The commercial sector in Saudi Arabia is witnessing remarkable development, driven by Vision 2030, which aims to improve the business environment and expand the scope of investment by attracting local and foreign investors.
Among the important legal entities for investors and entrepreneurs at the beginning of their projects, as well as for owners of small and medium-sized enterprises, are the sole Establishment and the single-person company.
Despite their similarity in terms of sole ownership, there are fundamental differences in terms of legal liability, management, size, and financing.
Therefore, in this article, we will review the most prominent differences between them, clarifying the advantages and disadvantages of each, to help you choose the most suitable structure for your goals and future vision.
Definition of a Sole Establishment
In the Kingdom of Saudi Arabia, a sole establishment refers to any commercial or industrial establishment owned and managed by a single individual. It does not possess a separate legal personality or financial liability distinct from its owner, and it operates independently without direct government involvement.
The business is based on individual ownership and personal management, where the owner or a person appointed by the owner directly manages the commercial or industrial activity.
Sole Establishments include a wide range of businesses such as restaurants, retail stores, offices, and technology companies.
These businesses are a fundamental pillar of the Saudi economy, playing a vital role in creating job opportunities, providing goods and services, and supporting sustainable development by encouraging entrepreneurship and private investment.
Advantages and Disadvantages of a Sole Establishment
Advantages:
Disadvantages:
Definition of a Single Person Company
The Single Person Company (SPC) is one of the newest forms of legal entities in the Kingdom, and it is an attractive option for individuals and investors who wish to establish and manage their companies independently.
It is a company owned by whether a natural or legal person, and their financial liability is limited to the company's capital.
Although it enjoys an independent legal and financial personality, the owner may bear personal liability in some specific cases, such as gross breach of obligations.
Advantages and Disadvantages of a Single-Person Company
Advantages:
Disadvantages:
Key Differences Between a Sole establishment and a Single-Person Company
1. Ownership:
A sole establishment is owned by a natural person, while a single-person company is considered a separate legal entity .
2. Financial Liability:
In a sole establishment, the owner is personally liable for all debts and obligations of the business.
In a single-person company, liability is limited to the company's capital only.
3. Management:
A sole establishment is managed by the owner alone, while the owner of a single-person company can appoint a manager or a board of directors to manage it.
4. Size and Scope:
A sole establishment is smaller in size and resources, while a single-person company offers greater opportunities for expansion and growth.
5. Financing:
Financing for a sole establishment often depends on the owner's personal resources, while a single-person company can attract investors or institutional financing.
6. Profits:
In a sole establishment, profits are considered personal income for the owner.
In a single-person company, profits are first recorded in the company's name and then distributed to the owner according to the distribution policy.
How to Convert a Sole establishment into a Single-Person Company
The Saudi Ministry of Commerce allows the conversion of a sole establishment into a single-person company electronically through its official website by following these steps:
1. Visit the Saudi Business Center website.
2. Select "Start Service".
3. Log in to your account.
4. Create a new request.
5. Specify the type of registration, region, and required service.
6. Upload the required attachments.
7. Review the data and ensure its accuracy.
8. Submit the request electronically.
Conclusion
Choosing the appropriate legal entity depends on the nature of the business, the size of the project, and the level of financial risk the business owner is willing to bear.
Understanding the differences between a sole establishment and a single-person limited liability company will help you make a more accurate legal and financial decision that aligns with your future goals and investment vision.
If you wish to undertake any procedure related to a sole establishment or a single-person company, please do not hesitate to contact us at Mohammed Al-Khliwi Law Firm, and we will assist you with utmost professionalism.
Disclaimer: The above content does not constitute legal advice, and the author of this article assumes no legal responsibility. For legal advice, please contact us.
With the booming hospitality sector in Saudi Arabia and the tremendous transformation driven by Vision 2030—aimed at attracting millions of visitors from around the world through various entertainment and sporting events hosted by the Kingdom—the demand for hotels has increased significantly. As a result, the Kingdom has adopted the hotel management agreement model to enhance hotel operations and, consequently, improve the overall guest experience.
So, what exactly are hotel management agreements? And what are the essential features of these agreements? This is what we will explore in this article.
What are Hotel Management Agreements?
The hotel sector in Saudi Arabia is undergoing a major transformation. With the growing demand for hotels, the need for a legal framework to govern the relationship between commercial property owners and hotel operators has become increasingly important. Many people are unaware that any hotel essentially consists of two companies: the company that owns the property and the management company that owns the brand.
Recognizing this, Saudi Arabia began adopting the hotel management agreement model to regulate the relationship between these two entities responsible for hotel operations—particularly with the surge of visitors drawn by the Kingdom’s expanding entertainment scene. Hotel management agreements have emerged as a practical solution for managing the industry and as an attractive opportunity for investors seeking partnerships with leading hotel brands.
These agreements can take several legal forms, the most prominent of which are:
First: Franchising and Licensing
We are dealing here with two different models. The first involves hotel operators that own and manage their properties, meaning that management, ownership rights, and reservation systems are all handled internally. In this model, franchises and licenses are not part of the organizational structure.
The second model involves hotel operators who license the brand from a third party. A franchise or licensing agreement may be in place. In this case, the property owner must ensure that the operator has conducted proper due diligence regarding these arrangements and that the agreements remain valid for the entire duration of the contract.
The agreement should also include representations and warranties regarding the adequacy and status of the franchise or licensing agreement, as well as covenants to maintain it in force, and intervention or remedy rights for the benefit of the commercial property owner to ensure continuity and compliance.
It should be noted that these franchise or licensing agreements cannot be used to define the specific terms and conditions of the arrangement between the commercial property owner and the hotel operator; however, they form an important part of the overall context within which the hotel management agreement is properly concluded.
Secondly: Lease Agreements
Lease agreements are fundamental to income-generating assets in the commercial real estate sector. They are legally binding contracts that guarantee the rights of both the property owner and the hotel operator. From the tenant’s perspective, lease agreements ensure a registrable right to the land, protect against third-party interference, and limit the owner’s ability to disrupt the tenant’s business operations.
