute cash and use the cash to
buy assets than to go through the complication of having the assets valued and the valuation accepted.
Increasing capital and decreasing capital require approval of SAGIA (if a foreign, non-GCC
shareholder is involved), MoCI and all of the partners. Increasing capital can require 45 to 60 days if the
company must amend a SAGIA license. If there is no SAGIA license, the process can be accomplished
within one to two weeks. Decreasing capital would require a longer period and is almost never a good
idea because it requires paying all creditors of the company who request to be paid. Paying premium for
shares in a share acquisition does not increase the capital of the Company, which has implications when a
foreign company buys into a trading company and the capital must be increased.
Dividends. Partners are entitled to profit distributions in accordance with their capital interest in
the company. Profits are allocated in that manner, and disproportionate profit allocations are not
permitted. All shares are alike, there is only one class of shares. Profits are determined based on annual
audits as approved by the shareholders. Dividends, therefore, are based on annual, audited results of the
prior year.
Shares and share transfers. There are no share certificates for LLCs. Ownership is evidenced by the
content of the articles of association, which specify the owners, the ownership percentages represented by
their respective shares of the LLCs capital, and the par value of their respective shares of the LLCs
capital. The articles of association may not be amended to change ownership without the approval of
SAGIA (if a foreign, non-GCC shareholder is involved), MoCI and, at the time the amendment is signed
by all partners, the notary public. Transferring ownership essentially requires consent at the time of
transfer by all partners. Notwithstanding the fact that it is permissible to enter into certain buy-sell
arrangements, if a partner breaches that contractual obligation and does not appear at the notary public to
sign the necessary amendment, the transfer normally will not occur.

It is customary to refer to owners of share capital in LLCs as either shareholders or partners.

There is a statutory, non-waivable right to transfer shares subject to a statutory right of

preemption if the share transfer is to someone not already a partner. Heirs of an individual partner have a
statutory right to inherit his or her shares upon his or her death. Due to the lack of injunctive relief, the
difficulty of recovering money damages for speculative lost profits, and the referenced procedural and
legal hurdles for share transfers, buy-sell arrangements, puts, calls, tag-along rights and drag-along rights
are of questionable value. Notwithstanding that fact, they are often included in shareholder agreements.
Stock options for LLC shares are not feasible and are not common.
Governance. Partners are entitled to vote. Even where the law does not require unanimity the
need for all amendments to the articles of association to be notarized, means that all the partners should
be present and sign the amendment. Third parties such as banks and government authorities may require
all partners to sign written resolutions in order to approve changes in signatories of bank accounts,
appointment or replacement of
general managers, approval of dividends, or other actions,
notwithstanding provisions in the articles of association that permit fewer than all partners to make the
decision or that might even permit the action to be taken without partner involvement.
A board of directors is not required. It is common to have one because foreign companies and
many Saudi companies want to have the board as a tool for managing the company. However, directors
are responsible primarily to the partner they represent and can take direction from that partner on voting.
Moreover, there is no available injunctive relief to enforce corporate governance arrangements relating to
quorum etc. and signed partner resolutions often must be presented to authorize action even if the board
has approved the action. So, it is often simpler to eliminate the board and have all issues either handled
by a strong general manager (in the case of a wholly-owned company) or dealt with at the partner level (if
there are two or more partners).
Formation. The partners must submit the LLCs proposed articles of association to the Ministry
of Commerce and Industry (MoCI) office for review and approval. If one or more of the partners is not a
national of either Saudi Arabia or another GCC country, the step of submitting articles of association to
the MoCI occurs after SAGIA has approved the foreign investment. The MoCI normally requires that an
LLCs articles of association closely follow the standard form of articles of association issued by the
MoCI. Articles of association that do not closely follow the standard form, except in a limited number of
articles, can be rejected by the MoCI. This part of the process can take one or two weeks to complete, if
no problems are encountered.
After the LLCs articles of association are approved by the MoCI, they must be signed by
representatives of the partners, at the notary public office. The notary public must review the substance
of the partners capacity to sign, including proof of the identity of the signatory, a power of attorney from
the signatorys company and resolutions from the signatorys company approving the power of attorney.
If the partner is foreign, these documents must be fully notarized, legalized and consularized by the
appropriate authorities in the partners home jurisdiction. Obtaining an appointment with the notary
public and attending the signing can take a week or two if no problems are encountered.
After the execution and recordation of the articles of association by the notary public, a summary
of the articles of association, as recorded by the notary public, must be submitted to the Saudi Official
Gazette, the Umm Al-Qura, for publication. Before the summary of the articles of association is actually
published in the Umm Al-Qura, it is usually possible to proceed with the commercial registration
formalities described below in order to obtain the CR. This can be accomplished by presenting a
summary of the articles of association to the MoCI in order for them to publish on their website. Thus,
obtaining the CR, the final step in each LLCs formation and registration process, as discussed below, can
be accomplished even though the required summary of its articles of association has not yet appeared in
the Umm Al-Qura.
The next step in the formation and registration process is the registration of the LLC at the
MoCIs commercial registry. Several additional documents are required in order to secure the CR,
including, but not limited to: (i) a certificate of capital from a Saudi Arabian bank certifying that the entire
share capital of the LLC has been deposited into a blocked account in Saudi Arabia; (ii) the unanimous

