Saudi Arabia has witnessed a radical transformation in its business environment in recent years, driven by Vision 2030 and national transformation programs aimed at diversifying the economy and enhancing the role of the private sector. In this context, the new companies law has become a cornerstone in updating the legislative framework governing the establishment and operation of companies in the Kingdom. This is not merely about amending some legal texts; it is a comprehensive restructuring of the corporate system, integrating and unifying old regulations and providing practical solutions to meet the demands of the digital economy and globalization.
The new law not only changes how companies are established but also profoundly affects daily operations, from capital management to protecting shareholder rights, facilitating foreign investor entry, and raising standards of transparency and governance. These changes have come in response to developments in the Saudi financial market, which has seen an increasing influx of foreign investments and an expansion in the number of registered and contributing companies. For instance, the number of registered local and contributing companies exceeded 37,000 by mid-2024, while the foreign investors' ownership ratio rose to over 8% of the total market.
This article aims to provide a comprehensive analysis of the new companies law in the Kingdom, in terms of its objectives, key amendments, impacts on the market and listed companies, and its importance in achieving sustainable development and attracting capital. We will also review updated data on market performance and discuss the implications of the law on vital sectors such as the cement sector, highlighting the experience of Hala Cement Company as a real case study. All of this will be presented in a neutral educational framework, adhering to the regulations of the Saudi Capital Market Authority, without providing direct investment advice.
Background of the New Law: Legislative Reform Motivations in the Kingdom
The roots of the need for the new companies law in Saudi Arabia stem from the major economic and social changes that the Kingdom has witnessed over the past decade, particularly with the launch of Vision 2030 and national transformation programs. The previous system, despite being amended several times, was no longer able to keep pace with the rapid technological changes, the increasing importance of the private sector, and the entry of new categories of local and foreign investors into the market. There was an official recognition that the business environment needed a more flexible and integrated legislative framework that eliminates redundancy between regulations, unifies requirements, and aligns with global governance standards.
Among the main motivations that led to the formulation of the new law is the Kingdom's desire to improve its ranking in international indicators, such as the World Bank's Ease of Doing Business and Investor Protection Index. Investors seek clarity in laws, speed in procedures, and guarantees for minority shareholder rights. Additionally, there was pressure from the business community to reduce bureaucracy and facilitate the transition of companies between different legal forms (from partnership to joint-stock or limited liability) without entering into complex procedures or high capital requirements that hinder growth.
Moreover, technological advancement necessitated the shift towards electronic transactions, whether in company registration, stock issuance, or managing general assemblies. The new law addresses these aspects, granting companies the ability to quickly interact with local and international markets, and stimulating innovation and entrepreneurship. Extensive consultations with regulatory authorities, major companies, and entrepreneurs contributed to shaping a comprehensive system that reflects the needs of all stakeholders. Thus, the new law has become not just a legal document but a strategic framework to support sustainable economic development.
Objectives of the New Companies Law: Enhancing Competitiveness and Transparency
The new companies law in Saudi Arabia is based on a set of strategic objectives that aim to enhance the Kingdom's position as a regional and global investment hub. The first of these objectives is to achieve a balance between protecting the rights of all parties (shareholders, partners, creditors) and granting companies flexibility in making financial and administrative decisions. The law seeks to reduce obstacles to establishing and operating companies, whether they are public joint-stock companies, limited liability companies, or even sole proprietorships.
Among the core objectives is also raising the level of transparency in business operations and financial disclosures, ensuring that companies commit to publishing accurate financial reports accessible to shareholders and stakeholders. This is part of the Kingdom's efforts to improve its ranking in international investor protection indicators. The law also aims to enhance governance by establishing clear frameworks for the responsibilities of the board of directors, mechanisms for separating ownership from management, and controls for dealing with related parties.