From the owner’s perspective, lease agreements establish a clear and defined obligation to pay rent, specify responsibilities and obligations at the end of the contract term, and grant certain privileges in the event of the tenant’s bankruptcy.
Despite these advantages, this model is not preferred for use in hotel management. . The reason is that fixed rent poses a significant risk to the operator in the event of a market downturn and does not accurately reflect the hotel’s operating profits. Moreover, traditional lease concepts are not compatible with the nature of the hotel business, which relies on variable operations and fluctuating income.
As a result, the relationship between the owner and the operator has evolved into a form of agreement that combines the benefits of a lease while eliminating its drawbacks, incorporating special provisions tailored to the nature of hotel operations. This is what is known today as a hotel management agreement.
Third: Hotel Management Agreements
The third legal framework governing the relationship between the commercial property owner and the hotel operator is the hotel management agreement. This represents a more advanced and modern form of hotel lease agreements and is known by several names, most notably operating service agreements and hotel operating agreements.
Hotel management agreements have their own specific standards and regulations, aiming to establish a deeper business relationship between the owner and the operator. They grant the property owner a voice in strategic decisions and allow them to benefit from the potential profits generated by the hotel’s performance.
Fourth: Revenues, Expenses, and Fees
The section concerning revenue sharing is the most important part of a hotel management agreement. Unlike lease agreements, where revenue is fixed through a predetermined rent, the owner in this case receives all net revenue after deducting costs and operator fees. This arrangement incentivizes the owner to control costs and ensures transparency in fee calculations.
Regarding fees, the common market practices dictate how profits are distributed. current market practice involves setting both a base fee and an incentive fee for the hotel operator. As for budgeting, this structure provides the property owner with a mechanism to approve the budget, serving as a control tool to monitor performance and manage expenses effectively.
Fifth: Management and Employees
It has become common practice for hotel management agreements to require that all employees working in the hotel be legally employed by the commercial property owner.For many owners, employing staff to serve tenants is an uncommon practice; therefore, owners should pay particular attention to this requirement and ensure its legality.
Although the hotel manager usually supervises the employees directly, their status as employees of the owner complicates the legal relationship between the parties. In exchange for assuming employment responsibilities—or due to their involvement in operational activities—the owner may obtain the right to approve or reject appointments to key management positions.
When drafting these rights, consideration should be given to the operator’s organizational structure, the status of existing employees, and the need to ensure their job security. Owners should also carefully assess the actual authority these rights grant them.
Sixth: Renovation and Development
The legal framework of hotel management agreements includes a Property Improvement Plan (PIP)—a structured plan outlining the necessary upgrades and renovations that the commercial property owner must undertake to maintain brand standards. The obligations under the Property Improvement Plan typically extend throughout the duration of the hotel management agreement and and it shall be updated periodically at intervals mutually agreed upon.
To ensure that commercial property owners adequately fund these obligations, hotel management agreements often require the establishment of a reserve account, funded by a fixed percentage of gross revenues. This mechanism guarantees adherence to the plan and ensures the periodic renovation and upkeep of the hotel.
Seventh: Term and Termination Rights
Hotel management agreements generally have fixed terms that are longer than typical commercial leases, sometimes extending up to 20 years. They also include termination rights for each party in the event of a breach of obligations by the other. However, because longer terms tend to disproportionately benefit hotel operators, it is common for property owners to negotiate additional termination rights.
Property owners may also secure termination rights in the following circumstances:
(a) Upon the sale of the property.
(b) Without cause after specified periods (to allow for property redevelopment or other reasons).
(c) If projected revenue targets are not consistently met. This last right can replace—or operate alongside—a minimum revenue target clause to ensure that hotel operators do not overestimate gross revenue.
Conclusion
Hotel management agreements form the cornerstone of the relationship between commercial property owners and hotel operators, surpassing traditional lease models due to their flexibility and adaptability to the sector’s needs. This makes them an ideal framework for fostering collaboration and creating long-term value in the hospitality industry.
If you are looking for professional assistance in drafting and structuring these agreements, you are in the right place. At Mohammed Al-Khliwi Law Firm, we will help you complete all necessary procedures with expertise and ease.
Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.
The hospitality sector in the Kingdom of Saudi Arabia is witnessing remarkable development at all levels. This growth is driven by Vision 2030, which aims to position the Kingdom as a global tourist destination offering visitors from around the world the best possible experience.
Among the significant improvements introduced by the Kingdom to support this sector are the implementation of the new Civil Code and the launch and continuous updating of the Saudi Building Code to meet the needs of the sector and achieve the objectives of Vision 2030.
In this article, we will explore hotel construction and development agreements, the legal risks involved in design and construction contracts, and the appropriate legal approaches to address and manage these risks effectively.
About Hotel Construction and Development Agreements
Hotel construction and development agreements refer to contracts that govern the relationship between the project owner, the real estate developer, the contractor, and the designer in the process of constructing a new hotel or developing an existing one. These agreements regulate the relationship from its inception until the hotel is delivered fully ready for operation, in accordance with the standards defined and agreed upon by the main parties to the agreement.
Recently, hotel construction and development agreements have become more regulated following the Kingdom’s implementation of the Saudi Building Code, which specifies design and safety requirements for all buildings, and the issuance of the new Civil Code in 2023, which establishes clear legal frameworks for contractual relationships.
Legal Risks in Design and Construction Contracts (3)
Legal risks refer to any losses incurred by any of the contracting parties involved in the construction or development of a hotel as a result of non-compliance with regulations and laws, or a breach of the established and applicable rules. These losses may include financial penalties, damage to the hotel's reputation in the market, or loss of customers.
Among the most common legal risks are contractual risks, which arise when parties fail to adhere to the terms of their contract, withdraw from the agreed-upon project, fail to deliver the project on time, or deliver it with specifications below the required quality or different from those agreed upon in the contract.
In such cases, the aggrieved party has the right to file a lawsuit against the party responsible for the breach and demand compensation for the damages incurred. Some of the most common problems that occur in contracts include:
Minimizing Legal Risks in Design and Construction Contracts
To avoid these risks from the outset, the following legal recommendations should be considered when drafting contracts:
Saudi Building Code (4)
Understanding the requirements of the Saudi Building Code is essential to ensure the success of any project and to avoid violations or delays in its completion. But first — what is the Saudi Building Code?