written consent or resolution of the shareholders of the LLC (as appropriate according to the articles of
association) appointing the general manager and/or board of managers; and (iii) a copy of the initial office
lease. Upon the issuance of the CR, the LLC would be fully authorized to engage in the activities set out
in its articles of association. This part of the process can take another week or so to complete. The share
capital of the LLC that was deposited in the blocked bank account is unblocked by the relevant bank
upon presentation of a copy of the CR. Although the LLC has been formed and licensed upon issuance
of its CR, it also must make several administrative filings and pursue other formalities including applying
for membership at the Chamber of Commerce, opening a 700 File and a Labor File at the Labor
Office, registering with the Department of Zakat and Income Tax (DZIT) and the General Organization
of Social Insurance (GOSI) and obtaining a Municipality License for the premises. Due to the increased
emphasis on Saudiization, it is recommended that, as part of the early business planning, the shareholders
address hiring Saudi personnel.
JSCs
General. The second most common form of commercial company is the joint stock company
(JSC), which may be either public (if its shares are listed on the Tadawul exchange) or closed, if its shares
are not traded publicly. A JSC must have a minimum of five shareholders. There is no maximum number
of shareholders. Natural persons and corporate entities may be shareholders. Shareholders have limited
liability for the liabilities of the company, up to the value of their shares. JSCs have articles of association
and bylaws.
Capital. Article 49 of the Companies Regulations, as amended, stipulates that the minimum share
capital for a JSC that offers shares for public subscription is SR 10,000,000. Otherwise the minimum
share capital is SR 2,000,000. Article 100 of the Companies Regulations provides that cash shares
subscribed to by the founders (as well as shares issued to the founders for contributions in kind) shall not
be negotiable before the publication of the companys financial statements for two complete fiscal years
(each consisting of at least 12 months) from the date of incorporation of the company. During the
restricted period, founders shares may be transferred or sold only by one founder to another or by the
heirs of a founder to third parties. Public sale of shares is also regulated by the Saudi Capital Market
Authority (CMA). The CMAs requirements for listing shares on the Tadawul stock exchange are beyond
the scope of this report.
Preliminary approval. A JSC may be incorporated under the Companies Regulations only following
issuance of either a royal decree approving its formation or a recommendation from the Minister of
Commerce and Industry. An application to form a JSC must be submitted by at least five founders to the
Minister of Commerce and Industry requesting approval for the incorporation either by royal decree or
by his ministerial resolution. The founders may include foreign shareholders, in which event a foreign
investment license from SAGIA is also required. The discussion in Exhibit 1 regarding the SAGIA
application process is generally applicable to a foreign investment in a JSC.
Charter documents. The MoCI application (as to which there is no prescribed form) should be
accompanied by the requisite license from any other government agency, together with copies of the
proposed contract of incorporation and bylaws of the company. The proposed contract of incorporation
must be pre-signed by the founders in advance of submission to the MoCI. The MoCI has published a
standard form of bylaws for a JSC which form is mandatory, although minor deviations will be accepted
by the MoCI in circumstances which it considers justifiable.
The contract of incorporation must be recorded by the notary public, but the bylaws do not need
to be so recorded. The MoCI signifies its approval of both documents by stamping each page thereof.
Upon such approval, the contract of incorporation is executed by the shareholders, or their attorneys-infact, before the notary public. A copy of the notarized contract of incorporation is submitted to the
MoCI, with a request for the license under Article 52 of the Companies Regulations. Shortly thereafter,
the license is issued in the form of a resolution of the Minister of Commerce and Industry. The sequence
is essentially the same for issuance of a royal decree. (It should be noted that fewer joint stock companies
are formed by royal decree, particularly since the Companies Regulations were amended in 1982 to allow

