A recent government report claims that in the 20 months since the New Companies Law was put into effect, Saudi Arabia’s commercial records have grown by an astounding 68%.
With the law’s implementation on January 19, 2023, important changes were made to streamline business procedures and create a more vibrant corporate environment.
According to the Ministry of Commerce, the number of commercial records increased from 230,762 before the law’s introduction to 389,413 by the end of the third quarter of 2024.
The law’s main innovations include easier procedures for forming joint stock companies, remote participation by shareholders, and better financing options, such as enabling limited liability companies to issue debt instruments. These modifications have changed the corporate environment by making it easier to form a company and providing a variety of financing options.
Additionally, the law promotes wider ownership by making it easier to buy shares and equity stakes. Of particular note are its provisions for non-profit organisations and its introduction of a streamlined joint-stock company model. Modernising regulations for corporate mergers and transformations, allowing company splits, and enabling sole proprietorships to convert into any kind of company are additional reforms.
The burden of compliance for small and micro businesses is lessened because they are not required to hire an external auditor. The law also eliminates limitations at every stage of a company’s creation, operation, and exit and improves digital services, allowing for remote shareholder meetings and decision-making.
In order to create a more adaptable and investor-friendly environment, the reforms also streamline the procedure for foreign companies to operate in Saudi Arabia and introduce a family charter to regulate family-owned enterprises.
The International Monetary Fund commended the reforms in its September report for strengthening governance, lowering fees, and facilitating better access to financing—all of which have contributed to record levels of foreign investment.
The IMF added that the reforms have boosted employment and the expansion of non-oil sectors. The increase in non-oil revenues, the IMF added, shows how effective these reforms have been in improving compliance and bringing customs procedures into line with global best practices.