The Saudi Building Code is a set of regulations, standards, and technical requirements that govern construction and building operations in the Kingdom of Saudi Arabia. It was developed by the National Committee for the Saudi Building Code as part of the Kingdom’s Vision 2030, with the aim of improving quality of life and enhancing sustainability within the construction sector.
The Code encompasses a wide range of technical requirements covering all aspects of construction — from architectural and structural design, to safety and fire prevention systems, as well as sustainability and energy efficiency standards.
The concept of creating a unified building code in the Kingdom began in 2000, and the National Committee for the Saudi Building Code was established in 2003. Since then, the Code has undergone multiple stages of development and updates to meet the evolving needs of the sector.
The Main Stages in the Development of the New Saudi Building Code
Stage 1: From the date the system took effect until the end of Dhul-Hijjah 1440 AH (31 August 2019) – applied to government administrative buildings, high-rise buildings (over 23 m), hospitals, and hotels.
Stage 2: Until the end of Dhul-Hijjah 1441 AH (20 August 2020) – additionally applied to mosques, sports facilities, educational buildings, commercial complexes, telecom towers, industrial facilities, buildings under 23 m, and high-risk structures.
Stage 3: Until the end of Dhul-Hijjah 1442 AH (10 August 2021) – additionally applied to wedding halls, cinemas, theatres, healthcare centers, serviced apartments, inns, residential buildings, and recreational facilities.
Stage 4: Until the end of Dhul-Hijjah 1443 AH (30 June 2022) – additionally applied to business buildings such as airports, banks, television stations, and postal facilities.
Stage 5: Until the end of Dhul-Hijjah 1444 AH (18 June 2023) – applied to all building types classified under the Saudi Building Code.
Requirements of the New Saudi Building Code for Hotels
The new Saudi Building Code establishes several specific requirements for commercial buildings such as shopping malls and hotels. The most important of these include fire safety requirements, accessibility and mobility standards, mechanical systems requirements, and architectural design specifications.
It is also essential to obtain the necessary licenses before commencing any project, as the new Saudi Building Code has introduced specific procedures for acquiring these licenses. Below, we outline these procedures and requirements.Top of Form
Required Documents for Obtaining a Building Permit
Obtaining a building permit under the new Saudi Building Code requires the submission of several key documents, including:
Authorities Responsible for Issuing Building Permits
You can obtain building permits from the following authorities:
Conclusion
In conclusion, hotel construction and development agreements in Saudi Arabia have significantly facilitated entry into and investment in the hospitality sector. If you wish to establish a new hotel or develop an existing one, the first step is to contact us. Our legal experts can help you understand the entire process and draft contracts accurately and professionally to ensure that all your rights are fully protected.
Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.
Saudi Arabia is heavily focused on developing, and even reshaping, its hospitality and tourism sector in line with Vision 2030, which aims to diversify national income sources and position the Kingdom among the top global tourist destinations, as well as enhance its standing as an attractive investment environment for both local and foreign investors.
In this article, we will explore the features of the hospitality sector in the Kingdom, discuss the investment opportunities available to foreigners, and outline the licenses and procedures required to start hospitality projects.
An Overview of the Hospitality Sector in Saudi Arabia
The hospitality sector is one of the most important sectors that the Kingdom is striving to develop, and it is considered one of the main pillars in achieving the goals of Vision 2030. Therefore, Saudi Arabia is attracting massive foreign direct investments to develop this sector by providing a promising investment environment based on advanced infrastructure, mega tourism projects, and diverse and state-of-the-art recreational facilities.
This is in addition to the tremendous support provided by the government to companies in both the public and private sectors, working to improve the quality of services offered, expanding the capacity of hotels and resorts, and operating according to international standards that provide customers with an unforgettable tourism experience, making Saudi Arabia a world-class hospitality destination that combines authenticity and modernity.
The Impact of Vision 2030 on the Hospitality Sector in Saudi Arabia (2)
Vision 2030 has a strong and direct impact on the hospitality sector in Saudi Arabia. Major cities such as Riyadh and Jeddah are witnessing an increasing influx of tourists and local and international visitors due to government initiatives and entertainment events, making them attractive tourist destinations and global centers for major international sports and media events.
In addition to the mega-projects and reforms led by the government, all of this has led to a radical transformation in the hospitality sector, which was previously underdeveloped and largely neglected. It has now become one of the most important sectors attracting foreign and local investment.
Among the most prominent of these projects and initiatives are:
In addition to the platforms and digitalization that have facilitated the visitor experience:
In addition to the distinctive programs in the tourism sector:
Why Should You Invest in the Hospitality Sector in Saudi Arabia? (3)
From the significant increase in the number of domestic and international visitors to the mega-projects and government-led reforms, investors are paying serious attention. Here are five key reasons why the hospitality sector in Saudi Arabia is attractive to investors:
1- The tremendous growth of the tourism sector
Saudi Arabia has made the tourism sector a cornerstone of its economic diversification efforts. In 2023, it attracted more than 100 million visitors, exceeding its target, which prompted it to set a new goal of attracting 150 million visitors by 2030.
2- Diverse facilities and reforms
The government has implemented visa reforms such as: (electronic visas and visas on arrival for more than 60 countries) to facilitate entry for visitors from various countries around the world.
It has also invested heavily in infrastructure, developing airports, roads, services, and entertainment areas to make the Kingdom a global tourist destination. This is in addition to the strong and smart promotion of its cultural, heritage, and natural tourism attractions, thereby attracting more and more visitors.
3- Religious tourism and events
Religious tourism, based on Hajj and Umrah pilgrimages, attracts millions visitors annually, and this number is expected to double by 2030 with the completion of capacity expansion and infrastructure development projects. Similarly, events held in the Kingdom, such as the Riyadh Season, which attracted more than 17 million visitors in 2023, and the Jeddah Season, which drew millions of visitors through concerts, cultural events, and air shows, as well as the Formula E Championship, the Dakar Rally, the LIV Golf Tournament, and other international sporting events, all create high demand and a huge need for hotels and hospitality facilities, representing a golden opportunity for investors that should be seized.
