A Joint Stock Company (JSC) in Saudi Arabia is a type of company where the capital is divided into shares, and the liability of the shareholders is limited to their respective shares. It is suitable for large businesses requiring significant capital and involves public or private ownership of shares

Benefits of Establishing a JSC

• Limited Liability: Shareholders’ liability is limited to their shares, protecting personal assets from company debts.
• Capital Accumulation: Ability to raise substantial capital through the issuance of shares.
• Transferability of Shares: Shares can be transferred, sold, or traded, offering liquidity and flexibility to shareholders.
• Credibility: JSCs are perceived as more credible and stable, which can enhance business opportunities and attract investors.
• Regulated Structure: A well-defined legal framework provides transparency and governance, ensuring compliance and protecting shareholders’ interests.

Key Requirements for JSC Formation in Saudi Arabia

1. Share Capital Requirements
   • Minimum capital of SAR 500,000.
   • At least 25% of the capital must be paid upon incorporation, with the remainder to be paid within 5 years.
   • JSCs must reserve 10% of net profits annually until the statutory reserve reaches 30% of the capital.
2. Shareholders and Governance
   • Minimum of two shareholders; a single shareholder is allowed only if the entity is government-owned or has a capital of more than SAR 5 million.
   • The board of directors must consist of 3 to 11 members, including the chairman and vice-chairman.
   • An independent audit committee must be established.
   • Share transfers are restricted for the first two years after incorporation.
3. Documentation and Legal Requirements
   • Articles of Association (AoA) must be drafted, approved, and notarized.
   • Obtain a Commercial Registration (CR) from the Ministry of Commerce and Industry (MOCI).
   • Register the company with MISA for the investment license.
   • Keep a shareholders’ register and issue share certificates.

Step-by-Step Formation Process

Pre-Setup Stage

• Reserve Company Name: Submit the desired company name for approval to MOCI.
• Legal Structure & Documentation: Prepare all required documents, including shareholder agreements and notarized AoA.
• Bank Account: Open a corporate bank account and deposit the initial capital.

Licensing & Registration

• MISA Investment License: Obtain the license to operate as a JSC.
• Commercial Registration: Apply for the CR with MOCI.
• National Address Registration: Register with National Address to get an official address in Saudi Arabia.
• Work Visa Registration: Register with the Ministry of Labor to issue employee work visas.
• Social Insurance Registration: Register with the General Organization of Social Insurance (GOSI) to meet social insurance and Saudization requirements.

Additional Approvals and Authorizations

• Activity-Specific Licenses: Certain industries, such as pharmaceuticals, require licenses from relevant authorities (e.g., Saudi Food and Drug Authority).
• Public Sector Authorization: If the company seeks government assistance or involvement in public projects, a royal decree is required.

 Tax and Financial Compliance

• Corporate Tax: JSCs are exempt from the 20% corporate tax but must pay Zakat at 2.5% of their net worth.
• VAT: A 15% VAT applies to most goods and services,
  Withholding Tax (WHT): Depending on transactions, WHT ranges between 5% and 20%.
• Financial Reporting: JSCs must submit audited financial statements annually to maintain compliance.
• Tax Returns: Filing must be completed within 120 days of the fiscal year-end (December 31). Late submissions incur penalties ranging from 5% to 25%.

Post-Incorporation Obligations

• General Assembly Meetings: Conduct an annual meeting within six months of the fiscal year-end to present financial statements and reports.
• Residency Permits: Sponsor Iqama (residency permits) for employees.
• Debt Instruments: JSCs can issue Sukuk and other debt instruments, convertible into negotiable shares.
• Subsidiaries and Holdings: JSCs can serve as holding companies, but subsidiaries cannot hold shares in the parent company.
• Share Buybacks and Mortgages: JSCs are authorized to buy back or mortgage shares under certain conditions.

Next Step

Start your Joint Stock Company in Saudi Arabia with confidence. Arab Dreams offers expert guidance through every step—from licensing to governance—ensuring a smooth and compliant formation process.


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