Reshaping the Commercial Legal Landscape: Saudi Arabia’s New Business Legislation Unpacked

In a significant step towards modernizing its commercial legal infrastructure, the Kingdom of Saudi Arabia has enacted a series of new laws – alongside their corresponding regulations and ancillary rules – collectively referred to as the “New Laws”. These reforms are designed to align the Kingdom’s business environment with global best practices, while simplifying processes and broadening investor accessibility.

The New Laws took effect on the dates outlined below, superseding the following legacy statutes:

In addition, the Ministry of Commerce (“MoC”) has, for the first time, introduced the Ultimate Beneficial Ownership (UBO) Rules (“UBO Rules”), which came into effect in April 2025. These rules are intended to bring the Saudi framework in line with the Financial Action Task Force standards.

While the New Laws and UBO Rules (collectively, the “New Legislation”) are supplemented by implementing regulations and guidance notes issued by the MoC respectively, their interpretation and application remain in early stages. We are observing a substantial overhaul of the internal procedures and regulatory systems operated by both MoC and the Ministry of Investment of Saudi Arabia (“MISA”), which is expected to facilitate a more efficient implementation of the New Legislation. However, these transitional changes have, in some instances, led to delays for businesses – especially where regulatory compliance is not proactively managed.

Below is a summary of the key developments and implications under the New Legislation:

Investment Law

In a notable departure from the previous Foreign Investment Law, the new Investment Law applies to foreign and domestic investors. While retaining several core principles from the earlier framework, the new law replaces the former ‘licensing’ regime with a ‘registration’ model, which continues to be a requirement only in relation to non-GCC investments within Saudi.

Although MISA has recently issued an investor guide detailing service requirements, the guide does not replicate the granular incorporation requirements previously detailed in MISA’s Services Manual, which remains the principal reference for foreign investors.

The Investment Law enshrines the principle of equal treatment for local and foreign investors, while simultaneously allowing MISA to identify certain prohibited or restricted activities (“Excluded Activities”) applicable to foreign investors. While the earlier Services Manual contained such a list, MISA has not yet issued a new list under the current framework. Importantly, the new regime permits foreign investors to apply for special approval to engage in an Excluded Activity – an option not previously available.

Other significant updates include formal recognition of alternative dispute resolution mechanisms and a bifurcation of legal violations into “severe” and “non-severe” categories, each subject to distinct compliance and enforcement procedures.

Commercial Registration Law

The new CR Law introduces transformative reforms, including the establishment of a unified CR system. Notably, the requirement for entities to establish branches to undertake additional activities – such as service or industrial operations – has been eliminated. Existing entities with multiple branches geography or activities are now mandated to restructure within a five-year transition period. More specifically, branches can be “converted” into legal entities (e.g., a LLC) or deregistered and combined into the “main” CR. Notwithstanding the foregoing, a foreign company may still operate in the Kingdom through a branch provided such branch is the only registered entity of the foreign company in the Kingdom.  

Additionally, the CR Law abolishes the need for periodic CR renewal. Moving forward:

• CR certificates will no longer have expiration dates; and
• Entities will instead be required to annually confirm and update their CR details as of their registration anniversary (“Annual Confirmation”) – the CR, accordingly, now also provides the date on which the next / following confirmation needs to be made. Saudi LLCs, that are owned by foreign shareholders, can encounter delay in making the Annual Confirmation if the foreign shareholders have not authorized the Manager or external counsel with specific authority to make such Annual Confirmations.

We understand that both the MISA and MoC are updating the ‘MISA Licenses’ to ‘Investment Registration Certificates’ and CR to the new format, respectively, on their own without requiring any action from the entities.

Tradenames Law

The new Tradenames Law significantly departs from its predecessor by allowing the use of non-Arabic words and combinations of alphanumeric characters in tradenames. Under the former regime, only Arabic tradenames were permissible, with English or stylized names appearing informally on letterheads or marketing materials. Entities now seeking to operate under new names must first register the tradename and amend relevant official documents accordingly. The Tradenames Law now also permits the assignment / transfer of tradenames independently of business ownership.

Ultimate Beneficial Owner (UBO) Rules

The UBO Rules require that entities subject to these rules must disclose the identity of their ultimate beneficial owners to the MoC and maintain a UBO register. Newly incorporated entities must comply at the time of incorporation, while existing entities are required to file such disclosures annually – coinciding with the Annual Confirmation process as described above.

The UBO disclosure threshold aligns generally with international norms. A UBO is defined as any natural person who, directly or indirectly:

• Holds 25% or more of the share capital;
• Exercises 25% or more of the voting rights;
• Has the authority to appoint or remove a majority of directors, managers, or the chairperson;
• Exercises de facto control over the company; or
• Acts as a representative of a legal person possessing the aforementioned attributes.

In cases where UBOs cannot be clearly identified, the company’s senior management – such as its directors, managers or chairperson – will be deemed the UBO by default. Non-compliance with the UBO Rules, including failure to maintain a register or submit disclosures, may result in administrative penalties, including fines up to SAR 500,000.

As noted, these legislative reforms are in their nascent stages and related practices, interpretations and administrative systems continue to develop. We strongly advise clients to plan proactively, ensure timely compliance and engage with counsel early to mitigate potential regulatory delays and operational disruptions.