4- A noticeable shortage of hotels
Despite the strong growth in the tourism sector, many cities in Saudi Arabia still lack high-quality hotel infrastructure. While luxury brands dominate in Mecca, Medina, and Riyadh, secondary cities such as Abha, Taif, AlUla, Tabuk, and the Eastern Province suffer from a limited presence of well-known hotel brands.
5- An attractive investment environment for investors
Saudi Arabia is actively working to attract foreign investment in the tourism and hospitality sectors through regulatory frameworks that support investors and public-private partnership models. The most prominent of these advantages include:
- Allowing 100% foreign ownership in most hospitality-related projects.
- Long-term land lease contracts in tourist areas with favorable terms.
- Government financial support and investment participation (especially through the Public Investment Fund and the Tourism Development Fund).
- Streamlined licensing procedures through platforms such as "Invest in Saudi Arabia" and the Ministry of Investment.
6- Attractive potential for long-term income and rewarding investment returns
The hospitality sector in Saudi Arabia is not limited to short-term gains, but can be considered a long-term income-generating asset class due to the following:
- High occupancy rates in major destinations .
- Long average length of stay for pilgrims and international visitors.
- Strong potential for additional revenue: food and beverage, spas, retail, and events. - Increased opportunities for exiting investments through real estate investment funds, initial public offerings, and institutional mergers and acquisitions, especially with the deepening of Saudi capital markets.
Ministry of Investment Licenses for Foreign Investors in the Hospitality Sector (1)
To apply for a license to operate tourist accommodation facilities, you must do the following:
Requirements
Required Documents
Finally; Investing in the hospitality sector in Saudi Arabia is a golden opportunity. According to reports by Colliers and Knight Frank, returns in the Saudi hospitality sector are among the highest in the GCC countries and are expected to remain strong over the next decade. (3)
If you aim to invest in the tourism and hospitality sector in Saudi Arabia, contact us to be your partners on this journey. We will handle all legal procedures for you with precision, professionalism, and commitment. We are here at Mohammed Al-Khaliwi Law Firm to assist you, working together to achieve your goals and contribute to the Kingdom's Vision 2030.
Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.
The insurance sector in Saudi Arabia has undergone significant regulatory reforms, especially following the establishment of the Insurance Authority as an independent body responsible for overseeing and regulating the industry. These reforms aim to drive digital transformation, strengthen governance, and ensure the protection of stakeholders’ rights.
In this article, we will explore the different types of insurance licenses available in the Kingdom, along with their requirements, conditions, and associated fees.
Types of Insurance and Supporting Services Licenses
The Insurance Authority in Saudi Arabia grants a variety of licenses designed to regulate and support entities operating within the insurance sector — including insurance companies, brokers, and supporting service providers. These licenses include:
Insurance and/or Reinsurance Licenses
Liberal professionals Licenses
Cover individuals or entities offering one or more of the following activities:
insurance brokerage, reinsurance brokerage, electronic insurance brokerage, insurance agency, inspection and loss assessment, insurance claims settlement, insurance consulting, and actuarial services.
Conditions for Obtaining a License to Practice Insurance Business
To obtain a license to engage in insurance activities in Saudi Arabia, applicants must meet a set of regulatory conditions established by the Insurance Authority. These conditions vary depending on the type of entity applying for the license:
(1) Insurance or Reinsurance Companies
The company must be established as a joint-stock company.
Its primary purpose must be to conduct insurance and/or reinsurance business.
The paid-up capital must not be less than SAR 300 million for insurance companies. Similarly, reinsurance companies—or companies practicing both insurance and reinsurance—must also maintain a paid-up capital of no less than SAR 300 million.
The percentage of Saudi employees must comply with the minimum ratio required under the applicable regulations and must increase annually in accordance with the company’s approved business plan submitted to the Insurance Authority.
(2) Liberal professions Related to Insurance or Reinsurance
Liberal professions Related to Insurance or Reinsurance related to insurance or reinsurance must maintain a Saudi workforce of at least 50% by the end of the first year, or the percentage specified by the Authority, with a mandatory annual increase as per the submitted business plan.
The company’s capital must not be less than the minimum amount stipulated in the Implementing Regulations.
(3) Digital Insurance Brokerage
The activity must be conducted by a joint-stock or limited liability company licensed to operate in Saudi Arabia.
The company’s minimum capital must be:
SAR 500,000 for entities engaged solely in digital insurance brokerage.
SAR 3 million for traditional insurance brokers also practicing digital insurance brokerage.
Requirements for Applying for a License to Practice Insurance Business
Applicants seeking to obtain a license to conduct insurance business in Saudi Arabia must fulfill a set of fundamental requirements established by the Insurance Authority. These include:
Additional Requirements Based on Applicant Type
In addition to the general requirements, applicants must meet specific conditions depending on the nature of their business activity:
(1) Insurance or Reinsurance Companies
Five-Year Business Plan: A comprehensive plan outlining projected operations, financial forecasts, and growth strategy over a five-year period.
Irrevocable Bank Guarantee: A guarantee equivalent to the required capital, issued in favor of the Insurance Authority by a local Saudi bank, and automatically renewable until the full capital amount has been paid.
(2) Liberal professions Related to Insurance or Reinsurance
Three-Year Business Plan: A detailed plan specifying the scope of operations, financial projections, and development goals for the first three years.
Irrevocable Bank Guarantee: A guarantee equivalent to the required capital, issued in favor of the Insurance Authority by a local Saudi bank, and automatically renewable until the full capital amount has been paid.
(3) Digital Insurance Brokerage
The license application for digital insurance brokerage must be submitted to the Insurance Authority and include the following:
Dedicated Business Plan for digital Operations:
The plan must detail:
The types of insurance products offered through the platform.
An analysis of the expected transaction volume for electronic insurance brokerage activities over the next three years.
An assessment of potential risks associated with online transactions, along with preventive and mitigation measures, including procedures to combat money laundering, address cyber and strategic risks, and ensure regulatory compliance.
The applicant must submit a detailed contingency plan outlining the procedures to be followed in case of system failure. The plan should:
Identify corrective actions to ensure business continuity.