The new law places special emphasis on empowering foreign investors by easing ownership restrictions, facilitating their entry and exit from the market, and providing advanced legal protection for their rights. The objectives also include facilitating digital transformation, making most operations (from company establishment to managing general assemblies) possible electronically, thus reducing costs and time and enhancing business efficiency. Finally, the law aims to support startups and entrepreneurs by allowing the establishment of sole proprietorships and reducing capital requirements for certain activities, opening the door for a broader segment of investors to participate in the national economy. With these objectives, the new law seeks to establish a stimulating, competitive, and flexible business environment that attracts local and foreign investments and supports comprehensive growth.
Key Amendments in the New Law Compared to the Previous System
The new companies law in Saudi Arabia is characterized by a series of substantial amendments that have transformed the business environment compared to the previous system. One of the most notable amendments is the unification of the rules governing various forms of companies (joint-stock, limited liability, partnership, simple recommendation, and professional companies), which facilitates the process of transitioning between legal forms without the need for complex procedures or unnecessary requirements.
One important change is allowing the establishment of a limited liability company by a single person, representing a qualitative leap in encouraging entrepreneurs and individuals to enter the market without the need for partners. The minimum required capital for certain types of companies, particularly private joint-stock companies and small and medium-sized enterprises, has also been reduced, removing significant financial barriers to establishing new projects.
The new law also included amendments to the mechanisms for issuing and trading shares, allowing for the issuance of multiple classes of shares with greater flexibility, along with clear regulations for voting rights and distributions. The processes of subscription and listing have become smoother, with the possibility of relying on electronic portals for registration and disclosure. In terms of governance, the law emphasizes the necessity of disclosing related party transactions and imposes stricter restrictions on conflicts of interest among board members.
Additionally, the law introduced amendments to the methods of holding general assemblies, allowing meetings to be held electronically, with recognition of remote voting, aligning with modern business conditions and increasing shareholder participation. Finally, the law has strengthened mechanisms for protecting minority shareholder rights by granting them the right to request the convening of an extraordinary meeting or review board decisions in certain cases. All these amendments aim to make the legislative environment more flexible and suitable for the changing market requirements.
Impact of the New Law on Listed Companies in the Saudi Financial Market
The impact of the new companies law extends directly to listed companies in the Saudi financial market (Tadawul), which form the backbone of the national economy. One aspect of the impact lies in updating governance rules, as listed companies are now required to enhance financial disclosure and publish their annual and quarterly reports through approved electronic platforms, contributing to raising transparency levels and increasing the confidence of local and foreign investors.
On the other hand, the new law allows companies to issue new classes of shares (such as preferred shares or non-voting shares), granting them greater flexibility in financing their projects and expanding their shareholder base. The law has also facilitated capital increases or restructuring without lengthy procedures, providing companies with the ability to quickly adapt to market changes.
Regarding shareholder rights, the new law has provided minority shareholders with greater opportunities to participate in decision-making, such as the right to call for an extraordinary general assembly or request a review of certain decisions. The law has also organized the handling of disputes between shareholders or with management through clear mechanisms for arbitration or resorting to specialized commercial courts, protecting the interests of all parties.
The new law has also affected profit distribution policies, as companies can now adopt flexible strategies between cash distributions or free shares, with disclosure of justifications for each option. As for foreign investors, the law has opened the door for increased ownership in listed companies, with advanced legal protection guaranteed. All these aspects make listed companies more capable of attracting new capital and align with best international practices in governance and disclosure.
Impact on Foreign and Local Investors: Opportunities and Challenges
The new companies law has provided investors, whether local or foreign, with unprecedented incentives and opportunities in the Saudi market, while also presenting challenges that require awareness and understanding of the regulatory environment. Among the most significant opportunities afforded by the law to foreign investors is the easing of ownership restrictions, allowing them to own larger stakes in listed companies, especially following the Capital Market Authority's decisions in 2025 permitting ownership of shares in real estate companies in Mecca and Medina. The law also facilitates foreign entry into sectors that were previously closed, granting them advanced legal protection in case of disputes or changes in the company's structure.
For local investors, the law has allowed for the establishment of sole limited liability companies, encouraging entrepreneurs and small business owners to enter the market without the need for partners or high capital requirements. The law has also strengthened minority shareholder rights, ensuring their access to financial data and active participation in decision-making, thereby raising transparency levels and limiting the dominance of major shareholders over critical decisions.
