Legal consultations in the Kingdom of Saudi Arabia are one of the basic steps for establishing and managing companies, because adherence to the law is a necessity for the stability of commercial transactions and guaranteeing rights, and because regulations are constantly evolving due to changing and renewed events in societies, so it is necessary to use legal specialists who are knowledgeable and aware of all developments in the legal regulations for companies to protect investors and ensure the success of their projects in the Kingdom.

Legal regulations related to companies in Saudi Arabia

There are a variety of legal systems for organizing companies and providing legal advice in Saudi Arabia has such as:

1- The New Companies Law

New Company Law It is a special system for organizing everything related to companies, and legal consultations in Saudi Arabia for this system help investors to establish and manage their companies in accordance with its provisions, which ensures the success of their projects and avoids exposure to legal violations.

Forms of Companies in Saudi Arabia

Companies established in the Kingdom in accordance with the provisions of this Law shall take one of the following forms:

• Solidarity company.
• A simple recommendation company.
• Joint stock company.
• A simplified joint stock company.
• Limited Liability Company.

Application for company formation in Saudi Arabia

One of the most important legal consultations in the Kingdom of Saudi Arabia related to companies is the consultations related to incorporation applications, and the Saudi regulator in the Companies Law has clarified how to submit an application for incorporation in Article 6 of the law, as it states:

• The founders of the company are the actual participants in its establishment and in contributing to its capital, whether this contribution is in cash or in kind.
• The application for incorporation is submitted by the founders and then registered in the Commercial Registry, along with the memorandum of association or articles of association and all the necessary documents according to the company’s form.
• The application will be processed in accordance with the provisions of the Companies Law.
• If the application for incorporation is rejected, the rejection must be reasoned, and the founders have the right to appeal this rejection to the Ministry within a period not exceeding sixty days from the date of notification of the rejection.
• If the grievance is also rejected or not resolved within 30 days from the date of submission, the founders have the right to appeal to the competent judicial authority.

Documents needed for company formation

To establish a company in the Kingdom, specific documents are required, and the importance of legal advice in Saudi Arabia lies in the fact that specialized lawyers prepare these documents and submit them to the competent authorities, which saves the client the trouble of preparing and submitting incorporation documents, and according to the Companies Law, the company’s incorporation documents are:

• Memorandum of Association, but a joint stock company, simple joint stock company and limited liability company owned by a single person require a memorandum of association.
• The Memorandum of Association or Articles of Association must contain all the provisions, conditions and data stipulated by law, in accordance with the form of the company to be established.
• The Memorandum of Association or Articles of Association must be written in Arabic, but a translation into any other language is not prohibited.
• The Ministry prepares the guiding models for the articles of association and bylaws according to the company’s form.

2- Saudi Labor Law

Labor system It is the system for organizing the contractual relationship between the employer and the worker, and therefore this system is essential in legal consultations in Saudi Arabia related to companies, and we will explain in the following lines the most important clauses related to companies in this system.

Information to be sent to the labor office

In Article 15 of this Law, the Saudi regulator stipulates the importance of the employer’s reporting the following data to the Labor Office at the start of his establishment’s activity:

• The organization’s name, type, location, mailing address, and any additional contact information.
• The type of economic activity the business is licensed to engage in.
• The commercial registration or license number and date, along with the issuing authority.
• Indicate the number of workers to be employed in the facility.
• The name of the manager in charge of the facility, in addition to any data required by the Ministry.

Worker’s obligations according to the labor law

Article 65 of the Labor Law stipulates the obligations of the worker, namely:

• Performing work in accordance with the principles of his profession and the employer’s instructions, provided that these instructions do not violate the labor contract, law or public morals, and that the implementation of these instructions does not endanger the worker.
• Take adequate care of the work machinery, tools, equipment and materials that he is responsible for or under his custody, provided that he is obliged to return the non-expendable materials to the employer.
• Commitment to good behavior and ethics while performing work.
• Provide assistance without requiring any additional remuneration in the event of disasters or hazards in the workplace.
• Undergo medical examinations, upon the employer’s request, to prove that he is free of occupational or communicable diseases, before joining the job or during his work.
• Keeping professional secrets related to his work, which may harm the employer’s interest if disclosed.

