The Simplified Joint-Stock Company is a modern corporate form introduced by the new Saudi Companies Law, which came into effect on January 19, 2023,
aiming to provide greater flexibility in the business environment, support entrepreneurs, and achieve the objectives of Saudi Vision 2030.
This company ensures full financial independence, as the company alone bears its debts and obligations up to its capital, and the liability of shareholders does not exceed their contribution to the capital.
It can be established by one or more persons (individuals or legal entities), who divide its capital into tradable shares.
Due to its high flexibility and ease of establishment, it is recommended for startups and small and medium-sized enterprises that require flexible capital and want to attract investors without significant financial burdens or bureaucratic obstacles.
This corporate form is specifically designed to accelerate business growth and facilitate private sector participation in Vision 2030.
Advantages of the Simplified Joint-Stock Company Compared to Other Types of Companies
The Simplified Joint-Stock Company has several advantages that make it unique compared to traditional types of companies:
- No minimum capital requirement:
The new law exempts the Simplified Joint-Stock Company from the minimum capital required for traditional joint-stock companies (SAR 500,000),
reducing the financial barrier to establishment and encouraging small investors to participate.
- Flexible administrative structure:
Founders can freely determine the management structure in the company’s bylaws;
the company is not required to have a board of directors as in traditional joint-stock companies.
Management can be vested in a single president, one or more managers, or a board of directors,
with wide authority to implement the company’s objectives.
- Simplified formal procedures:
The law removes the mandatory general assembly requirement, as shareholders replace the ordinary
And extraordinary general assemblies in all their powers.
This means that decisions are made internally among shareholders without holding multiple formal meetings,
speeding up procedures and reducing administrative costs.
In addition, the law allows issuing multiple types and classes of shares.
Achieving a balance between the rights of investors and decision-makers, enhancing the company’s attractiveness to diverse investors.
Requirements and Procedures for Establishing a Simplified Joint-Stock Company
Establishing a Simplified Joint-Stock Company requires fulfilling a set of formal conditions and submitting the following documents:
- Written company bylaws:
A founding contract or written bylaws must be drafted, including key data such as the company name, headquarters, purpose, authorized, issued, and paid-up capital.
Number of shares, types and classes of shares, nominal value per class, management provisions, and quorum required for shareholders’ meetings and decision-making.
- Number of founders:
The law generally requires at least two founders as a precautionary measure, while allowing the company to be established by a single founder if that person subscribes to all shares.
- Capital deposit:
Founders must deposit the paid-up portion of the capital in a Saudi bank account and obtain an official deposit certificate to submit with the establishment application.
- Founders’ data and resolutions:
Names and information of founders (including nationality), expected founding expenses, founders’ subscription declaration to all shares at the specified values, and commitment to comply with all legal requirements must be provided.
- Management appointment:
Founders must issue a resolution appointing a president, manager, or initial board of directors, specifying their names and details in the application.
- Additional documents:
In the case of in-kind contributions, the partners must attach an approved valuation report showing the fair value and their consent to the assessed consideration.
- Registration procedures:
After completing the documents, the company registers its bylaws and any amendments with the Commercial Registry at the Ministry of Commerce and publishes the necessary data and documents.
The company becomes legally established upon issuance of the commercial registration.
Comparison with Limited Liability Companies and Traditional Joint-Stock Companies
- Limited Liability Company (LLC):
An LLC can be established by one or more persons and its capital is divided into shares.
It shares the principle of limited liability with the Simplified Joint-Stock Company but differs in that it issues tradable shares and organizes partners’ stakes as shares.
LLCs generally require a comprehensive founding contract, while a Simplified Joint-Stock Company allows share transferability and may include transfer restrictions in its bylaws.
LLCs are also not required to have minimum capital, nor a board of directors of a specified number.
- Traditional Joint-Stock Company:
Requires a high minimum capital (SAR 500,000 at least), a board of directors with no fewer than three members,
and at least two general assemblies annually to complete decisions.
In contrast, the Simplified Joint-Stock Company combines features of both: it allows issuing shares like a joint-stock company,
Enhancing the ability to attract investors, while eliminating cumbersome requirements such as high minimum capital and mandatory general assemblies.
Administrative and Organizational Aspects
The company’s bylaws freely define the management structure, which may be a company president, one or more managers,
or a board of directors, specifying their appointment, removal, and powers.
The president or manager exercises all powers of a traditional chairman within the limits set in the bylaws.
And may delegate some functions to others.
There is no mandatory general assembly; shareholders assume the powers of ordinary and extraordinary assemblies.
Meetings with shareholders are held as needed and in accordance with the provisions specified in the bylaws
(including quorum and required decisions).
Like other companies, a Simplified Joint-Stock Company must prepare annual financial statements
And a report on its financial activities at the end of each fiscal year.
The company presents this report and the auditor’s report (if any) to the shareholders for review and distribution.
or handling of profits according to standard accounting procedures.
Practical Use Cases
The Simplified Joint-Stock Company is practical in several business scenarios:
- Startups:
Founders need a capital structure that allows attracting external investors or participation through shares without high setup costs.
This suits innovation and technology projects where a flexible structure enables later expansion of shareholders.
- Growing SMEs:
Families or small investors seeking to integrate investments or bring in new partners (local or foreign) without high capital requirements.
The law facilitates and accelerates business growth by reducing establishment and financing procedures.
- Preparation for public listing:
Companies initially registered as Simplified Joint-Stock Companies can later transition to a traditional joint-stock company or list on the stock exchange,
given their ability to issue shares and carry the status of a joint-stock company in the future.
- Restructuring partnerships:
Limited partnerships or family partnerships wishing to convert to a joint-stock entity can use the simplified structure to create a diversified shareholding framework with high flexibility and avoid constraints from traditional regulations.
In summary, the Simplified Joint-Stock Company helps attract investors due to its capital and managerial flexibility.
Founders can design different share classes according to investor needs (e.g., shares with greater voting rights or preferred shares).
It also facilitates share transfers to and from new investors under conditions specified in the bylaws.
This operational flexibility makes it attractive to businesspersons.
And entrepreneurs seeking a dynamic work environment aligned with the objectives of Saudi Vision 2030 to simplify procedures and encourage investment.
conclusion
The new corporate form, the “Simplified Joint-Stock Company,” represents a flexible legal
And investment opportunity that aligns with the Kingdom’s efforts to stimulate the business environment.
For investors and entrepreneurs wishing to establish this type of company or benefit from its advantages,
Al-Mashoura Law Firm offers high-level legal expertise in drafting bylaws and completing administrative procedures efficiently and professionally.
We guide our clients step by step, from preparing customized bylaws to completing registration and operational consultations,
Ensuring the success of their business under the latest commercial regulations in the Kingdom.
For more details on our services in company formation and business affairs,
we welcome you to contact us to start a solid legal partnership for the success of your commercial projects.