However, the new environment is not without challenges, such as the need for a deep understanding of the new legal requirements and the necessity to update internal company systems to comply with the new governance and disclosure standards. Additionally, opening the market to foreign investors may increase competition, requiring companies to develop their products and services to maintain their market share. Furthermore, rapid changes in regulations may compel investors to closely monitor regulatory updates to avoid legal or operational risks. Overall, the new law creates a more competitive and transparent environment, but it requires investors to adapt quickly and understand the new policies to ensure success.
Protection of Shareholder Rights and Governance in the New Law
The new companies law has placed significant emphasis on protecting the rights of shareholders, whether they are majority or minority, through a set of controls and procedures that enhance transparency and fairness in corporate management. Among the most prominent protection mechanisms is the obligation for companies to provide periodic financial reports, accessible to all shareholders before the convening of general assemblies, allowing them to review financial performance and make informed decisions. The law also grants minority shareholders the right to call for an extraordinary general assembly if they reach a certain percentage of capital and the right to vote on essential decisions such as capital increases or approval of transactions with related parties.
In terms of governance, the law imposes a strict framework for the responsibilities of the board of directors, with clear delineation between ownership and management, and controls to prevent conflicts of interest. For instance, board members are prohibited from voting on decisions related to transactions in which they have a personal interest and are required to fully disclose such transactions in annual reports. The law has also organized the election and dismissal processes for board members, ensuring renewal and preventing managerial monopolies.
The law has also stressed the necessity of subjecting major transactions to the approval of the general assembly, especially if they involve related parties, protecting the interests of all shareholders and limiting the abuse of power. Additionally, the law provides mechanisms for arbitration or resorting to specialized commercial courts in case of disputes, ensuring swift resolution of commercial cases. These collective aspects enhance investor confidence in the Saudi market and make companies more committed to international governance standards.
Facilitating Company Establishment and Improving the Investment Environment
One of the main objectives targeted by the new companies law is to facilitate and simplify the procedures for establishing companies in the Kingdom, in line with the aspirations of Vision 2030 to attract local and international investments. The number of documents and procedures required to establish a company has been reduced, and most steps can now be completed electronically through the platforms of the Ministry of Commerce and the Capital Market Authority, resulting in a reduction of the time required from several weeks to just a few days in some cases.
Among the significant facilitation measures introduced by the law is the ability to establish limited liability companies by a single person, opening the door for entrepreneurs and individual investors to start their projects easily without the need for partners. The minimum capital requirement for establishing certain types of companies, especially small and medium enterprises, has also been reduced, removing a significant barrier that many new investors faced.
Moreover, companies can now change their legal form (e.g., from partnership to joint-stock or limited liability) without lengthy procedures or high fees, providing them with greater flexibility to adapt to their business development. The law has also introduced the possibility of issuing and registering shares electronically, facilitating subscription and capital increase processes, and allowing companies to access diverse funding sources.
These facilities have directly reflected on registration figures, with the number of registered companies in the Kingdom exceeding 37,000 by mid-2024, with expectations of further increases in the coming years. These reforms have also helped improve the Kingdom's ranking in ease of doing business indicators and attract more foreign investments, particularly in technology, industry, and services sectors.
Impact of the Law on the Cement Sector: Case Study of Hala Cement
The cement sector is a vital part of the Saudi economy, directly linked to infrastructure projects, housing, and energy, which are witnessing significant expansion under Vision 2030. The new companies law has had a clear impact on companies in this sector, whether in terms of ease of establishment, attracting investments, or improving governance and disclosure mechanisms.
The experience of Hala Cement Company (3001) provides a real example of how listed companies can benefit from legislative updates. The flexibility of the new law has allowed the company to easily restructure its capital and issue regular financial reports, enhancing investor confidence and attracting new capital. Hala Cement has also benefited from streamlined capital increase procedures and the ability to hold general assemblies electronically, facilitating shareholder participation in decision-making.
