In the business world, a company's success depends not only on good management or strong marketing, but also on legal compliance and sound risk management. This is why it's crucial for a company to hire a reputable law firm, which will be primarily responsible for protecting the company's interests and ensuring its operations comply with applicable laws and regulations.

But is hiring a permanent in-house lawyer the best option? Or does hiring a specialized law firm offer the company broader protection, more comprehensive expertise, and lower costs? This is what we will explore in this article.

The Importance of Hiring a Specialized Law Firm to Protect Your Company

In today's rapidly changing and highly complex business world, legal protection is no longer an option but an essential element for any company, regardless of its size or activity. With the increasing number of laws and regulations governing various business activities, an experienced legal representative is needed to defend the company and protect it from potential risks.

Hiring a law firm provides you with a range of advantages, all aimed at protecting the company's interests and helping it achieve its goals and ensure continuity. These advantages include:

- Preparing for Risks Before They Occur

Anticipating and mitigating legal risks before they escalate is achieved through proactive risk reduction strategies. This proactive approach protects the company from significant financial losses and helps safeguard its reputation in the event of any problem. This is difficult to achieve with a single lawyer within the company, compared to a comprehensive legal team within a law firm possessing diverse and specialized expertise.

- Identifying and Assessing Potential Risks

Through a comprehensive legal review of the company's status, activities, and business operations, and by studying the legal implications of administrative decisions before they are made, and by monitoring all changes occurring in the market, the law firm can accurately assess risks and determine how to address them, even uncovering any potential vulnerabilities to prepare for them.

- Developing Effective Compliance Programs

Designing and implementing compliance programs tailored to the company's nature is one of the most important roles of a law firm. These programs aim to ensure compliance with laws and minimize or at least reduce risks. They include company policies, employee training on compliance with regulations and systems, the establishment of oversight mechanisms, the provision of secure channels for reporting any legal violations, and the definition of procedures for handling such violations.

This is a key strength of a law firm: it ensures you benefit from accumulated expertise across multiple sectors, compared to relying on the limited judgment of an individual lawyer, no matter how experienced that lawyer may be. - Periodic Auditing

Continuous monitoring is one of the strong services that law firms provide to companies. This is achieved through establishing standardized procedures for periodic legal reviews to ensure the validity of contracts, intellectual property rights, compliance with labor regulations, and other procedures that guarantee the detection and resolution of problems in their early stages before they escalate into major legal disputes.

- Legal Support for the Board of Directors

Thanks to the expertise of the law firm, it can provide comprehensive support to the company's senior management by offering sound legal advice when making any decision. This prevents the company from encountering legal problems with negative consequences. Providing correct legal advice and opinions in various situations ensures the protection of the company's interests and enhances its stability and continuity.

- Crisis Management

Contracting with a law firm is a necessity, not an option. You will need them when any legal problem arises. They will handle the entire process, from organizing paperwork to complying with judicial authorities, mediation, or arbitration, according to the situation, to provide effective solutions that protect the company's interests.

Here, a law firm gives you the advantage of rapid action with a complete team in the event of a crisis, instead of burdening a single in-house lawyer with responsibilities beyond their capacity and ability to handle.

How to Choose the Right Law Firm

Your choice of a law firm to entrust with your business should not be arbitrary. It should be a well-considered decision based on the following:

(1) Experience

The firm must possess sufficient experience, be familiar with all the regulations and bylaws pertaining to the company's activities, and stay up-to-date with all legal developments. It should also be capable of handling various legal aspects of companies, such as commercial registration, incorporation procedures, intellectual property rights protection, company liquidation, mergers and acquisitions, and so on.

(2) Ability to Manage Cases

Naturally, companies need a law firm capable of managing multiple cases simultaneously. This is due to the numerous legal issues and requirements that arise during a company's operations. Multiple cases may occur at once, or official documents may need to be notarized in various areas. Therefore, the firm's ability to manage cases professionally and meticulously is paramount for companies.

(3) Deep Understanding of the Corporate Environment

A law firm must possess a practical understanding of the nature of business operations and be able to leverage its legal expertise in alignment with the company's goals and aspirations, supporting its growth and sustainability plans.

(4) Strong Communication Skills

Law firm representatives must possess the ability to build successful professional relationships with clients, along with strong listening and analytical skills, critical thinking abilities, and other skills that enable them to win cases of all types.

Why is hiring a law firm better than hiring an in-house lawyer?

Lower Operating Costs

Hiring a law firm eliminates the need for a fixed monthly salary, social security contributions, and ongoing administrative expenses. Furthermore, it provides a higher level of professionalism in all legal services.