for licensing by ministerial resolution.). The ministerial resolution or royal decree licensing the companys
formation is then published in Umm Al-Qura.
Initial shareholder meeting. An invitation to attend the constituent meeting of shareholders, with the
agenda for such meeting approved by the MoCI, is then required to be published by the founders in two
daily newspapers. The agenda includes verification that the authorized capital has been subscribed to in
full and that the capital or the minimum (not less than 25 per cent) has been paid up in full; ratification of
the approved bylaws; consideration of the founders report on pre-formation activities and expenses;
consideration of the evaluation of founders contributions in kind (if any), including the experts report
thereon; appointment of the first board of directors; and appointment of the first auditor. Any major
financing would also normally be placed on the agenda for shareholder approval.
The constituent meeting is held at the appointed time and place at which a representative of the
MoCI must be present. The minutes and resolutions of the constituent meeting must be signed by the
chairman and the company secretary and approved by the MoCIs representative. The minutes are
submitted to the MoCI, with another application requesting issuance of a ministerial resolution
announcing the companys incorporation. Shortly after receipt of such application, the Minister of
Commerce and Industry issues his resolution to this effect. This ministerial resolution is required to be
submitted for publication in Umm Al-Qura, together with copies of the notarized contract of
incorporation and the bylaws as ratified at the constituent meeting. The company is then registered in the
appropriate commercial register in the city where its head office is situated and is deemed to be duly
incorporated from the date of issuance of the Minister of Commerce and Industrys resolution
announcing the incorporation of the JSC.
Other actions. The JSC must then establish its files with the Labor Office, DZIT, and GOSI, and
join the Chamber of Commerce, as for an LLC.
Governance. A JSC is administered by a board of directors. The number of directors is specified
in the companys bylaws, but may not be less than three. Each director must own company shares having
a nominal value of at least SR 10,000. These shares must be deposited in a Saudi Arabian bank
designated by the Minister of Commerce and Industry and are held as a guarantee for the directors
statutory liability under Articles 75 to 77 of the Companies Regulations. In practice, the JSC purchases
and holds the shares and such shares are only nominally the property of the directors.
Timing. The formation and operation of a JSC involves a higher degree of MoCI involvement
than does the formation of an LLC and, generally speaking, takes longer. A minimum of six months
from initial application to the Minister of Commerce and Industry until commercial registration would
not be unusual, absent exceptional circumstances. This assumes that all of the share capital has been
subscribed for by the founders or raised by private placement and that the founders and other investors
funds (i.e., all of the capital or the minimum required to be paid up) are available for deposit prior to
submission of the initial application to the Minister of Commerce and Industry. The MoCI must be
informed of and does attend meetings of the shareholders of a JSC in order to scrutinize its activities.
Branches
A branch is equivalent to an office or division of the company that owns it, and it is indivisible from that
company. A unique feature of a branch of a foreign company in Saudi Arabia, is that it is required to
have its own capital deposited in a Saudi Arabian bank account registered in the name of the branch. The
company is fully liable for the branchs acts, omissions and debts. The branch cannot be sold (although
its assets can be). A branch cannot be a shareholder in another company, but can enter into teaming
agreements or contractual consortia with other companies just as a company can. Foreign companies may
establish branches to perform industrial or service activities, but not for trading. The process for
establishing a branch is similar to the process for establishing a company, but without articles of
association and related corporate governance arrangements. Of course, there is never a partner for a
branch. In Saudi Arabia it is not necessary to have a sponsor for a branch.

Saudi Arabia does not license representative offices. In other jurisdictions a representative office (or
rep office) is a branch that is licensed to conduct non-revenue generating marketing and liaison
activities. Saudi Arabia will, in limited circumstances, license such activities to be conducted through a
technical and scientific service office (TSSO). The authorities have not been consistent over the years
with TSSOs. They are required for pharmaceutical companies, but are very difficult to establish for other
technical companies and in all events can only be established with the consent of a Saudi agent or
distributor for the company. Most foreign companies prefer instead to establish a services branch to
handle installation, commissioning, and warranty work for the product or to second a home office
employee into the distributor to assist the distributor in marketing the products.