Financially, Hala Cement's stock has shown relatively stable performance in 2024 and 2025, trading between 12 and 14 Saudi Riyals, with a market value of around 3.5 billion Riyals. The company has also provided high transparency regarding its financial results and expansion plans, positively reflecting on its price-to-earnings ratio (15-18 times), which is moderate in the basic materials sector. The new law is expected to continue supporting cement companies in facing challenges such as environmental costs, competition, and financing needs by providing a more stable and flexible legal environment.
Analysis of the Cement Sector and Competition Under the New Law
The Saudi cement sector is experiencing complex dynamics that combine relative stability in demand with challenges related to competition, prices, and operational costs. With the launch of the new companies law, cement companies have received a strong boost in terms of procedural ease, financing flexibility, and improved governance. These companies can now restructure their capital or issue new shares more quickly, supporting their expansion plans amid the construction boom and mega projects like NEOM and the Red Sea.
Competition in the sector is intensifying with over 17 listed companies, varying in size and production capacity. Companies such as Yamama Cement, Qassim, Najran, Eastern, and Southern hold significant market shares and compete with medium and small-sized companies like Hala Cement. The new law has contributed to standardizing regulatory procedures for these companies and made transitioning between legal forms easier, enabling some to attract new investors and expand their ownership base.
Financially, the sector has benefited from the total market capitalization of listed companies rising to around 11 trillion Riyals by the end of 2024, with an average daily trading volume reaching 7.5 billion Riyals. The foreign investors' ownership ratio has also increased to over 8%, enhancing liquidity and raising disclosure standards. However, companies still face challenges such as rising energy and raw material costs and pressures to comply with new environmental standards. Governance and disclosure are expected to become increasingly important in determining companies' ability to maintain investor confidence and sustain growth.
Recent Regulatory Developments and Their Impact on the Companies Law
The years 2024-2025 witnessed several significant regulatory developments that directly affected the implementation of the new companies law and the overall business environment in Saudi Arabia. Among the most notable developments was the Capital Market Authority's decision in early 2025 to lift foreign ownership restrictions in certain sectors, including allowing foreign investors to own shares in real estate companies in Mecca and Medina, a step that was widely welcomed by investors and increased the attractiveness of the Saudi market.
The Saudi financial market also experienced historic rises in the Tadawul index, driven by investor expectations of further reforms, such as the possibility of raising the maximum foreign ownership limit in listed companies. These expectations led to increased liquidity, higher trading rates, and encouraged companies to leverage the new law to enhance their capital.
On another front, the Ministry of Commerce launched the "National Window" platform for electronic business documentation, which accelerated the procedures for establishing and registering companies, making integration with the new system easier. The government also launched a program to rectify investment contract situations, clarifying the future of some foreign investments and opening the door for new settlements for both national and foreign companies.
In the cement sector, these developments have led to the resumption of some expansion projects and encouraged companies to adopt environmentally friendly production technologies, in line with new environmental and social governance requirements. All these changes reflect a more dynamic and flexible regulatory environment, allowing companies and investors to quickly adapt to global market changes.
The New Law's Role in Achieving Vision 2030
The new companies law is a pivotal part of the Kingdom's strategy to achieve the goals of Vision 2030, which focuses on diversifying the economy and reducing dependence on oil. By updating commercial laws and simplifying the procedures for establishing and operating companies, the law contributes to empowering the private sector and increasing its contribution to GDP. The law also encourages innovation and entrepreneurship by facilitating the establishment of startups, reducing capital requirements, and providing flexible legal frameworks that align with the needs of small and medium enterprises.
The law also supports the government's efforts to attract foreign investments by providing advanced legal protection, raising transparency and governance standards, and facilitating investor entry into various sectors. The law integrates with digital transformation initiatives, such as issuing licenses electronically and managing general assemblies remotely, enhancing business efficiency and reducing operational costs.
Moreover, the law contributes to improving the Kingdom's ranking in international indicators, such as the Ease of Doing Business Index and the Investor Protection Index, increasing the attractiveness of the Saudi market at both regional and international levels. The implementation of the new law is expected to lead to an increase in the number of registered companies, provide new job opportunities, and support the growth of non-oil sectors such as industry, technology, and services. In this way, the law forms the foundation for achieving the goals of Vision 2030 in building a diverse, competitive, and sustainable economy.