A Complete Team Instead of Relying on One Person

A law firm allows you to benefit from a complete team with diverse expertise and specializations, unlike relying on a single lawyer who may lack sufficient experience or be unable to cover all the legal aspects the company requires. Diversity of Specializations

A law firm possesses expertise in multiple areas, such as company formation, contract drafting, and various types of dispute resolution, ensuring efficient handling of every case.

Continuous Legal Support Without Administrative Burdens

Hiring a law firm guarantees you access to legal support whenever you need it, without placing unnecessary operational or administrative burdens on your company.

Services Tailored to Your Stage

Hiring a law firm offers greater flexibility in the legal services provided to your company. Services are tailored to the scope of work and the company's actual needs, whether during the establishment or expansion phases.

Finally, if your company is located outside Riyadh and you believe you are limited to finding a corporate lawyer within your geographical area, let us assure you that this is no longer the case. Whether your company is in Riyadh or elsewhere, you can comfortably search for the best lawyer in Riyadh, the best lawyer in Jeddah, or the best lawyer in the Kingdom and meet with them to learn about the services they offer. With technological advancements and the digital transformation of legal services, geographical location is no longer an obstacle to hiring a specialized law firm, even if they are located in another city or country. Through modern technologies and digital communication channels, legal consultations, contract reviews, legal file management, and communication with relevant parties can be provided remotely with high efficiency, eliminating the need for physical presence in the same city or country. This ensures greater flexibility and speed in service delivery and the provision of continuous legal support at any time.

Therefore, regardless of your geographical location, contact us at the Mohammed Al-Khliwi Law Firm. We are capable of representing your company wherever it is located and dealing with official entities and clients throughout the Kingdom.

In conclusion, contracting with a law firm is essential to ensuring integrity within your company, enhancing transparency, and protecting your company's interests. Let us be your legal partner, supporting your decisions with confidence and professionalism, keeping pace with your business development, supporting your expansion plans, protecting your reputation and rights at every stage, and providing you with practical legal solutions tailored to your company's needs and future plans.

Disclaimer: The above content does not constitute legal advice, and the firm assumes no legal responsibility. For legal consultations, please contact us.

Commercial contracts are the foundation upon which commercial transactions between individuals and companies are based. They provide the legal framework that governs these relationships and clearly defines the rights and obligations of each party. With the increase in commercial activity in Saudi Arabia and the remarkable economic development in recent years, it has become essential to understand everything related to commercial contracts in detail.

In this article, we will learn about commercial contracts in the Saudi system, their most important regulations, provisions, and conditions for validity, and everything related to commercial contracts for a successful and sound business transaction.

What is the definition of commercial contracts in the Saudi Law?

In reality, there is a misunderstanding, or rather a misinterpretation, of the concept of commercial contracts. Most people believe that commercial contracts are a separate category of contracts with their own distinct commercial nature, completely different from civil contracts. However, the truth is that commercial contracts are the same as civil contracts in the Saudi system and do not differ in their principles and the foundation upon which they are based.

What determines that a contract is commercial and not civil is its purpose, meaning it must be for a commercial purpose. Additionally, the nature of the parties and their relationship must be based on a commercial interest. This is what gives it its commercial character and makes it subject to the provisions governing commercial transactions.

Essential Elements and Clauses in Commercial Contracts

For a commercial contract to be legally valid and enforceable, it must contain the essential elements of a contract, which are the fundamental conditions for its formation and validity. These elements are: (consent, subject matter, and cause). There are several necessary clauses that the contract must include, which define the rights and obligations of all parties. These are as follows: - Identification of the contracting parties: This involves clearly defining the status of each party, whether they are individuals, companies, or government entities.

- Subject matter of the contract: This requires a clear and detailed formulation of the nature of the service or product being contracted for.

- Financial consideration: The contract value, payment methods, and agreed-upon payment dates must be clearly and in detail specified.

- Contract duration: The contract's start and end dates must be included, along with any renewal terms and procedures. - Termination and Cancellation: Clarifying the circumstances under which a contract may be terminated before its expiry date, the resulting consequences, and the rights of each party.

- Dispute Resolution: Specifying the competent authority for resolving disputes, which is agreed upon by the contracting parties, whether arbitration or litigation.

- Obligations: Defining the obligations of each contracting party and clearly outlining their responsibilities and assigned tasks.

- Force Majeure: Explaining the exceptional circumstances that may occur and how to address and regulate them.

Omitting or ignoring any of these clauses invalidates the contract and may lead to unnecessary financial losses, problems, and disputes. Therefore, it is essential to ensure that all these clauses are properly covered as outlined.