Include a reporting mechanism for notifying both the Insurance Authority and the company of system disruptions or corrective measures taken.
Insurance License Fees
Applicants are required to pay an initial fee of SAR 10,000 for the review of their license application.
Upon approval, the following issuance fees apply depending on the license type:
Insurance or Reinsurance Companies
SAR 100,000 – for an insurance company.
SAR 200,000 – for a reinsurance company.
SAR 300,000 – for a company practicing both insurance and reinsurance.
Liberal Professionals
SAR 25,000 – for any self-employed professional, excluding actuaries and insurance consultants.
SAR 5,000 – for actuaries or insurance consultants.
Obtaining an insurance license in Saudi Arabia involves a detailed and highly regulated process.
If you plan to apply for an insurance or reinsurance license, our legal team can guide you through every step — ensuring full compliance, efficiency, and a hassle-free experience.
Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.
The commercial landscape in the Kingdom of Saudi Arabia has undergone significant transformation following the enactment of the new Companies Law of 2022, which introduced greater flexibility and clearer regulations for various types of companies. Among the most notable corporate forms established under the law are the Public Joint Stock Company (PJSC) and the Simplified Joint Stock Company (SJSC) — both of which serve as key investment vehicles within the Saudi business environment.
At first glance, these two company types may appear similar due to the resemblance in their names. However, in practice, there are substantial differences between them in terms of structure, management, and establishment requirements. This article explores these distinctions in detail.
An Overview of Companies in Saudi Arabia
Companies in the Kingdom of Saudi Arabia are classified into different categories based on the laws governing their establishment and operation. Some companies are governed by the Saudi Companies Law, issued under Royal Decree No. (M/132) dated 12/01/1443 AH, and these are classified as commercial companies.
Conversely, other entities are governed by the Civil Transactions Law, issued under Royal Decree No. (M/191) dated 11/29/1444 AH, and are referred to as civil companies.
In the following sections, we will focus on commercial companies, particularly the Public Joint Stock Company (PJSC) and the Simplified Joint Stock Company (SJSC).
First: Joint Stock Company in Saudi Arabia
A Joint Stock Company (JSC) is a company established by one or more individuals, with its capital divided into tradable shares that may be bought and sold by investors. Profits are distributed among shareholders in proportion to their respective shareholdings.
The company is solely liable for its debts and obligations incurred or arising from its business activities. Shareholders’ liability is limited to the value of the shares they have subscribed to, and their personal assets are not affected by the company’s debts.
Advantages of Joint Stock Companies
Management of Joint Stock Companies
Second: Simplified Joint Stock Company in Saudi Arabia
A Simplified Joint Stock Company (SJSC) is a company established by one or more persons, whether individuals or legal entities. It is governed by the same provisions applicable to Joint Stock Companies, except where specific provisions apply.
The company’s capital is divided into tradable shares, and the company alone is responsible for any debts and obligations arising from its activities. Shareholders’ liability is limited to the value of the shares they have subscribed to or purchased, and it does not extend to their personal assets.
Advantages of a Simplified Joint Stock Company
Structure and Management of a Simplified Joint Stock Company
If you wish to learn more about company structures and regulations in Saudi Arabia, follow us to stay informed about the latest updates and legal developments.
Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.
With the rapid growth of the legal sector in the Kingdom of Saudi Arabia, choosing the right lawyer has become an essential step to ensure accurate legal advice and high-quality professional service.
Many people begin their search online using phrases such as “Top 10 Lawyers in Riyadh” or “Foreign Judgment Enforcement Lawyer in Saudi Arabia”, or even “Corporate Lawyer” or “Best Law Firm in Riyadh”, in an effort to find the most suitable lawyer or law firm for their case.
Given the wide variety of law firms and their increasing specialization — whether in corporate law, litigation, arbitration, or enforcement of foreign judgments — it is crucial to follow a clear and professional approach when choosing your legal representative.
1. Searching Online – A Good Start but Not Enough
Most individuals begin by searching online using phrases such as:
“Lawyer in Saudi Arabia”, “Best Lawyer in Saudi Arabia”, or by specifying a city such as “Lawyer in Riyadh” or “Top 10 Lawyers in Jazan.”
Search engines will display several prominent law firms, many of which have a strong online presence. However, these results do not necessarily indicate the firm’s area of specialization or the types of cases it handles.
For this reason, some users refine their search with more specific terms such as:
“Corporate Lawyer in Saudi Arabia,” “Litigation Lawyer in Riyadh,” or “Foreign Judgment Enforcement Lawyer.”
This helps narrow down the results to firms with expertise in a particular legal field.
However, relying solely on search engine results is not sufficient, as online visibility does not always reflect professional competence or legal experience.
2. The Saudi Bar Association – The Most Reliable Source
The Saudi Bar Association is the official authority regulating the legal profession in the Kingdom. Its website provides an accurate and up-to-date directory of licensed lawyers, including their specializations, experience, and practice locations.
Through the Association’s website, you can verify:
This method remains the most reliable and official way to ensure the lawyer you select is properly licensed and authorized to practice in Saudi Arabia.
3. Review the Lawyer’s Articles and Professional Contributions
Another strong indicator of a lawyer’s expertise and professionalism is the content they publish.
Legal articles, commentaries, and thought pieces demonstrate a lawyer’s understanding of Saudi laws and their ability to analyze and simplify complex legal issues.
For instance, reviewing articles on topics such as:
can help you assess the depth of a lawyer’s practical knowledge and determine whether the firm’s specialization aligns with your legal needs.
4. Direct Communication with the Law Firm
After identifying a few specialized law firms and reviewing their publications and services, the next step is to contact them directly.
At this stage, it is advisable to:
This stage helps establish trust and ensures that the firm has the required expertise to handle your specific case effectively and efficiently.
Conclusion
Choosing a lawyer in Saudi Arabia should not depend solely on online rankings or advertisements. It requires a strategic and informed approach — starting with the Saudi Bar Association’s official listings, reviewing the lawyer’s publications, and then communicating directly with the firm that best matches your needs.
Given the growing specialization among law firms in the Kingdom, selecting the right firm means securing the legal expertise that protects your interests and supports your business success.