Expected Effects on Corporate Tax and Financial Policies
Although the new companies law does not include direct amendments to the tax policy in Saudi Arabia, it has indirect effects on companies' obligations and financial procedures. The preparation and submission of financial data to tax authorities (Zakat, Tax and Customs Authority) have become easier and more organized, thanks to the unification of rules and simplification of procedures established by the law. Regular disclosure of companies' profits and distributions helps in accurately determining tax obligations and reduces the chances of discrepancies or delays in payments.
On the other hand, the reduction of the minimum capital requirement and the possibility of issuing multiple classes of shares have led to greater flexibility in capital formation, affecting how profits are distributed and expenses are deducted, and consequently on tax obligations. The process of transitioning companies between legal forms (e.g., from partnership to joint-stock) has also become smoother, with clarity in tax disclosure requirements.
In the long term, the presence of a modern and organized companies law is expected to increase the number of formal companies, expanding the state's tax base. The law also encourages small and medium enterprises to disclose their activities and join the formal economy, enhancing tax collection efficiency. Although the tax rates themselves have not changed, the new law makes the tax compliance process clearer and more efficient, benefiting both companies and the government.
Dispute Resolution and Bankruptcy Mechanisms in the New Law
The new companies law in Saudi Arabia has introduced advanced mechanisms for resolving disputes between partners or shareholders and for dealing with bankruptcy or liquidation cases, ensuring the protection of all parties' rights and the continuity of businesses. Clear provisions have been included to allow recourse to commercial arbitration or specialized commercial courts in the event of disputes between partners or with the board of directors. The law also grants minority shareholders the right to file legal actions against board decisions in certain cases, such as the appropriation of ownership rights or violations of governance rules.
Regarding bankruptcy, the new law has coordinated its procedures with the Saudi bankruptcy system, allowing creditors and shareholders to submit requests for the orderly restructuring or liquidation of the company. The law outlines clear procedures for settling creditors' claims and determining the priority of payments, protecting the interests of all parties and minimizing potential losses.
The law also introduced mechanisms for resolving internal disputes, such as forming reconciliation committees or reviewing the decisions of the general assembly or board of directors, allowing for the resolution of disputes without resorting to courts in many cases. These combined mechanisms enhance the stability of the business environment and reassure investors of the existence of a modern and fair legal framework for dealing with crises, increasing the attractiveness of the Saudi market and encouraging further investments.
Digital Transformation and Its Impact on Implementing the New Law
Digital transformation is one of the main pillars in implementing the new companies law in the Kingdom of Saudi Arabia, as integrated electronic platforms have been adopted to facilitate all processes related to company establishment, stock issuance, managing general assemblies, and submitting financial reports. The Ministry of Commerce has launched the "National Window" platform, enabling entrepreneurs and investors to complete all procedures electronically, from company registration to obtaining business and tax licenses, typically within just a few days.
This digital transformation contributes to reducing operational costs, speeding up workflows, and minimizing human errors, while enhancing transparency in operations and allowing regulatory authorities to monitor performance directly and in real-time. General assemblies are now held electronically, with remote voting capabilities, increasing shareholder participation and enhancing decision-making democracy within companies.
Additionally, digital platforms have helped companies comply with financial disclosure requirements through standardized electronic forms that facilitate the submission of periodic reports. This system has also enabled real-time tracking of company performance and data analysis, supporting decision-making processes and increasing companies' ability to respond quickly to market changes.
The digital transformation is expected to continue enhancing the implementation of the new law in the coming years, with the introduction of technologies such as blockchain and artificial intelligence in company management, raising business efficiency and making the investment environment in Saudi Arabia more competitive and modern.
Conclusion
The new companies law in the Kingdom of Saudi Arabia represents a qualitative leap in commercial legislation, reflecting the Kingdom's ambitions to build a diverse and modern economy characterized by flexibility, transparency, and global competitiveness. This law has facilitated the procedures for establishing companies, enhanced the protection of shareholder rights, updated governance mechanisms, and increased the market's attractiveness for local and foreign investors. It has also opened wide opportunities for entrepreneurs and small and medium enterprises and paved the way for complete digital transformation in all business operations.