* * *

EXHIBIT 1
FOREIGN INVESTMENT LICENSE
Introduction
This Exhibit and its Appendices describe the requirements and process for obtaining a foreign investment
license from SAGIA. SAGIA has in recent times been in a state of flux following the changes to the
licensing procedure and required documents as implemented by the Governor of SAGIA. Therefore,
while the information contained in this report represents the most current information available, changes
to the process and requirements for obtaining a SAGIA license are possible. This Exhibit focuses on
LLCs. The process for obtaining a SAGIA license in connection with the formation of a JSC is
substantially the same.
SAGIA was established pursuant to the Foreign Investment Regulations, Royal Decree No. M/1, dated
05/01/1421 A.H. (corresponding to April 9, 2000 G.), and their Implementing Rules (collectively, the
Foreign Investment Regulations). Subject to certain limitations based on the activity to be conducted (e.g.,
negative list or professional activities), it is possible for foreign entities to form an LLC for purposes
of either a) performing services (including trading activities subject to certain capital and shareholding
requirements), or b) manufacturing in Saudi Arabia.
Approval of a foreign direct investment such as the formation of an LLC is discretionary, although it is
reasonable to expect that such approval can be obtained if all the requirements are met and the
shareholders are able to satisfy the SAGIA authorities that they have the required experience and financial
support, and that the companies activities will be beneficial to the Kingdom of Saudi Arabia. Under
current procedures obtaining a SAGIA license can require two to four months from the time the
complete application is submitted if no complications arise.
Application
In order to obtain a foreign investment license the proposed shareholders must submit a completed
application form to SAGIA together with a significant number of supporting documents, including a
copy of the proposed articles of association of the LLC. Lists of such supporting documents for an LLC
based on the various types of activities, are attached hereto as Appendices A-D. Such requirements are
subject to change by SAGIA in its discretion.
The activities to be performed by the LLC are listed on the foreign investment license and therefore a
proposed description of those activities must be provided on the application. Assuming that the
application and supporting documents are complete and no problems are encountered, based on previous
experience SAGIA often issues a foreign investment license within approximately thirty to forty-five days.
As set out in the attached document lists (Appendices A D), the shareholders making an application to
SAGIA for a foreign investment license are required to provide three years audited financial statements in
order to convince SAGIA that they have the financial means to operate the LLC in Saudi Arabia.
Therefore ideally in selecting which entities are used as shareholders, this should be kept in mind. It has
in the past been possible in certain appropriate cases to obtain SAGIA approval for shareholding entities
that did not have the required three years of financial statements.
* * *

APPENDIX A
LIST OF DOCUMENTS REQUIRED FOR SAGIA APPROVAL
(TRADING COMPANY)
1.
Name reservation for the new Saudi company obtained from the Ministry of Commerce
and Industry (MoCI).
2.
A letter addressed by a Saudi lawyer, as attorney in fact for the foreign investor entity, to
the Director of the License Department of SAGIA.
3.

A completed SAGIA License Application Form.

4.
An original resolution of the foreign investor entity issued by its relevant corporate
governance body, approving the formation of the new Saudi company, and authorizing the powers of
attorney (see items #5 and #6 below).
5.
An original power of attorney issued by the foreign investor entity in favor of the
designated general manager of the new Saudi company.
6.
An original power of attorney issued by the foreign investor entity in favor of the foreign
investor entitys Saudi lawyers for purposes of executing and filing documents and processing the file in
connection with the formation of the new Saudi company.
7.
An original Foreign Bank Certificate issued by the foreign investor entitys bank outside
Saudi Arabia, evidencing that the foreign investor entitys bank account balance is sufficient to fund the
foreign investor entitys portion of the new Saudi companys capital.
8.
Audited financial statements of the foreign investor entity for the three most recent years
(i.e., auditors opinion, financial statements and accompanying notes for each year), certified by an officer
of the foreign investor entity.
9.
Copies of the constitutive documents of the foreign investor entity (e.g., Certificate of
Incorporation, Memorandum of Association, By-laws and Long Form Certificate of Good Standing)
based on its jurisdiction of incorporation and entity type. NOTE: If these constitutive documents of the
foreign investor entity name individuals as its shareholders, then passport copies of those individuals will
be required.
10.
Corporate Profile of the foreign investor entity, its business, strategy, management team,
and past projects and experience.
11.
A Feasibility Study or Business Plan of the foreign investor entity describing its business
and investment strategy for operating in Saudi Arabia.
12.

List of the foreign investor entitys Most Significant Acts during the last three years.

13.

Saudiization Plan (i.e., plan to hire Saudi nationals) for the new Saudi company.

14.
A general overview of the benefits that the new Saudi company plans to bring to the
Saudi economy and the local community.
15.

A completed SAGIA Entity Biography Form.

10

16.
A copy of each of the following for the local partner: (i) the notarized Articles of
Association and all notarized amendments thereto, (ii) the Commercial Registration (C.R.), (iii) the
latest years audited financial statements and (iv) Department of Zakat and Income Tax Clearance
Certificate.
17.
An original shareholders resolution of the local partner approving the formation of the
new Saudi company.
18.

The proposed form in Arabic of the Articles of Association for the new Saudi company.

19.

Regarding the appointment of Board members of the new Saudi company:

a. Passport copy for each expatriate Board member;
b. Saudi ID copy for each Saudi national Board member; and

c. Shareholders resolution appointing the Board member, issued by the shareholder

company that is appointing such Board member.
20.

