Everything you need to know about mixed companies under Saudi law

Mixed companies have emerged under Saudi law as part of modern systems that combine the advantages of partnerships and corporations, allowing flexibility in company management while providing greater protection for capital and attracting investments.

This article will discuss in detail the definition of mixed companies under Saudi law, their types and advantages, and the legal framework governing them, while highlighting their role in driving economic development in the Kingdom.

 Abdulaziz bin Yasser Al-Anzi Law Firm

Definition of mixed companies

Mixed companies under Saudi law are a commercial entity consisting of Saudi and foreign partners, where the system stipulates that the Saudi partner’s share shall not be less than 25% of the capital, while the foreign contribution shall not exceed 75% of the total shares. This type of company is subject in full to the provisions of the Saudi Companies Law issued by the Ministry of Commerce.

Mixed companies combine the advantages of both partnerships and corporations, and are a strategic tool par excellence for achieving Vision 2030, as they attract foreign capital and expertise, stimulate the local private sector, and create job opportunities for citizens.

under Saudi law, mixed companies have become a common model in Vision-led mega-projects, combining the power and influence of the state with the flexibility and efficiency of the private sector.

Key characteristics of mixed companies under Saudi law

1. It is a combination of government contribution and private sector contribution.
2. It combines the strategic "governmental" objective with the profit-driven "private" objective.
3. It takes the legal form of a joint-stock company.
4. It has a financial liability independent of the partners.
5. The liability does not extend to the personal property of the partners.
6. The survival of the company does not depend on the survival or lives of the partners.
7. Its shares can be traded partially or wholly on the financial market.
8. It is subject to sound governance and oversight by a board of directors.

Types of mixed companies under Saudi law

Mixed companies under Saudi law can be classified into two main types that combine the characteristics of partnerships and corporations, as follows:

1. Stock recommendation companies

It includes two types of partners: general partners who are jointly responsible for the company’s debts and obligations, and who participate in its management in an effective way, and whose shares cannot be transferred without the consent of the other partners.

Limited partners, whose responsibilities are limited to the amount of their share in the capital, do not participate in management, and their role is to finance the company, and their shares can be traded freely.

This type of company must include at least one general partner and three limited partners, and the capital is divided into shares of equal value.

2. Mixed Limited Liability Company

    

It is the most common type because of its flexibility, where the partner’s liability is limited to the amount of his share in the capital, and the number of partners in it does not exceed fifty partners.

There are restrictions on transferring shares as it requires the consent of all partners, and capital is not required to be divided into shares. Because this type of company is easy to manage, it is the ideal choice for small and medium-sized enterprises.

Steps to establish a mixed company in Saudi Arabia

The following steps should be taken when establishing a joint venture:

1. Conduct a feasibility study for the project that details the required capital, profits and losses, and the project requirements in general.
2. Determine the type of mixed company to be established.
3. Choosing a suitable name for the company that complies with the approved terms and regulations in the Kingdom.
4. Preparing the necessary documents and paperwork for establishing the company, including: articles of incorporation, shareholders' and management's rights and duties, and the company's bylaws.
5. Fill out the form for establishing a mixed professional company, submit the company registration application to the competent authorities, submit the required documents, and pay the registration fees.
6. Submitting the required licenses if the nature of the company's activity requires it.
7. Opening a bank account specifically for the company, and transferring the capital for establishing the company to it, in accordance with Saudi laws and regulations.
8. Obtaining the company's incorporation certificate and authenticating the necessary documents.

It is worth noting that the process of establishing this type of company is subject to the supervision of several government agencies, each of which has a pivotal role in ensuring that the company complies with the applicable regulations.

Among these entities are: the Ministry of Commerce, which is the primary entity responsible for issuing the commercial registration and approving the establishment of the company, and the Ministry of Human Resources and Social Development, which grants work permits to non-Saudi workers in this type of company.

Other supervisory bodies include the Capital Market Authority, which oversees mixed joint-stock companies whose shares are traded on the financial market, to ensure transparency and protect shareholders' rights.

Capital required to establish a mixed company

To establish a mixed company according to the Saudi Companies Law, its capital must not be less than 500,000 Saudi Riyals, and the shares must be distributed between the Saudi partner and the foreign partner according to specific ratios.

The Saudi partner must own at least 25% of the capital, while the foreign partner's share may not exceed 75%. These regulations are essential to ensure compliance with the legal and investment framework in the Kingdom.

Advantages of establishing a mixed company in Saudi Arabia

Mixed companies under Saudi law enjoy a range of advantages, the most important of which are:

1. It can be established simply and without complication.
2. You can increase the money or partners at any time, provided that the number of partners does not exceed fifty partners.
3. Strengthening trust between partners in joint ventures is a result of mutual knowledge between them, and this contributes to strengthening cooperation and making decisions more effectively.
4. Each partner's opinion is taken into account, and partners are given real authority in managing the company and making important decisions.
5. The partners are not obligated to pay the company's debts from their own money or personal property, as their liability is limited to their shares in the capital.
6. The death of a partner does not lead to the dissolution or dismantling of the company, thus ensuring its continuity and that it is not affected by changes in members, unlike some traditional forms of companies.
7. The large number of partners, along with the strong relationships between them, contributes to strengthening the company and building a broad network of relationships that supports future expansion and growth.

The impact of mixed companies on the Saudi economy

Joint ventures contribute to achieving the goals of the Kingdom's Vision 2030, and their importance is highlighted as follows:

1. Enhancing economic diversification and enabling the national vision

These entities contribute to the implementation of the economic diversification policy by attracting foreign direct investment and transferring knowledge and technology. This, in turn, supports the emergence of new strategic sectors and increases the contribution of the private sector to the gross domestic product.

2. Establishing an effective partnership between the public and private sectors

This type of entity represents an advanced model of partnership between the two sectors, where the government provides regulatory and legislative support, while the private sector provides operational efficiency and innovation, within the framework of infrastructure and basic services projects, with sharing of risks and obligations according to clear contracts governed by Saudi competition and corporate regulations.

3. Stimulating the investment and innovation environment

These companies constitute a safe and regulated investment channel under the Saudi Companies Law, which increases the confidence of foreign investors, encourages the introduction of modern technologies and advanced management, and supports the disclosure and governance requirements contained in the Capital Market Authority's regulations, thus protecting shareholders' rights.

Hiring a licensed law firm to establish a mixed company

The law firm is a key partner in mixed companies under Saudi law, where it assumes a comprehensive advisory and executive role.

The lawyer's role begins with providing legal advice on the optimal legal structure that suits the nature of the client's activity and objectives, taking into account the regulatory restrictions on foreign investment in certain sectors.

The office prepares and reviews the basic incorporation documents (the basic contract and articles of association) accurately to ensure their compliance with the Saudi Companies Law and the requirements of the General Investment Authority and the Ministry of Commerce, and to avoid any future disputes between the partners.

The lawyer also handles the application procedures and follows up until the commercial registration and investment license are obtained, while ensuring compliance with all regulatory and tax requirements from the beginning. This contributes to saving the client a lot of time and effort, and ensures that the establishment process is completed smoothly in accordance with Saudi regulations.

You can now contact the team.Abdulaziz bin Yasser Al-Anzi Law FirmTo ensure your company is legally established, protect your interests, and avoid future risks.

What are you waiting for?Contact us