New Companies Law 2022: Corporate Governance Reimagined.

Saudi Arabia's New Commercial Companies Law (CCL 2022), enacted under Royal Decree M/132 of 1443H (2022), represents the most comprehensive overhaul of the Kingdom's corporate legal framework since the original Commercial Companies Law of 1965. Aligned directly with Vision 2030's objective of attracting foreign investment and building a competitive business environment, CCL 2022 introduces significant reforms across company formation, corporate governance, shareholder rights, and insolvency.

LLC Formation Under CCL 2022

The Limited Liability Company (LLC) remains the preferred vehicle for foreign investors entering Saudi Arabia. CCL 2022 has liberalised LLC formation significantly — minimum share capital requirements are determined by sector (not a uniform floor), and a single-member LLC is now permitted, enabling wholly-owned Saudi subsidiaries without the need for a local shareholder for most activities.

However, LLC formation now requires stricter compliance with the Ministry of Commerce (MOC) commercial registration procedures, including mandatory online registration via the MOC's platform, electronic Memorandum of Association (MoA) authentication, and integration with ZATCA for tax registration upon incorporation.

JSC Governance: The Audit Committee Imperative

Joint-Stock Companies (JSCs) in Saudi Arabia — including those listed on the Saudi Exchange (Tadawul) and the parallel Nomu market — face significantly enhanced governance obligations under CCL 2022. The mandatory establishment of an audit committee is now a statutory requirement, not merely a CMA corporate governance recommendation. The audit committee must include at least one financially literate independent member.

For listed JSCs, the CMA Corporate Governance Regulations 2017 (as amended) layer additional requirements on top of CCL 2022: minimum of two independent directors on the audit committee, charter publication, and an annual report on the committee's activities submitted to the Annual General Meeting.

Foreign Company Branches vs. Wholly-Owned Subsidiaries

Foreign companies entering Saudi Arabia under CCL 2022 face a strategic choice: register a foreign branch (requiring annual audited financial statements filed with MISA) or establish a wholly-owned LLC subsidiary (increasingly the preferred route for full operational flexibility and MISA licensing benefits).

Branch offices

A Saudi branch of a foreign company is not a separate legal entity — all liabilities of the branch are borne by the parent. MISA-registered branches are permitted for most professional services sectors. The branch must file audited accounts annually with MISA and ZATCA. Notably, branch profits are subject to 20% Corporate Income Tax (CIT) — Zakat does not apply to branches of non-GCC-headquartered companies.

LLC subsidiaries

A Saudi LLC subsidiary is a separate legal entity. The foreign parent's MISA foreign investment licence covers the subsidiary's activities. The dual Zakat/CIT regime applies: the Saudi (or GCC) shareholder portion is subject to Zakat (2.5% on the Zakat base), and the non-Saudi/non-GCC shareholder portion is subject to 20% CIT on taxable income.

The Vision 2030 Alignment

CCL 2022 is explicitly designed to support Vision 2030's FDI targets. The liberalisation of ownership requirements, the strengthening of minority shareholder protections, and the enhanced corporate governance framework collectively aim to make Saudi Arabia a credible destination for sophisticated international investors. The Regional Headquarters (RHQ) programme — which requires qualifying multinationals to establish their Middle East HQ in Saudi Arabia — operates alongside CCL 2022 to create a more attractive corporate domicile proposition.

Practical Implications for Existing Saudi Entities

Saudi entities incorporated under the previous CCL must review their constitutional documents (MoA, AoA) for alignment with CCL 2022 requirements. JSCs must ensure their audit committee is properly constituted, charted, and reporting. LLCs with multi-member structures should revisit shareholder agreements in light of the new minority protection provisions. Directors should receive formal briefings on their expanded fiduciary duties and personal liability exposure.