Regarding the designated General Manager:

a. four passport-size photos;

b. if the GM is a non-Saudi, then a full copy of his passport (including all pages of the
passport, not just the photo page);
c. if the GM is a non-Saudi holding an Iqama (Saudi residence permit), then a copy of the
Iqama;
d. if the GM is a married Saudi, then copies of the individuals Saudi identification card and
family identification card; and
e. if the GM is an unmarried Saudi, then copies of the individuals Saudi identification card
and Civil Registry Print-Out.
Notes:
(i) Under current Saudi law, up to 75% of the share capital of a Saudi trading company may be
owned by a foreign shareholder; a local Saudi partner must own at least 25% of the share capital of the
Saudi trading company.
(ii) The documents included in this list are all of the documents that SAGIA normally requires
for the formation of a Saudi trading company currently. However, it is important to bear in mind that
SAGIA reserves the right to require additional documents in its sole discretion and, in practice, it is not
unusual for SAGIA to exercise this right.
(iii) The documents referred to in paragraphs 4, 5, 6, 7, 8, 9 and 15 above are required to be fully
authenticated for use in Saudi Arabia. As a general rule this requires that they are notarized, legalized and
consularized at the relevant Saudi Arabian Embassy. Please note that the document referred to in
paragraph 15 will need to be signed on the original Arabic version.
(iv) The documents referred to in paragraphs 10, 11, 12, 13 and 14 above will need to be
translated into Arabic but will not need to be authenticated for use in Saudi Arabia.
(v) The documents referred to in paragraph 17 and 19c above will need to be executed by an
authorized signatory, and attested at the Chamber of Commerce.
* * *

11

APPENDIX B
LIST OF DOCUMENTS REQUIRED FOR SAGIA APPROVAL
(SERVICES COMPANY - CONTRACTING)
1.
Name reservation for the new Saudi company obtained from the Ministry of Commerce
and Industry (MoCI).
2.
A letter addressed by a Saudi lawyer, as attorney in fact the foreign investor entity, to the
Director of the License Department of SAGIA.
3.

A completed SAGIA License Application Form.

4.
An original resolution of the foreign investor entity issued by its relevant corporate
governance body, approving the formation of the new Saudi company, and authorizing the powers of
attorney (see items #5 and #6 below).
5.
An original power of attorney issued by the foreign investor entity in favor of the
designated general manager of the new Saudi company.
6.
An original power of attorney issued by the foreign investor entity in favor of the foreign
investor entitys Saudi lawyers for purposes of executing and filing documents and processing the file in
connection with the formation of the new Saudi company.
7.
An original Foreign Bank Certificate issued by the foreign investor entitys bank outside
Saudi Arabia, evidencing that the foreign investor entitys bank account balance is sufficient to fund the
foreign investor entitys portion of the new Saudi companys capital.
8.
Audited financial statements of the foreign investor entity for the three most recent years
(i.e., auditors opinion, financial statements and accompanying notes for each year), certified by an officer
of the foreign investor entity.
9.
Copies of the constitutive documents of the foreign investor entity (e.g., Certificate of
Incorporation, Memorandum of Association, By-laws and Long Form Certificate of Good Standing)
based on its jurisdiction of incorporation and entity type. NOTE: If these constitutive documents of the
foreign investor entity name individuals as its shareholders, then passport copies of those individuals will
be required.
10.
Corporate Profile the foreign investor entity, its business, strategy, management team,
and past projects and experience.
11.
A Feasibility Study or Business Plan of the foreign investor entity describing its business
and investment strategy for operating in Saudi Arabia.
12.

List of the Most Significant Acts of the foreign investor entity during the last three

13.

Saudiization Plan (i.e., plan to hire Saudi nationals) for the new Saudi company.

years.

14.
A general overview of the benefits that the new Saudi company plans to bring to the
Saudi economy and the local community.
15.

A completed SAGIA Entity Biography Form.

16.

A completed SAGIA Undertaking Form for Services (Contracting) Companies.

12

17.
A list of, together with completion certificates for, the foreign investor entitys
previously completed contracting projects in excess of the minimum aggregate value threshold specified
in the Appendix to the SAGIA Undertaking Form for Services (Contracting) Companies (see item #16
above) for the type(s) of projects that the new Saudi company will be carrying out in the Kingdom of
Saudi Arabia.
18.
A Bank Guarantee issued by the bank of the foreign investor entity in favor of SAGIA,
for 2% of the contractual minimum amounts (as identified in the schedule to document #16 above.
19.
[Applicable only if there will be a local partner] A copy of each of the following for the
local partner: (i) the notarized Articles of Association and all notarized amendments thereto, (ii) the
Commercial Registration (C.R.), (iii) the latest years audited financial statements and (iv) Department of
Zakat and Income Tax Clearance Certificate.
20.
[Applicable only if there will be a local partner] An original shareholders resolution of
the local partner approving the formation of the new Saudi company.
21.

