SAUDI ARABIA: An Introduction to Corporate/Commercial

Saudi Arabia Brings Vision 2030 into Focus 

The Kingdom of Saudi Arabia (“the Kingdom”) is undergoing profound systemic and transformational change. If such a statement initially seems a bit hyperbolic, we need only consider the Kingdom’s efforts thus far to realise the goals embodied in its “Vision 2030” strategic plan. Although Vision 2030 has several stated objectives, this overview only considers those objectives that are transforming the legal landscape.

Under Vision 2030, the Kingdom intends to transform its Public Investment Fund (PIF) into the world’s largest sovereign wealth fund. The Kingdom will also encourage its companies to expand outwards across borders.

Digital services and digital transformation are to be embraced, both in terms of lessening bureaucracy and expanding the country’s telecommunications and IT infrastructure.

Corporate law 

When it comes to business and courting foreign direct investment, few statutes facilitate matters as much as a robust, well-developed and predictable body of corporate law. Hence, in January 2023, Saudi Arabia’s new Companies Law (Royal Decree No M/132) came into force.

The new law establishes a consolidated legislative framework for commercial, professional and non-profit companies in the Kingdom and introduces a new form of company, known as the “simplified joint stock company”.

The new Companies Law is a very deliberate effort to align with international best practices. As such, the new law introduces significant changes and improvements to the current framework by:

  - recognising the validity and enforceability of shareholders' agreements;

  - authorising the distribution of interim and annual dividends; and

  - allowing the issuance of different classes of shares for joint stock companies and tradable debt and financial instruments for limited liability companies.

In this respect, the new Companies Law makes the traditional limited liability company a more powerful vehicle for foreign investment. It also demystifies the joint stock company and provides a more accessible platform for foreign investors who prefer joint stock companies from a corporate governance perspective.

FDI and private sector participation 

Ultimately, Vision 2030 could perhaps be summarised as a bold set of social, environmental, and financial undertakings that look well beyond the year 2030. In light of this, one might argue that the level of investment required to achieve Vision 2030 is not only justified but necessary. The impact on the public fisc is not inconsequential, however – even for a country with a sovereign balance sheet as strong as that of Saudi Arabia.

Nonetheless, it is evident that – although Vision 2030 represents a set of national objectives – the Kingdom has no intention of going solo. To that end, laws are being adapted to ensure that the country is viewed as an attractive and friendly investment.

Consider, for example, that the board of directors of the National Center for Privatization approved the executive regulations of the Private Sector Participation Law in early 2022, thereby clarifying the regulatory framework governing the tendering and implementation of private sector participation (PSP) projects. These executive regulations set out a clear and comprehensive institutional and governance framework for PSP projects and rules governing the determination and prioritisation thereof – as well as a non-exhaustive list of PPP models, PPP tender methods, and minimum value thresholds for the application of the law. All of which give greater certainty of outcome and comfort to prospective foreign investors.

Furthermore, the Council of Ministers approved legislation establishing the Saudi Investment Marketing Authority and its governing organisational arrangements. The authority is organisationally linked to the Minister of Investment and aims, amongst other things, to:

  - improve all businesses and services related to marketing investment;

  - promote the Kingdom as an investment destination;

  - highlight investment opportunities in all sectors;

  - enhance and unify the efforts of both public and private sectors in this respect; and

  - ensure the establishment of necessary pillars to encourage and facilitate investment for the benefit of the national economy.

Local industry safeguards 

Vision 2030 recognises the need for Saudi companies to broaden their cross-border footprints. However, in terms of legal changes, the authorities also recognise that – in order to grow Saudi companies to the point where they can spread their wings and soar – they must first be nurtured and incubated in an environment that prevents them from falling prey to predatory trade practices such as dumping.

To that end, Saudi Arabia approved Royal Order No (M/60) concerning “trade remedies” in international trade. This law protects local industry from damage resulting from dumped and subsidised imports, so as to:

  - prevent an increase in imports; and

  - defend the Kingdom’s exports that are subjected to trade remedies.

The law is also comprehensive insofar as it includes oversight and enforcement powers for the authority concerned to undertake investigations/reviews, as well as imposing measures in accordance with the Kingdom’s international commitments.

Space-bound 

As alluded to earlier, the notion of Saudi companies “going out” is fundamental to Vision 2030. But just how far out?

The question remains unknown in the near term; however, we need only consider that, in 2022, the Council of Ministers approved the transfer of regulatory and supervisory competencies in the civil space sector from the Saudi Space Commission to the newly designated Communications, Space and Technology Commission.

Indeed, the importance of space exploration and exploitation to Vision 2030 is clearly evidenced by the fact that the Kingdom’s newly commissioned Higher Space Council is chaired by HRH Crown Prince and Prime Minister Mohammed bin Salman.

Telecommunications and IT 

Saudi Arabia recognises that “information” is the currency of the future and that telecommunications and IT infrastructure are the means for monetising and safeguarding such currency. As such, the recently promulgated Telecommunications and Information Technology Law (Royal Decree M/106) aims to develop the sector by encouraging digital transformation and innovation while ensuring effective usage of scarce resources.

Tourism Law 

By 2030, the Kingdom aims to become a tourist destination like no other on the planet. Considering the enormous resources being deployed in support of “giga projects” (eg, planned “smart cities” such as Neom and the Line), new laws are required to address the changing landscape. In 2022, a new Tourism Law (Royal Decree No M/18) was approved.

As per Vision 2030, the new Tourism Law adopts an all-inclusive and holistic approach whereby it aims to safeguard and develop touristic destinations and services, protect and attract tourists, streamline licensing processes, promote investments in the sector, and ensure alignment and collaboration between public and private sectors’ stakeholders.

The issuance of the new law clearly evidences the Saudi government’s commitment to turning the Kingdom into a distinguished global touristic destination.

Conclusion 

Saudi Arabia’s Vision 2030 is certainly ambitious; however, the Kingdom is proactively transforming its legal landscape to ensure that the “vision” remains in focus.