In an attempt to address recent criticisms targeted at its complex and time-consuming registration procedures and in order to attract significant foreign investments, perceived as a means of counterbalancing a decrease in oil prices and deficit in budgets, the Saudi Arabian General Investment Authority (“SAGIA”), has embarked upon a comprehensive overhaul of the framework governing the registration of foreign companies in Saudi Arabia.
One of the most notable improvements introduced recently by SAGIA in the heels of the adoption of the new license guide in May 2015, has been the implementation of a “fast-track registration process” which is designed to make the incorporation of foreign companies easier and faster.
It is worth noting that the fast-track registration process although designed to be used in relation to all types of investments and business activities, may only be resorted to if certain criteria is met (we understand the criteria to be alternative and not cumulative) by foreign entities applying for a SAGIA license which includes:
- If the company is a multinational company.
- If the company is listed on a stock exchange either in its country of incorporation or another country.
- If the company manufactures a product that is internationally classified through a technically accredited production line.
- Small and mid-sized companies that have intellectual property rights registered in their names or that have been classified and characterized as being innovative.
- International companies that establish their regional headquarters in the Kingdom of Saudi Arabia.
- Contracting companies that have a Class 1 classification in their country of incorporation or that have undertaken a project whose value is not less that SAR. 500,000,000 (five hundred million Saudi Riyals (SAR) equivalent to US$133,333,333) with more than 2000 employees and whose total assets are not less than SAR 50,000,000 (fifty million Saudi riyals).
- Companies that that have a collaborative relationship such as a partnership or joint venture with Saudi companies qualified by a Saudi governmental authority or owned by a Saudi governmental authority or with a publicly listed Saudi company.
SAGIA has considerably reduced the number of documents required to process the registration application cutting them down from an average 13-14 to only four. They are as follows:
- Shareholders’ resolutions stating their intent to invest in the Kingdom, indicating the name of the shareholders/partners, the company’s share capital. Each shareholder’s percentage shareholding, the company’s activities and its head office. The resolutions should also indicate the name of the company’s general manager, specify his powers and be authenticated and legalised up to the Saudi embassy in the relevant country.
- A copy of the company’s commercial register certificate (or certificate of incorporation) legalised up to the Saudi embassy in the relevant country.
- A copy of the company’s Articles of Association legalised up to the Saudi embassy in the relevant country.
- Written evidence showing that the above requirements are met.
- A power of attorney granted by the company to a Saudi law firm or a service agency or to the general manager legalised up to the Saudi embassy in the relevant country.
SAGIA has also laid down the requirements in terms of the minimum capital requirements and percentages of Saudi share ownership for each type of activity open to the fast track registration process. The below table summarizes those requirements and percentages:
Minimum Saudi Ownership Percentage
|Minimum Capital (SAR)||License Type|
Foreign investor’s share not less than SAR.20,000,000 and percentage shareholding not to exceed 75%
|30%||–||Telecoms’ Value Added Services|
|40%||200,000,000||Real Estate Finance|
|–||The value of each single project may not be less that SAR.30,000,000 in land and constructions outside of the boundaries of two holy mosques.||Real Estate Development|
|25%||–||Engineering, Procurement, Construction (EPC)|
Lastly, SAGIA has indicated that the time frame to complete the fast-track registration process is five working days from the day the application together with all supporting documents are filed on SAGIA’s website (e-services’ gate).
Although the fast-track registration process represents a significant step forward, it remains to be seen in practice whether SAGIA will finalise the review of licensing applications within the indicated time frame so as to make good on its promise to make licensing of foreign entities in Saudi Arabia a straightforward and swift exercise, and ultimately make the Kingdom of Saudi Arabia an attractive destination for foreign investors.
|Title:||SAGIA implements a fast track registration process
in a bid to attract sizable foreign investments
|Practice:||Corporate and M&A, Commercial|