The proposed form in Arabic of the Articles of Association for the new Saudi company.

22.

Regarding the appointment of Board members of the new Saudi Company:

a.

Passport copy for each expatriate Board member;

b.

Saudi ID copy for each Saudi national Board member; and

c. Shareholders resolution appointing the Board member, issued by the shareholder

company that is appointing such Board member.
23.

Regarding the designated General Manager:

a.

four passport-size photos;

b. if the GM is a non-Saudi, then a full copy of his passport (including all pages of the
passport, not just the photo page);
c.

if the GM is a non-Saudi holding an Iqama (Saudi residence permit), then a copy of the

Iqama;
d. if the GM is a married Saudi, then copies of the individuals Saudi identification card and
family identification card; and
e. if the GM is an unmarried Saudi, then copies of the individuals Saudi identification card
and Civil Registry Print-Out.
Notes:
(i) Under current Saudi law, a Saudi services company may be 100% foreign owned. There is no
requirement to have a local partner. However, as a general requirement, any Saudi limited liability
company must have at least two shareholders, both of which may be foreign entities.
(ii) The documents included in this list are all of the documents that SAGIA normally requires
for the formation of a Saudi services (contracting) company currently. However, it is important to bear in
mind that SAGIA reserves the right to require additional documents in its sole discretion and, in
practice, it is not unusual for SAGIA to exercise this right.
(iii) The documents referred to in paragraphs 4, 5, 6, 7, 8, 9, 15 and 16 above are required to be
fully authenticated for use in Saudi Arabia. As a general rule this requires that they are notarized, legalized

13

and consularized at the relevant Saudi Arabian Embassy. Please note that the documents referred to in
paragraphs 15 and 16 will need to be signed on the original Arabic version.
(iv) The documents referred to in paragraphs 10, 11, 12, 13 and 14 above will need to be
translated into Arabic but will not need to be authenticated for use in Saudi Arabia.
(v) The documents referred to in paragraph 20 and 22c above will need to be executed by an
authorized signatory, and attested at the Chamber of Commerce.
* * *

14

APPENDIX C
LIST OF DOCUMENTS REQUIRED FOR SAGIA APPROVAL
(SERVICES COMPANY NOT CONTRACTING)
1.
Name reservation for the new Saudi company obtained from the Ministry of Commerce
and Industry (MoCI).
2.
A letter addressed by a Saudi lawyer, as attorney in fact for the foreign investor entity, to
the Director of the License Department of SAGIA.
3.

A completed SAGIA License Application Form.

4.
An original resolution of the foreign investor entity issued by its relevant corporate
governance body, approving the formation of the new Saudi company, and authorizing the powers of
attorney (see items #5 and #6 below).
5.
An original power of attorney issued by the foreign investor entity in favor of the
designated general manager of the new Saudi company.
6.
An original power of attorney issued by the foreign investor entity in favor of the foreign
investor entitys Saudi lawyers for purposes of executing and filing documents and processing the file in
connection with the formation of the new Saudi company.
7.
An original Foreign Bank Certificate issued by the foreign investor entitys bank outside
Saudi Arabia, evidencing that the foreign investor entitys bank account balance is sufficient to fund the
foreign investor entitys portion of the new Saudi companys capital.
8.
Audited financial statements of the foreign investor entity for the three most recent years
(i.e., auditors opinion, financial statements and accompanying notes for each year), certified by an officer
of the foreign investor entity.
9.
Copies of the constitutive documents of the foreign investor entity (e.g., Certificate of
Incorporation, Memorandum of Association, By-laws and Long Form Certificate of Good Standing)
based on its jurisdiction of incorporation and entity type. NOTE: If these constitutive documents of the
foreign investor entity name individuals as its shareholders, then passport copies of those individuals will
be required.
10.
Corporate Profile of the foreign investor entity, its business, strategy, management team,
and past projects and experience.
11.
A Feasibility Study or Business Plan the foreign investor entity describing its business
and investment strategy for operating in Saudi Arabia.
12.

List of the Most Significant Acts of the foreign investor entity during the last three

13.

Saudiization Plan (i.e., plan to hire Saudi nationals) for the new Saudi company.

years.

14.
A general overview of the benefits that the new Saudi company plans to bring to the
Saudi economy and the local community.
15.

A completed SAGIA Entity Biography Form.

16.
[Applicable only if there will be local partner] A copy of each of the following for the
local partner: (i) the notarized Articles of Association and all notarized amendments thereto, (ii) the

15

Commercial Registration (C.R.), (iii) the latest years audited financial statements and (iv) Department of
Zakat and Income Tax Clearance Certificate.
17.
[Applicable only if there will be local partner] An original shareholders resolution of the
local partner approving the formation of the new Saudi company.
18.