The Enforcement Court represents one of the key pillars of the Saudi judicial system. It serves as the stage where judicial decisions and regulations are put into effect to uphold justice and protect rights. The court is responsible for ensuring the execution of all judicial rulings issued by various courts across the Kingdom, in full compliance with Islamic Sharia and the laws in force in Saudi Arabia.
In this article, we will take a closer look at the Enforcement Court, exploring its role, jurisdiction, and position within the overall judicial framework of the Kingdom of Saudi Arabia.
An Overview of the Judiciary in the Kingdom of Saudi Arabia
Before defining the Enforcement Court, it is important to first understand its position within the broader judicial structure of the Kingdom of Saudi Arabia.
The regular courts in the Kingdom operate on three levels:
First-instance courts
Second-instance courts (known as the Courts of Appeal)
Third-instance courts (known as the Supreme Court)
With respect to the Enforcement Court, it falls under the first-instance courts, which are classified as follows:
General Courts
Criminal Courts
Labor Courts
Commercial Courts
Personal Status Courts
Enforcement Court
The Enforcement Judge's decisions on procedural matters are typically final and not subject to appeal, except when specific exceptions are provided by law for cases involving substantive disputes.
Definition of the Enforcement Court
In brief, the Enforcement Court is the judicial authority responsible for executing judgments issued by other courts, except for cases issued by administrative and criminal courts. It is also entrusted with enforcing executive instruments such as commercial papers, notarized contracts, and arbitration awards, in accordance with the provisions and procedures set forth in the Enforcement Law issued by Royal Decree.
The Enforcement Court operates under the supervision of an Enforcement Judge, who is vested with judicial powers that enable him to oversee enforcement procedures and issue the decisions and orders he deems necessary to ensure the effective and efficient execution of judgments.
Formation of Enforcement Courts
Given the importance of Enforcement Courts and their vital role in implementing judicial decisions and rulings, the Kingdom has ensured the establishment of an Enforcement Court in most cities. In cities where no dedicated Enforcement Court exists, an Enforcement Department is established within the local court.
Each Enforcement Court is composed of several departments, each with its own jurisdiction. Every department includes one or more judges, in accordance with the regulations and directives issued by the Saudi Supreme Judicial Council.
Jurisdiction of the Enforcement Court
As previously noted, the Enforcement Court has the authority to carry out the actual enforcement process, which represents the final stage of any legal case. The following are the enforcement instruments that fall within the jurisdiction of the Enforcement Court:
Obstacles Facing the Enforcement Court in Enforcing Judgments
Despite the remarkable progress achieved by the judicial system in the Kingdom, several obstacles continue to hinder the speedy and efficient execution of judgments. The following are among the key challenges that require attention and mitigation:
Lack of legal awareness among citizens: The enforcement process is often delayed due to individuals’ lack of understanding of their legal obligations once an enforcement order is issued against them, which prolongs proceedings and delays the realization of rights.
Evasion of enforcement and the use of obstructive tactics: Such practices remain among the most significant factors that consume the court’s time and resources.
Non-compliance with court orders: The refusal or failure of convicted parties to comply with judicial orders necessitates firm judicial interventions to uphold the authority of the judiciary and ensure the proper execution of rulings.
Difficulties in proving ownership and locating assets: Challenges arise when assets are registered under other persons’ names, making it difficult to trace and seize them, and thereby complicating the enforcement process.
Enforcement Court Procedures
In line with Saudi Vision 2030 and the Kingdom’s efforts toward comprehensive digital transformation across all sectors, filing an enforcement request has become an entirely electronic process through the Ministry of Justice website.
Once the application is submitted online, the applicant proceeds to the court and visits the Judicial Office to follow up on the progress of the case. The Enforcement Judge then reviews the enforcement document to ensure its validity, completeness, and compliance with all legal requirements. The judge also verifies the applicant’s information and, upon confirmation, issues the enforcement order.
For professional assistance in submitting an enforcement request or following up on related procedures, you may contact the Mohammed Al-Khliwi Law Office, where our team will handle the entire process on your behalf with professionalism and efficiency.
Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.
If you're planning to establish a business in Saudi Arabia but are uncertain about the types of companies allowed and which structure best suits your needs, this article will help you gain a clear understanding to make the right decision.
We will focus on LLC vs SJSC in Saudi Arabia,the two most common and significant forms for entrepreneurs and investors in the Kingdom.
Since choosing the appropriate company structure is the first and most crucial step in launching any business, we’ll explore the advantages and disadvantages of each type from legal, administrative, and organizational perspectives, helping you determine the legal form that best aligns with your business needs and objectives.
Types of Companies in Saudi Arabia
Companies in Saudi Arabia vary in form and are governed by different sets of regulations. Some are subject to the Saudi Companies Law, issued by Royal Decree No. (M/132) dated 01/12/1443 AH, and these are classified as commercial companies.
On the other hand, there are companies regulated under the Civil Transactions Law, issued by Royal Decree No. (M/191) dated 29/11/1444 AH, which are referred to as civil companies.
In the following sections, we will focus on commercial companies, particularly the Simplified Joint Stock Company (SJSC) and the Limited Liability Company (LLC).
First: The Simplified Joint Stock Company (SJSC)
A Simplified Joint Stock Company may be established by one or more persons, whether individuals or legal entities. It is governed by the provisions applicable to Joint Stock Companies, except where specific rules are provided for this type.
The company’s capital is divided into tradable shares, and the company itself is solely liable for its debts and obligations. The liability of shareholders is limited to the value of the shares they have subscribed to or purchased, without extending to their personal assets.
Advantages of a Simplified Joint Stock Company (SJSC)
No minimum capital requirement: There is no legally required minimum capital to establish an SJSC.
Flexibility in share structure: The company may issue different classes of shares with varying rights, obligations, and restrictions.
Flexible management model: The company can be managed by one or more directors or by a board of directors, depending on what is stipulated in its articles of association.
No mandatory general assembly: Holding general assemblies is not required; shareholders themselves decide who will assume management and decision-making responsibilities.
Customizable governance rules: The articles of association define the quorum requirements for meetings and the voting thresholds needed to approve resolutions, providing flexibility in corporate governance.
