The Saudi Companies Law explained

Why a new law was needed

The previous Companies Law dated from 2015, and professional firms such as engineering or accounting practices had their own law. The 2022 law, approved by the Council of Ministers and issued by Royal Decree M/132, put commercial, professional and non-profit companies under one framework and modernised the rules for start-ups, investors and family businesses. It was published in July 2022 and came into force on 19 January 2023.

The five company forms

Key changes for business owners

Single-owner companies. A company may be incorporated by one person. In a single-shareholder JSC, decisions that would normally be taken by a general assembly can be issued in writing.

Share classes and investor rights. JSCs can issue ordinary, preference and redeemable shares with different rights. The law also recognises drag-along and tag-along rights, which matter in investment and exit planning.

Shareholder agreements. Article 11 allows founders and shareholders to conclude agreements regulating their relationship with each other and with the company — a significant change from the previous position, where such agreements had uncertain status.

Family charters. The same article allows a family charter regulating family ownership, governance, management, employment of family members and profit distribution. It binds the parties once adopted.

Flexible board rules. The cap on the number of board members and the cap on board remuneration were removed; the general assembly decides remuneration on fair standards.

Governance minimums for joint stock companies

The Companies Law sets rules that apply to every joint stock company, listed or not:

• Board size and term. At least three members (Article 67), each appointed for a term of no more than four years (Article 68).
• Meetings. The board must meet at least four times a year (Article 80).
• Conflicts. A board member must immediately disclose any direct or indirect interest in the company's business and contracts (Article 71), and conflicted interests require authorisation (Article 27).
• Losses. If losses reach half of the issued capital, the board must act within 60 days of learning of them (Article 132).

Listed companies must also comply with the Capital Market Authority's Corporate Governance Regulations. See the governance guide for how the rules differ by company type.

Liability of managers and directors

Under Article 28, managers and board members are jointly liable for damage suffered by the company as a result of breaches of the law or the articles of association, or of mistakes in management. The same article deals with when liability for a board decision is shared by all members and when it falls on individuals — which is why a director who disagrees with a decision should make sure the objection is recorded in the minutes. Because of this exposure, accurate minutes and a clear delegation of authority are practical protections, not formalities.

What existing companies needed to do

Companies that existed before 19 January 2023 had two years to bring their position into line with the new law, with the Ministry of Commerce and the Capital Market Authority setting the arrangements within their jurisdictions. A company whose articles have not been reviewed since the old law should check that its documents reflect the current rules and how the business actually operates.

Other laws every Saudi company should know

The Companies Law is the starting point, not the whole picture. Most companies also deal with the Commercial Register Law and Trade Names Law (in force since 3 April 2025), the Investment Law (February 2025) for foreign owners, the Civil Transactions Law (December 2023) for contracts, the Labour Law, the Personal Data Protection Law, zakat and tax rules administered by ZATCA, the Bankruptcy Law and the Anti-Concealment Law.