Employer Obligations

The Labor Law obliges the employer with specific obligations towards the workers in his establishment, including:

• Pay the wages agreed upon in the labor contract and on time.
• Providing preventive and therapeutic health care for the worker according to the levels prescribed by the Minister.
• Providing transportation for workers from their places of residence or from a specific gathering center to the workplace and vice versa on a daily basis, in case transportation does not reach the workplace, or arrives at times contrary to working hours.
• Non-Saudi workers’ recruitment fees, residency fees, work permit and renewal fees, change of profession fees, exit and return fees, and repatriation fees after the end of the contractual relationship between them.
• Improving the level of Saudi workers in technical, administrative, professional and similar jobs to replace non-Saudi workers, provided that the names of Saudi workers who have replaced non-Saudi workers shall be registered in a register in accordance with the terms and conditions of the regulation.

The employer and the worker are also bound by all the obligations agreed upon in the labor contract between the two parties.

Labor contract

A labor contract is a contract between an employer and a worker, in which the employer undertakes to pay the worker a wage in exchange for the worker’s obligation to perform specific tasks under the employer’s supervision and management.

Legal consultations in Saudi Arabia for labor contracts are very important, whether in the field of companies or in other fields, as the conclusion of labor contracts through a specialized lawyer protects the rights of the contracting parties and avoids them resorting to the judiciary later.

3. Commercial Court System

Commercial courts are the courts that hear commercial disputes that arise between companies and commercial organizations. Commercial Courts System One of the regulations related to legal advice in Saudi Arabia related to companies, and the following is a brief summary of what is included in it.

Companies

According to Article 11 of the Commercial Courts Law, a company is a contract between two or more people, each of whom commits to a specific act to obtain a legitimate profit: Negotiation Company, Anan Company, and Mudaraba Company.

Bargaining company

It is a company known as a solidarity company, which is a company that is formed after the signature of all partners on an equal and known capital, and the partners are jointly responsible for all the undertakings and contracts in the bonds signed by the partners who are competent to do business.

Al-Anan Company

According to Article 13 of the Commercial Courts Law, an Anan company is a company formed between two or more partners, and each partner participates with a certain share in the capital, provided that he bears the damages or losses incurred by the company in accordance with his share without exceeding it.

One of the branches of the Anan Company is the shareholding company, which is held on a known capital, which is divided into shares, and the shares are divided into equal shares, without mentioning the names of the owners of these shares, and the company is managed by selected agents, who are responsible for the work assigned to them, and are not responsible for the company’s commitments.

Speculative company

A Mudaraba company is one in which one party is responsible for the capital and the other is responsible for the labor, and both share in the collection of profits.

4. Income tax system

There are many legal consultations in the Kingdom of Saudi Arabia related to corporate income tax, due to the provisions that need to be clarified and interpreted, and Income Tax Law It is the organizer of this tax and we mention some of its provisions:

Persons subject to income tax

The following natural and legal persons are subject to income tax

• Resident money company, for shares owned by non-Saudi persons, as well as shares owned by persons engaged in the production of oil and hydrocarbons (excluding employees of money companies listed on the Saudi Stock Exchange, and shares owned by these companies in money companies).
• A natural person residing in Saudi Arabia and practicing his/her activity within the Kingdom of Saudi Arabia.
• Persons who are not residents of Saudi Arabia, but conduct their activities in Saudi Arabia through a permanent establishment.
• A non-resident natural person who has other taxable income.
• Anyone working in the field of natural gas exploitation or in the production of oil and hydrocarbons.

The concept of residency in Saudi Arabia

A natural person is considered a resident of Saudi Arabia during the tax year if the following conditions are met

• Have a permanent residence in Saudi Arabia and reside in the Kingdom for at least 30 days in the tax year.
• The person must reside in Saudi Arabia for at least 183 days in the tax year.