Structure and Management of a Simplified Joint Stock Company
Full organizational flexibility: Shareholders in an SJSC have complete freedom to determine the company’s organizational and management structure, as set out in the articles of association.
Delegated powers: The chairman, director, or board of directors—as determined in the articles of association—exercises all powers granted to the chairman and board members of a traditional joint stock company, unless otherwise specified.
Incorporation requirements: The incorporation details of an SJSC are identical to those of a joint stock company, as stated in Article 140 of the Companies Law.
Defined management mechanism: The company’s articles of association must specify the management mechanism, which may include a chairman, one or more directors, a board of directors, or any other agreed-upon structure. The articles should also outline the method for appointing and removing managers and define the scope of their powers.
If these matters are not defined in the articles, they shall be determined by the shareholders.
Broad management authority: The chairman, director, or board of directors holds broad powers to manage the company and achieve its objectives, except for matters that the Companies Law or articles of association reserve for the shareholders.
Delegation of authority: The chairman or director may, within the limits of their powers, delegate specific tasks to one or more persons, provided such delegation falls within their authorized scope.
Representation before third parties: The chairman, director, or chairman of the board represents the company before courts, arbitration bodies, and other entities. The company may also authorize another party to represent it, if permitted by the articles of association.
Binding effect of management actions: The company is bound by all actions carried out in its name by its chairman, manager, or board of directors, even if such actions exceed their authority, unless the other party acted in bad faith or was aware of the misuse of authority.
Second: The Limited Liability Company (LLC)
A Limited Liability Company (LLC) is an entity established by one or more persons. It possesses a separate financial liability distinct from that of its partners or owners. The company itself is solely responsible for its debts and obligations, while the liability of the partners is limited to the value of their contributions to the company’s capital.
The owners of an LLC are referred to as members. They are partners in a business structure that provides legal protection from personal liability while allowing profits and losses to pass directly to their personal tax returns. For this reason, many businesses prefer to establish an LLC, as it provides an ideal balance between legal protection, operational flexibility, and avoidance of double taxation.
Advantages of a Limited Liability Company
Personal liability protection:
Members enjoy protection from personal liability. They are not held personally responsible for the company’s debts or legal obligations, thereby safeguarding their personal funds and assets in case the company faces legal or financial difficulties.
Flexible profit distribution:
Profits and losses are distributed among members based on mutual agreement. The distribution does not need to be equal; it follows the ratios agreed upon in the company’s articles of association or operating agreement.
Simplified establishment procedures:
Setting up an LLC involves fewer procedures and documentation compared to other business structures, making it one of the most convenient and efficient forms of incorporation.
Clear internal governance:
The written operating agreement of an LLC clearly outlines the roles, responsibilities, and powers of each member, which enhances internal organization, ensures stability, and supports the company’s long-term continuity.
Structure and Management of a Limited Liability Company
The company is managed by one or more managers, who may be partners or external appointees.
Managers are appointed by the partners—either in the articles of association or under a separate contract—for a fixed or indefinite term.
In cases where there are multiple managers, the partners may form a board of managers to supervise the company’s operations and make decisions collectively.
The articles of association or a partners’ resolution define the management mechanism, including the decision-making process and the voting majority required for resolutions, whether in appointing managers or forming a board.
Conclusion
This brings us to the end of the article.
If you would like to learn more about the Saudi corporate system or the process of establishing a company, feel free to contact us. Our team will be happy to provide you with a comprehensive package of services to support you throughout your company formation journey in Saudi Arabia.
Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.
In 2021, the Kingdom of Saudi Arabia launched the Saudi Regional Headquarters Program to Attract Global Companies as part of its broader strategy to draw foreign investment and encourage multinational corporations to establish a physical presence in the Saudi market. The initiative aims to diversify the national economy and reduce its dependence on oil revenues.
In this article, we will explore the program’s objectives, the advantages it offers to international companies.
Program Overview
The Saudi Regional Headquarters Program (RHQ) is an initiative designed to attract international companies to establish their regional headquarters in Saudi Arabia. Its primary goal is to position the Kingdom — and particularly its capital, Riyadh — as the leading destination for regional headquarters across the Middle East and North Africa (MENA) region.
The program was first conceived in 2020, when His Royal Highness Prince Mohammed bin Salman directed the Royal Commission for Riyadh City to develop and launch the initiative in collaboration with the Ministry of Investment, under the supervision of a specialized steering committee. The program was officially launched in 2021.
Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.
At its inception, the program set an ambitious target of attracting 500 regional headquarters of international companies by 2030. Remarkably, by 2025—well ahead of schedule—the program has already surpassed this goal, successfully attracting over 600 global companies.
It is worth noting that the program is supported by several key government partners, including the Ministry of Finance, the Ministry of Human Resources and Social Development, the Ministry of Commerce, the Ministry of Economy and Planning, the Local Content and Government Procurement Authority, the Zakat, Tax and Customs Authority, the General Authority for Foreign Trade, and the National Center for Government Resource Systems.
What is a Saudi Regional Headquarters?
A Saudi Regional Headquarters (RHQ) refers to an entity established by a global or multinational company in Riyadh to oversee and manage its operations across the Middle East and North Africa (MENA) region. This headquarters functions as a strategic hub that provides leadership, coordination, and support to the company’s offices, subsidiaries, and branches operating in other countries within the region.
To qualify for establishing a regional headquarters in Saudi Arabia, a company must be an international or multinational enterprise with active operations or branches in more than one country. Moreover, the RHQ in Saudi Arabia must carry out genuine administrative and managerial functions, such as human resources management, finance, sales, marketing, and regional strategic planning.
Objectives of the Regional Headquarters (RHQ) Program
Through the launch of the Regional Headquarters Program, the Kingdom of Saudi Arabia aims to achieve several strategic objectives:
Services Provided by the Program to Companies
The Saudi Regional Headquarters Program offers a comprehensive range of essential services designed to support companies across all sectors as they establish and operate their regional bases in Saudi Arabia. These services are categorized as follows:
1. Business Setup Services
The program assists companies in setting up their operations by providing temporary office spaces, housing options (such as apartments and villas) tailored to each company’s needs, and support in attracting local talent. It also offers a variety of advisory and administrative services to facilitate a smooth establishment process.