The proposed form in Arabic of the Articles of Association for the new Saudi company.

19.

Regarding the appointment of Board members of the new Saudi company:

a.

Passport copy for each expatriate Board member;

b.

Saudi ID copy for each Saudi national Board member; and

c. Shareholders resolution appointing the Board member, issued by the shareholder

company that is appointing such Board member.
20.

Regarding the designated General Manager:

a.

four passport-size photos;

b. if the GM is a non-Saudi, then a full copy of his passport (including all pages of the
passport, not just the photo page);
c.

if the GM is a non-Saudi holding an Iqama (Saudi residence permit), then a copy of the

Iqama;
d. if the GM is a married Saudi, then copies of the individuals Saudi identification card and
family identification card; and
e. if the GM is an unmarried Saudi, then copies of the individuals Saudi identification card
and Civil Registry Print-Out.
Notes:
(i) Under current Saudi law, a Saudi services company may be 100% foreign owned. There is no
requirement to have a local partner. However, as a general requirement, any Saudi limited liability
company must have at least two shareholders, both of which may be foreign entities.
(ii) The documents included in this list are all of the documents that SAGIA normally requires
for the formation of a Saudi services (not contracting) company currently. However, it is important to
bear in mind that SAGIA reserves the right to require additional documents in its sole discretion and, in
practice, it is not unusual for SAGIA to exercise this right.
(iii) The documents referred to in paragraphs 4, 5, 6, 7, 8, 9 and 15 above are required to be fully
authenticated for use in Saudi Arabia. As a general rule this requires that they are notarized, legalized and
consularized at the relevant Saudi Arabian Embassy. Please note that the document referred to in
paragraph 15 will need to be signed on the original Arabic version.
(iv) The documents referred to in paragraphs 10, 11, 12, 13 and 14 above will need to be
translated into Arabic but will not need to be authenticated for use in Saudi Arabia.
(v) The documents referred to in paragraph 17 and 19c above will need to be executed by an
authorized signatory, and attested at the Chamber of Commerce.
* * *

16

APPENDIX D
LIST OF DOCUMENTS REQUIRED FOR SAGIA APPROVAL
(SERVICES COMPANY - MANUFACTURING)
1.
Name reservation for the new Saudi company obtained from the Ministry of Commerce
and Industry (MoCI).
2.
A letter addressed by a Saudi lawyer, as attorney in fact for the foreign investor entity, to
the Director of the License Department of SAGIA.
3.

A completed SAGIA License Application Form.

4.
An original resolution of the foreign investor entity issued by its relevant corporate
governance body, approving the formation of the new Saudi company, and authorizing the powers of
attorney (see items #5 and #6 below).
5.
An original power of attorney issued by the foreign investor entity in favor of the
designated general manager of the new Saudi company.
6.
An original power of attorney issued by the foreign investor entity in favor of the foreign
investor entitys Saudi lawyers for purposes of executing and filing documents and processing the file in
connection with the formation of the new Saudi company.
7.
An original Foreign Bank Certificate issued by the foreign investor entitys bank outside
Saudi Arabia, evidencing that the foreign investor entitys bank account balance is sufficient to fund the
foreign investor entitys portion of the new Saudi companys capital.
8.
Audited financial statements of the foreign investor entity for the three most recent years
(i.e., auditors opinion, financial statements and accompanying notes for each year), certified by an officer
of the foreign investor entity.
9.
Copies of the constitutive documents of the foreign investor entity (e.g., Certificate of
Incorporation, Memorandum of Association, By-laws and Long Form Certificate of Good Standing)
based on its jurisdiction of incorporation and entity type. NOTE: If these constitutive documents of the
foreign investor entity name individuals as its shareholders, then passport copies of those individuals will
be required.
10.
Corporate Profile of the foreign investor entity, its business, strategy, management team,
and past projects and experience.
11.
A Feasibility Study or Business Plan of the foreign investor entity describing its business
and investment strategy for operating in Saudi Arabia.
12.

List of the Most Significant Acts of the foreign investor entity during the last three

13.

Saudiization Plan (i.e., plan to hire Saudi nationals) for the new Saudi company.

years.

14.
A general overview of the benefits that the new Saudi company plans to bring to the
Saudi economy and the local community. This overview should include a confirmation that the products
of the new Saudi company will fulfill a need in the Saudi domestic market and/or will increase exports
from the Kingdom of Saudi Arabia.
15.

A completed SAGIA Entity Biography Form.

17

16.

A completed SAGIA Undertaking Form for Manufacturing Companies.

