In view of the economic development, rising investments in Saudi Arabia, and global expansion across different industries and sectors, HH King Salman bin Abdulaziz Al Saud recognizes the importance of facilitating foreign investments. To support this, the Royal Commission has issued Royal Decree R/132 on 01.12.1443 AH, approving the new Saudi Companies Law. With the growing interest of foreign entities to establish agreements with Saudi Arabia, it is necessary to discuss the regulations and conditions for foreign companies operating in the country, which we will address as follows:
Regulations for foreign companies or representative offices to carry out their activities in the KSA.
How to determine the financial position of such foreign branches, and whether these provisions apply to representative offices based in the KSA.
Registration of foreign branches in the commercial register in the KSA, and the consequences of such foreign branches violating the provisions of the Law.
Regulations for foreign companies or representative offices to carry out their activities in the KSA:
Foreign companies comply with the provisions of Saudi Companies Law, without prejudice to the international agreements between foreign countries and the KSA. However, such foreign companies are required to carry out their activities in the KSA through a branch of the foreign parent company, a representative office or any other form, in accordance with foreign investment regulations and other relevant provisions.
Every foreign branch or representative office of a foreign company shall write down its address in the KSA, the full name of the company and the address of the head office of the parent company on all company's documents and letterhead.
The branch or representative office of a foreign company within the KSA is deemed domicile in relation to its activities and doing business in the KSA and is subject to all applicable regulations in the KSA.
How to determine the financial position of foreign branches, and do these provisions apply to representative offices located in the KSA:
- When submitting a branch registration application, the branch of a foreign company shall indicate the start and end date of the branch's fiscal year.
- Notwithstanding the representative offices in the KSA, branches of foreign companies shall prepare financial statements related to their activities, by the accounting standards adopted in the KSA. Such documents and the auditor's report shall be filed within 6 months from the end of the fiscal year related to the branch's activity.
- The auditor shall be appointed by a decision issued by the branch manager of the foreign company based on the authorization of the foreign parent company.
Registration of foreign branches in the commercial register in the KSA, and the consequences of such foreign branches violating the provisions of the Law.
Branches of foreign companies shall obtain all necessary licenses to practice the activity and register in the commercial register. If the activity is practiced before completing the procedures for licensing and registration in the commercial register or practicing works that exceed the limits of its license, the companies and persons who practiced that activity or those works shall be jointly responsible for that violation.
Branches of foreign companies are registered in the commercial register to carry out certain works during a specific period, so they are temporarily registered until the completion of such works. The company shall be written off from the commercial register after its rights and obligations are settled in accordance with the provisions of the Law and other applicable laws. The company may continue upon fulfilling the applicable statutory requirements, which are established by the Saudi Ministry of Commerce, in coordination with the Ministry of Investment.
Why should you hire a legal advisory firm for the incorporation and registration of foreign branches?
The establishment of branches of foreign companies in other countries is a complex process that requires extensive legal expertise and deep knowledge of local laws and regulations. In this context, Al-Saadani & Khalifa Advocates & Legal Consultants law form plays an important role in helping foreign companies successfully establish their branches in order to help their customers:
Understanding foreign investment, labor, tax, intellectual property, trade and customs laws.
License applications, government approvals, opening bank accounts, hiring employees, contracts and agreements.
Compliance with laws, legal disputes, fines and penalties.
Providing advice to avoid risks and make the right decisions.
To ensure a smooth and successful establishment process, contact us today to be our success partners!
In conclusion, these regulation and controls as put in place by the Royal Commission are a strong incentive to attract more diversified investments to all countries within the KSA in order to achieve Saudi Arabia's Vision 2030.
As a law firm with legal experience in the Saudi Companies Law and its provisions, we work hard to assist Arab and foreign investors and facilitate everything related to the establishment and management controls of foreign companies' branches or representative offices in the KSA.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.