2. Logistics Services
These services cover travel arrangements and reservations, event organization, and sports or recreational activities, in addition to providing personal assistant services to ensure convenience for company executives and staff.
3. Support Services
Support offerings include business setup facilitation, provision of domestic staff, issuance of work permits for spouses, and assistance with finalizing legal and administrative procedures.
4. Consulting Services
The program also provides specialized consulting, including tax advisory, bank account setup assistance, and government relations services to help companies navigate local regulations effectively.
5. Exclusive Discounts
Participating companies benefit from exclusive discounts on a variety of services, including airlines, office spaces, housing, and educational services, further enhancing the overall value of operating within the Kingdom.
Financial Incentives for Companies
To encourage multinational corporations to participate in the Regional Headquarters (RHQ) Program, the Kingdom of Saudi Arabia has introduced a range of long-term tax exemptions designed to enhance the attractiveness of establishing regional operations in Riyadh. These incentives include:
Full exemption from corporate income tax.
Full exemption from withholding tax on payments made to non-resident related parties.
Full exemption from withholding tax on dividend payments made by the regional headquarters to its foreign parent entity (or entities).
Full exemption from withholding tax on payments made to non-resident, unrelated parties for services essential to carrying out the activities of the regional headquarters.
Available Sectors within the Program
The Saudi Regional Headquarters Program targets multinational companies operating across a wide range of sectors, including:
Professional Services
Healthcare
Communications and Information Technology
Logistics
Finance
Industry and Mining
Energy
Aviation and Defense
Construction
Education
Tourism, Hospitality, and Quality of Life
Food and Beverage
Oil, Gas, and Water
Finally, The Regional Headquarters Program represents a significant strategic initiative aimed at strengthening the Kingdom’s position as a leading business hub in the region. Its vision extends beyond merely attracting multinational companies — it seeks to create an integrated and dynamic business ecosystem that enables effective regional management and informed decision-making within Saudi Arabia.
Over the next few years, Riyadh is expected to emerge as one of the most influential business centers in the Middle East, rivaling regional powerhouses such as Dubai and Singapore in attracting and hosting global corporations.
If you are interested in joining the Saudi Regional Headquarters Program, our team is ready to assist you with all necessary procedures — handled with utmost precision and professionalism.
Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.
Saudi Arabia has recently made significant progress in diversifying its sources of income, shifting from a primarily oil-based economy to one increasingly driven by industry. This transformation is largely attributed to Vision 2030, which places industry at the core of the Kingdom’s economic strategy.
When examining the industrial sector in Saudi Arabia, the Jazan region stands out as a key area of focus. For many years, it remained outside the Kingdom’s major development plans. However, it has now emerged as one of the most important industrial hubs in Saudi Arabia, thanks to the government’s commitment to advancing its industrial and economic growth.
In this article, we will highlight the advantages of Industrial Investment in Jazan. We will also explore the opportunities available in the region and outline the steps to obtain an investment license and begin operations there.
About Jazan
Located in southern Saudi Arabia, Jazan occupies a strategic position along the Red Sea, serving as a vital gateway for global exports through its modern ports and active sea lanes. The region is also rich in natural resources, which has encouraged the government to invest heavily in developing its industrial infrastructure as part of the Kingdom’s broader economic diversification efforts.
Since the launch of these development initiatives, Jazan has made steady progress toward establishing itself as a strategic hub for advanced technologies, particularly within the industrial and energy sectors. This remarkable transformation is driven by Vision 2030, which positions Industrial Investment in Jazan as a highly attractive point for both domestic and international investors.
The Current Economic and Industrial Situation in Jazan
The ongoing transformation in Jazan—driven by strong political will—has led to remarkable economic and industrial progress. Among the most notable achievements are:
Together, these achievements illustrate how Jazan is rapidly evolving into a strategic center for industry and investment within Saudi Arabia.
Available Investment Areas in Jazan
The Jazan region presents a wide range of investment opportunities for those seeking a promising market with strong potential returns. Among the most attractive sectors for investment are:
Jazan Special Economic Zone
To further attract investors, Saudi Arabia has established the Jazan Special Economic Zone, one of the zones in the Kingdom operating under special commercial regulations. Covering mote than 24 square kilometers, the zone focuses on three key areas: food processing, metal processing, and logistics. With favorable policies and infrastructure designed to support business growth, it plays a vital role in Saudi Arabia’s economic diversification and strengthens Jazan’s position as a leading industrial hub.
Investment Privileges in Jazan
To strengthen investors’ ability to establish and expand their businesses both regionally and globally, the Kingdom has introduced a package of incentives and facilities within the Jazan Special Economic Zone. These benefits aim to create a business-friendly environment that is fully interconnected with international markets:
These privileges position Jazan as one of the most competitive destinations for industrial and commercial investment in Saudi Arabia, ensuring both cost efficiency and long-term business growth.
Licenses and Regulatory Requirements in Jazan
To establish an industrial project in Jazan or within the Special Economic Zone—investors must obtain several licenses and approvals to ensure compliance with regulatory and operational standards. The most important requirements include:
These regulatory requirements are designed to provide investors with a structured, transparent framework that promotes sustainable industrial development while aligning with Saudi Arabia’s Vision 2030 goals.
Conclusion
As an investor, be sure that the Industrial Investment in Jazan offers strong potential—particularly in the mining, food, and manufacturing sectors. By meeting the necessary investment requirements and securing the appropriate licenses, you can launch your business smoothly and securely.
At the Mohammed Al-Khilwi Office, we are here to support you every step of the way. From handling regulatory procedures to simplifying complex details, our team will ensure your investment journey in Jazan is seamless and efficient.
Disclaimer: This content is not legal advice. No liability is assumed. For legal consultation, please contact us.
Mohammed Alkhliwi Law Firm is a Saudi legal practice that serves individuals, institutions, and corporations, drawing on extensive experience in litigation and legal consultancy. The firm believes that law is not merely a set of regulations and procedures, but a powerful tool to protect rights and ensure justice. For this reason, the firm is dedicated to serving its clients with the utmost professionalism and responsibility.