A company is considered a resident of Saudi Arabia during the tax year if the following conditions are met

• It must be an organization in accordance with the Companies Law.
• The management of this facility must be located in the Kingdom of Saudi Arabia.

Source of taxable income

Income is taxable if it is realized from a source in Saudi Arabia in one of the following cases:

• If the income resulted from an activity that took place in Saudi Arabia.
• If the income was generated from immovable property within the Kingdom.
• If it results from the disposal of shares or partnership in a resident company.
• If the income arose from the rental of movable property used in the Kingdom.
• If the income resulted from the sale or license to use industrial or intellectual property in Saudi Arabia.
• Dividends from shares or fees for management and directors paid by the resident company.
• Amounts paid by a resident for services performed entirely or partially within the Kingdom.
• Amounts due for the exploitation of a natural resource in Saudi Arabia.
• If the income is attributable to a permanent establishment of a non-resident in the Kingdom.

Benefits of Legal Consulting in Saudi Arabia for Businesses

Legal consultations in Saudi Arabia are very useful for investors wishing to establish companies in Saudi Arabia, or those who already own companies in the Kingdom and need legal specialists to support them in the conduct of their business, and the benefits of legal consultations in Saudi Arabia with regard to companies include the following:

1- Comply with Saudi legislation and avoid contravening it

The establishment and management of companies must be carried out in accordance with the provisions of the Saudi regulations, and any violations thereof expose the company to punishment in the event of its existence and failure to establish it in the event that the founder does not adhere to the establishment procedures, so the investor must resort to legal advice in the Kingdom of Saudi Arabia from lawyers specialized in the commercial field, so that his company is established and managed in accordance with the provisions of Saudi regulations, ensuring its success and not exposed to any future statutory violations.

2- Drafting commercial and labor contracts

Drafting contracts is one of the most prominent legal consultations in the Kingdom of Saudi Arabia that contractors are obligated to hire lawyers to prepare them, because of their importance in organizing the contractual relationship, in terms of clarifying the rights and obligations of the contracting parties and how to resolve disputes in amicable ways in case they are exposed to them in the future, all in accordance with Saudi regulations and their amendments.

3. Support for conflict resolution

Legal consultations in Saudi Arabia are an ideal solution for resolving disputes in an amicable manner, as resorting to legal counsel to resolve existing disputes is in many cases better than resorting to the judiciary, for the following reasons:

• The speed of amicable solutions: Dispute resolution through legal counseling in Saudi Arabia is very fast, as disputing parties may reach an agreement through a single session with legal counsel.
• Confidentiality: It is a very important feature for everyone who works in commercial activities, due to the sensitivity and special status of this field in societies, as the reputation of the merchant is his capital, so resorting to legal consultations in Saudi Arabia is the most appropriate solution to resolve disputes.
• Conflicting parties are satisfied with the solutions: As an amicable solution is with the consent of the disputing parties, no party is forced to resolve it, unlike what is done in the judiciary, as the judicial ruling is binding on both parties without regard to their consent or not.
• Low cost compared to going to court: Amicable solutions through legal consultations in Saudi Arabia are characterized by their low cost compared to the cost that results from resorting to litigation to resolve disputes.

4- Facilitating the procedures for establishing companies and licenses

Resorting to an experienced legal specialist in the establishment of companies is very important for every investor who wants to establish his company on Saudi territory, as the lawyer has done the establishment procedures and extracting licenses over the years, making him the most suitable to do this task, and whatever difficulties he encounters, he is able to solve them in accordance with the provisions of Saudi regulations, so Legal advice in Saudi Arabia is the first thing to do to do if you want to establish a company in Saudi Arabia.

In conclusion, keeping abreast of the latest legal developments is extremely important and difficult for the general public to do, as interpreting the law and following the latest developments is at the core of the work of professional lawyers. Legal consultations in Saudi Arabia should only be done through specialists in this field such as Invest Global, which includes a select group of the most competent legal advisors with more than fifteen years of experience in providing legal consultations to companies in Saudi Arabia.