However, understanding regulatory requirements and keeping up with ongoing updates remains essential for all market participants. The changing business environment requires legal and financial awareness to ensure compliance and achieve desired goals. In light of these changes, it is always important to consult a licensed financial advisor before making any investment or financial decisions, to ensure decisions are based on sound foundations and compliant with modern regulations. The Saudi market environment is evolving, and the new companies law is one of the cornerstones of this transformation that will continue to shape the future of business in the Kingdom.
Frequently Asked Questions
The new companies law is a modern legislation adopted to update and regulate the environment for establishing and operating companies in Saudi Arabia. It began to be implemented gradually in 2024, with full and widespread application expected in 2025. The law aims to integrate and unify previous regulations, simplify procedures, stimulate investment, and provide a flexible legal framework that keeps pace with ongoing economic and technological transformations in the Kingdom.
The new law significantly simplifies the procedures for establishing small and medium enterprises, as it reduces capital requirements and allows for the establishment of limited liability companies by a single person. Most steps have become electronic and quick, reducing time and cost. Additionally, the law provides flexibility in changing the legal form of the company according to its business development, encouraging entrepreneurs to enter the market with greater confidence.
The new law has significantly enhanced shareholder rights by requiring companies to provide periodic financial disclosures and ensuring all shareholders have access to financial information. It also grants minority shareholders the right to call for extraordinary assemblies, participate in important decision-making, and protects against conflicts of interest. Additionally, the law establishes clear mechanisms for arbitration and dispute resolution, contributing to the protection of all parties' interests.
Yes, any qualified individual can now establish a limited liability company alone, without the need for partners as previously required. This amendment aims to encourage entrepreneurs and individual investors to start their projects more easily while providing legal protection that separates the company's assets from the founder's personal financial liabilities.
Tadawul-listed companies will experience increased transparency and governance, with the requirement for periodic financial disclosures and important decisions to be published through electronic portals. The law also facilitates the issuance of new classes of shares and provides flexibility in capital increases or restructuring. Minority shareholders have more rights to participate and oversee, increasing investor confidence and enhancing the attractiveness of the local and international market.
The new law has increased the attractiveness of the Saudi market for foreign investors by easing ownership restrictions and expanding the sectors available to them. The law also guarantees advanced legal protection and facilitates entry and exit procedures from the market. This has led to an increase in foreign ownership in the market to over 8% in 2024, with continued growth expected as the law is fully implemented.
The new law supports Vision 2030 by empowering the private sector, facilitating company establishment, and stimulating innovation and entrepreneurship. It also enhances transparency and governance, raises the Kingdom's ranking in business practice indicators, and attracts foreign investments, contributing to economic diversification and increasing the contribution of non-oil sectors to GDP.
The new law does not change tax or zakat rates, but it simplifies the preparation of financial data and makes compliance with the Zakat and Income Authority's requirements easier. The unification of procedures and clarity of disclosures helps companies comply with tax obligations more efficiently and reduces risks associated with delays or errors in reporting and data submission.
The new law provides multiple mechanisms for resolving disputes, including recourse to specialized commercial courts or commercial arbitration. Internal reconciliation committees can also be formed to resolve disputes, with minority shareholders granted the right to review board decisions in certain cases. These procedures ensure fairness and prompt resolution of disputes, protecting the interests of all parties.
Digital transformation is a fundamental pillar in implementing the new law, as all procedures for establishing companies, issuing shares, and financial disclosures are now conducted electronically. This facilitates compliance for companies, increases transparency, and reduces time and costs. It also allows investors to monitor their performance and exercise their rights remotely, enhancing market efficiency.
Yes, the new law provides significant flexibility in transitioning companies between different legal forms (e.g., from partnership to joint-stock or limited liability) without the need for complex procedures or high fees. This facilitates companies' adaptation to their business development and makes the investment environment more dynamic.