17.

Engineers Plans for the manufacturing site and facility.

18.
A Facilities Plan for managing garbage waste disposal/storage and energy and electricity
use at the manufacturing facility.
19.

A Safety Plan for the manufacturing facility.

20.
[Applicable only if there will be a local partner] A copy of each of the following for the
local partner: (i) the notarized Articles of Association and all notarized amendments thereto, (ii) the
Commercial Registration (C.R.), (iii) the latest years audited financial statements and (iv) Department of
Zakat and Income Tax Clearance Certificate.
21.
[Applicable only if there will be a local partner] An original shareholders resolution of
the local partner approving the formation of the new Saudi company.
22.

The proposed form in Arabic of the Articles of Association for the new Saudi company.

23.

Regarding the appointment of Board members of the new Saudi company:

a.

Passport copy for each expatriate Board member;

b.

Saudi ID copy for each Saudi national Board member; and

c. Shareholders resolution appointing the Board member, issued by the shareholder

company that is appointing such Board member.
24.

Regarding the designated General Manager:

a.

four passport-size photos;

b. if the GM is a non-Saudi, then a full copy of his passport (including all pages of the
passport, not just the photo page);
c.

if the GM is a non-Saudi holding an Iqama (Saudi residence permit), then a copy of the

Iqama;
d. if the GM is a married Saudi, then copies of the individuals Saudi identification card and
family identification card; and
e. if the GM is an unmarried Saudi, then copies of the individuals Saudi identification card
and Civil Registry Print-Out.
Notes:
(i) Under current Saudi law, a Saudi manufacturing company may be 100% foreign owned. There
is no requirement to have a local partner. However, as a general requirement, any Saudi limited liability
company must have at least two shareholders, both of which may be foreign entities.
(ii) The documents included in this list are all of the documents that SAGIA normally requires
for the formation of a Saudi manufacturing company currently. However, it is important to bear in mind
that SAGIA reserves the right to require additional documents in its sole discretion and, in practice, it is
not unusual for SAGIA to exercise this right.
(iii) The documents referred to in paragraphs 4, 5, 6, 7, 8, 9, 15 and 16 above are required to be
fully authenticated for use in Saudi Arabia. As a general rule this requires that they are notarized, legalized

18

and consularized at the relevant Saudi Arabian Embassy. Please note that documents referred to in
paragraph 15 and 16 will need to be signed on the original Arabic version.
(iv) The documents referred to in paragraphs 10, 11, 12, 13, 14, 18 and 19 above will need to be
translated into Arabic but will not need to be authenticated for use in Saudi Arabia.
(v) The documents referred to in paragraph 21 and 23c above will need to be executed by an
authorized signatory, and attested at the Chamber of Commerce.
* * *

19

EXHIBIT 2
SAGIA NEGATIVE LIST
(ACTIVITIES IN WHICH FOREIGN INVESTMENT IS NOT PERMITTED)
INDUSTRIAL SECTOR
1. Oil exploration, drilling and production. Except the services related to mining sector listed at ( CPC
5115+883) in International Industrial classification codes.
2. Manufacturing of military equipment, devices and uniforms.
3. Manufacturing of civilian explosives.
SERVICE SECTOR
4. Catering to military sectors.
5. Security and detective services.
6. Real estate investment in Makkah and Madina.
7. Tourist orientation and guidance services related to Hajj and Umrah.
8. Recruitment and employment services including local recruitment offices.
9. Real estate brokerage.
10. Printing and publishing. Except the following activities:
Pre-printing services internationally classified at ( CPC 88442)
Printing Presses internationally classified at ( CPC 88442)
Drawing and calligraphy internationally classified at ( CPC 87501)
Photography internationally classified at ( CPC 875)
Radio and Television Broadcasting Studios internationally classified at ( CPC 96114)
Foreign Media Offices and Correspondents internationally classified at ( CPC 962)
Promotion and Advertising internationally classified at ( CPC 871)
Public Relations internationally classified at ( CPC 86506)
Publication internationally classified at ( CPC 88442)
Press Services internationally classified at ( CPC 88442)
Production, selling and renting of computer software internationally classified at (CPC 88)
Media consultancies and studies internationally classified at ( CPC 853)
Typing and copying internationally classified at ( CPC 87505 + 87904).
Motion picture and video tape distribution services internationally classified at ( CPC 96113).

20

11. Commission agents internationally classified at ( CPC 621).

12. Audiovisual and media services.
13. Land transportation services, excluding the intra-city passenger transport by trains
14. Services provided by midwives, nurses, physical therapy services and quasi-doctoral services
internationally classified at ( CPC 93191).
15. Fisheries.
* * *

21