This blog post discusses in detail the process of setting up a joint stock company in Saudi Arabia. We will talk about the organizational structure, benefits, as well as requirements for starting a joint stock company in KSA. Analytix has over 15 years of experience with business incorporation in Saudi Arabia, and we will try to share our insights and knowledge for opening a Saudi joint stock company.
What is a Joint Stock Company?
A joint stock company is an organization where ownership is divided into shares, permitting individuals to have part-ownership in the company and enjoy dividends as well as losses proportionately.
Benefits of setting up a JSC in Saudi Arabia
The following points highlight the unique advantages of establishing a Joint Stock Company (JSC) in Saudi Arabia:
- Large financial resources
A joint stock company can raise capital by issuing shares and debentures to the general public. Since the company can have any number of shareholders, it is easier to increase capital.
- Limited liability
In case the company experiences losses and is shut down, the shareholders of the company will be liable for the losses only up to the amount of capital they have invested in the company.
- Scope for growth and expansion
A joint stock company can use its large financial resources to operate on a large scale, and expansion can be done by issuing new shares and debentures.
- Professional management
A joint stock company can use its resources to employ experts to manage its business and carry out operations effectively and efficiently.
- Public Confidence
A joint stock company is a legal entity that is audited every year and whose financial statements are publicly disclosed. This helps create confidence in the public about the company’s operations.
How can Analytix Help You to Set Up a Joint Stock Company in KSA?
Analytix is a consulting firm that helps investors simplify the process of establishing a joint stock company (JSC) in Saudi Arabia. Our well-versed experts provide continuous hands-on support and assistance. We make the setup smooth and simplified, offering invaluable insights to fine-tune your JSC setup in Saudi.
Documents Required for Setting Up a Joint Stock Company in Saudi
Here, we will discuss the document requirements for starting a Joint Stock Company (JSC) in Saudi Arabia. Having a clear understanding of document requirements to make the whole process better organized.
- Getting a Commercial Registration from the Ministry of Commerce and Industry (MOCI)
- Obtaining an investment license from MISA, the Ministry of Investment, Saudi Arabia.
- Drafting and having the Articles of Association (AoA) approved by MOCI and notarized.
- Opening a local bank account in Saudi Arabia.
- Mandatory registration with Wasel to get a registered local address in Saudi Arabia.
- Obtaining a Commercial Registration or business permit (CR) from MOCI which allows the JSC to conduct business activities in the country.
- Registering with the Saudi Ministry of Labor for the issuance of a local work visa.
- Register with the General Organization of Social Insurance (GOSI) to comply with the social insurance requirements of employees and fulfil Saudization criteria.
- Certain activities may require specific licensing from the relevant governmental departments, e.g., pharmaceutical companies should have a license from the Saudi Food and Drug Authority.
- JSC has to undergo authorization through a royal decree to get state assistance or undertake public sector projects, banking, or insurance activities.
Requirements for Starting a Joint Stock Company in KSA
In this section, we provide detailed explanations regarding the basic conditions for establishing a joint stock company (JSC) in the Kingdom of Saudi Arabia.
Share Capital Requirement
- Joint-stock companies (JSC) are mandatorily required to maintain a minimum share capital of SAR 500,000.
- The minimum share capital appears on the company’s balance sheet and can be used as operating cash.
- The Saudi Arabian Ministry of Investment (MISA) has specified minimum capital for different types of business activities:
SAR 30 million for real estate investment projects
SAR 500,000 for contracting
SAR 30 million for commercial activities with a commitment to invest SAR 200 million over 5 years for 100% foreign ownership. - Specific activities prescribed by MISA require either a Saudi partner/shareholder or reserved exclusively for Saudi citizens.
- After incorporation, 25% of the capital must be paid immediately, and the rest within 5 years.
- JSCs must reserve at least 10% of net profit until its statutory reserve reaches 30% of the original capital.
- Shareholders of JSCs own pre-emption rights when new shares are issued except for share transfers
Tax Requirement
- The General Authority of Zakat and Tax (GAZT) has made compulsory the registration of JSCs.
- It is mandatory to submit financial statements for auditing to maintain financial transparency.
- Withholding Tax (WHT) rates vary from 5% to 20% for JSCs.
- Zakat is applied at 2.5% of the company’s Zakat base.
- The standard VAT standard rate of 15% applies to all goods and services.
- Tax returns of SJCs from KSA are due within 120 days after the end of the financial year, which is from the 1st of January to the 31st of December.
- Delays in filing of tax returns result in fines ranging from 1% of revenue to between 5-25% depending on the degree of lateness.
- 20% corporate tax or capital gains tax is not applicable for joint stock companies in KSA.
Other Requirements
- The managers of a joint stock company (JSC) have to call at least one shareholders meeting (AGM) within 6 months of the end of the financial year to present financial statements, operational reports, etc.
- At least two shareholders are required to start a JSC. A closed JSC can have a single shareholder if it is government-owned or has a share capital of more than SAR 5 million.
- The JSC must have a board of a minimum of three and a maximum of eleven directors, including the chairman and vice chairman.
- A JSC must establish an audit committee that is independent of the board.
- A JSC can be a holding company as long as its subsidiaries do not hold shares in the holding company.
- The JSC can sponsor the residency permit of its employees.
- Transferring shares is not allowed for the first two years of incorporation.
- A constituent general assembly meeting is held to ascertain all the capital is subscribed in full and appoint the first board of directors and auditors.
- The JSC has to keep a shareholder’s register and issue share certificates.
- JSCs have the power to issue sukuks and other debt instruments which can be converted into negotiable shares.
- JSCs are authorized to buy back or mortgage their shares.
How can Analytix Help You Set Up a Joint Stock Company in KSA?
Analytix can act as your trusted partner in joint stock company (JSC) formation in Saudi Arabia. With our extensive experience and in-depth knowledge of local regulations, we offer solutions customized to your needs to simplify the setup process. From handling paperwork to strategic advising, we are here to help you every step of the way for the seamless establishment of your Saudi JSC.
Looking to Start a Joint Stock Company in Saudi Arabia?
Analytix offers strategic guidance for foreign investors setting up a Joint Stock Company (JSC) in Saudi Arabia. We help you complete the key steps, fulfil legal requirements, and claim benefits to ensure a smooth and successful establishment of your business in the Kingdom.
- FAQs
Frequently Asked Questions
If your question is not addressed here, please feel free to reach out to us. We value your inquiry.
What is an example of a joint stock company?
An example of a joint stock company is Exxon Mobil Corporation, a multinational oil and gas corporation where ownership is divided into shares held by shareholders.
What are the minimum and maximum members in a joint stock company?
In a joint stock company, the minimum number of shareholders required by law is at least two shareholders. There is typically no maximum limit on the number of shareholders.
What is the difference between a branch and a subsidiary in Saudi Arabia?
A branch is an extension of a foreign company operating in Saudi Arabia, while a subsidiary is a separate legal entity established under Saudi Arabian law. The main difference lies in their legal status and autonomy.
What is another name for a joint stock company?
A joint stock company is also known as a corporation or a public limited company. These terms are commonly used interchangeably to refer to companies owned by shareholders.
