The presence of foreign companies contributes to diversifying the national economy by transferring knowledge and advanced technology, attracting investment, and localizing expertise, in addition to raising the level of competitiveness and quality in the Saudi market. In order to ensure alignment between the interests of such companies and the objectives of national development, operations must be conducted within a robust regulatory framework.
The provisions of the New Companies Law apply to foreign companies that conduct their activities in the Kingdom, except for the provisions relating to the incorporation of companies, without prejudice to agreements concluded between the Kingdom and certain states or foreign companies. (1)
- Form of the Foreign Company within the Kingdom.
A foreign company selects the form that suits its strategies and investment objectives based on several factors, including the relationship of the host state with the state of the foreign company, the size of the foreign company and its presence in international markets, and the expected costs and profits of investments within the Kingdom. (2) A foreign company is deemed to be conducting its activities within the Kingdom if such activities are conducted through a branch, a representative office, or through any other form. (3)
- Domicile of the Foreign Company.
The branch of the foreign company or its representative office within the Kingdom constitutes its domicile in relation to its activities and business within the Kingdom, such that, through this domicile, all laws in force in the Kingdom apply to it. (4) Accordingly, foreign companies must, before undertaking any investment in the Kingdom, register with the Ministry of Investment in the register designated for that purpose. This obligation does not apply to investments in securities that are subject to the provisions of the Capital Market Law. (5)
- Information Required to be Included in the Documents of the Foreign Company.
The Companies Law obliges a foreign company that conducts its activities in the Kingdom through its branch or representative office to state on all its papers, documents, and printed materials its registered address in the Kingdom, in addition to the company’s full name, address, and head office. (6)
- Financial Matters of the Branch of a Foreign Company.
The Companies Law sets out certain provisions specific to the financial affairs of branches of foreign companies in the Kingdom, as follows:
- The application to register the branch of the foreign company must include the date of commencement and the date of end of the financial year of the branch.
- The branch of the foreign company, excluding representative offices, must prepare financial statements relating to its activities within the Kingdom in accordance with the accounting standards adopted in the Kingdom, and must deposit those documents and the report of the external auditor thereon within six months from the end of the financial year relating to the activities of that branch, in accordance with what is determined by the regulations.
- The external auditor may be appointed by a decision of the manager of the branch of the foreign company based on an authorization from the foreign company. (7)
- Liability of the Foreign Company for Violating Acts.
The liability of the company or the partners shall be joint and several if the foreign company conducts its activities and business before completing the licensing procedures and its registration in the commercial register, or if it carries out acts that exceed the scope of what it is licensed to undertake. (8)
- Temporary Registration of the Foreign Company.
The foreign company shall be registered in the commercial register on a temporary basis if its presence in the Kingdom is for the purpose of executing specific works within a specified period. Its registration shall end upon completion and execution of such works, and the registration shall be struck off after settlement of its rights and obligations. It may continue after satisfying the necessary statutory requirements. (9)
Sources:
(1) Article (235) of the Companies Law issued pursuant to Royal Decree No. (M/132) dated 1/12/1443H corresponding to 30/6/2022G.
(2) Dr. Badr bin Muhammad Al-Mu‘ajjal, “The Legal Status of Foreign Companies in the Kingdom of Saudi Arabia”, a comparative analytical legal study, Journal of the Shari‘ah and Law Sector, Faculty of Shari‘ah and Law, Al-Azhar University, Cairo, Issue (17), February 2025, p. 2970 et seq.
(3) Article (236) of the Companies Law.
(4) Article (239) of the Companies Law.
(5) Article (7) of the Investment Law issued pursuant to Royal Decree No. (M/19) dated 16/1/1446H corresponding to 22/7/2024G.
(6) Article (237) of the Companies Law.
(7) Article (238) of the Companies Law.
(8) Article (240) of the Companies Law.
(9) Article (241) of the Companies Law.