Types of Commercial Contracts

Commercial contracts in the Saudi legal system vary according to the nature of the commercial activity and the purpose of the contract. These diverse contracts form the foundation upon which commercial relationships are built in an organized and sound manner. The following are the most important commercial contracts and the role of each:

Sales Contract

This is the most common of the commercial contracts. It is based on an agreement whereby the seller commits to transferring ownership of the goods or services to the buyer in exchange for an agreed-upon sum of money specified in the contract. The sales contract also includes the quantity, methods of delivery, payment terms and methods, and payment dates agreed upon by both parties.

Lease Contract

As its name suggests, this contract regulates the rental of properties or premises for commercial activities in exchange for a specific rent and for a specific period. The contract includes the lease term, the rent amount, and any other matters agreed upon by the parties on a case-by-case basis.

Construction Contract

This contract is used to regulate the relationship between a contractor and a client. It defines the mechanism for executing a specific project, such as construction, maintenance, and installation work. The contract clearly defines the service, the agreed-upon timeframe for completion, the required specifications, and the project cost.

Supply Contract

This contract is used to regulate the relationship between suppliers and clients. It obligates the supplier to provide the agreed-upon products or services to the other party under predetermined conditions, which include quantity, specifications, quality, price, and so on. Distribution Agreement

This agreement grants its holder the right to distribute the products of a specific company within a defined geographic area. The agreement outlines the distribution terms, sales objectives, the obligations of both the distributor and the company, and the rights of each party.

Partnership Agreement

This agreement regulates the relationship between two parties involved in a single business activity. It specifies each party's contribution percentage, the methods for dividing profits and losses, and the authority of each partner. This type of agreement is common in projects that rely on diverse expertise or capital.

Agency Agreement

This agreement grants its holder the authority to conduct business transactions and procedures on behalf of another party. The principal authorizes the agent to perform a set of tasks on their behalf, and these tasks and authorities are precisely defined in the agreement.

Franchise Agreement

This agreement, also known as a franchise, allows a party to use a brand and build a complete business system based on it in exchange for a specific fee. The agreement obligates the franchisee to adhere to the brand's operational standards, and the fee is clearly defined.

Financing Agreement

This agreement aims to provide financial support for business activities. It includes the financing amount, repayment methods, and the necessary guarantees for obtaining the financing. Consulting Contract

This contract is used when providing specialized investment services to help companies develop their businesses. It specifies the work location, contract duration, and fee.

Finally, commercial contracts in their various forms represent the cornerstone of regulating commercial transactions, defining the relationship between parties, clarifying and specifying shared objectives, and protecting the rights of each party.

Documenting Commercial Contracts In the Saudi law :

Although notarization is not a prerequisite for the validity of a contract—as a contract is valid and produces its legal effects as soon as the parties sign it (provided its essential elements and conditions are met)—the contract is the law between the contracting parties.

However, the importance of notarization lies in its being a fundamental and necessary procedure for contracts that are eligible for notarization. Notarization grants the contract enforceability before official authorities, and without it, some contracts are not recognized.

The following are the steps for notarizing commercial contracts in the Saudi legal system:

- Agreeing on the contract terms and drafting them precisely to define the rights and obligations of each party.

- Reviewing the contract with a notary public to ensure its compliance with applicable laws and regulations, or notarizing it through the designated contract notarization platform.

- Paying the prescribed fees.

- Officially approving the contract to make it notarized and recognized by all official authorities.

You can contact us at Mohammed Al-Khliwi Law Firm office to handle all these steps on your behalf, ensuring speed and accuracy without the hassle of following up on each step yourself.

Disclaimer: The above content does not constitute legal advice, and the office assumes no legal responsibility. For legal advice, please contact us.

Throughout their journey in the business world, companies face various financial crises. They may experience minor financial difficulties that can be remedied, or sometimes the crisis may escalate to the point of declaring bankruptcy. Regardless of the reasons leading to bankruptcy, a company reaching this stage requires a legal system and structure that regulates the relationship between the company and its creditors.

Therefore, in this article, we will learn about bankruptcy in the Saudi system, how corporate bankruptcy is handled, and how Saudi Arabia has managed to establish a flexible system that supports companies to continue operating and helps them recover, while also guaranteeing creditors their full rights.

What is meant by the term bankruptcy?

Corporate bankruptcy is a financial situation in which a company is unable to fully repay its debts, whether due to a lack of liquidity or because the debts have become greater than the value of the assets. It is a legal status for a debtor who is either in default or bankrupt. A defaulter is a debtor who faces current or anticipated financial difficulties that prevent them from repaying their debts on their due dates. A bankrupt debtor, on the other hand, is one who has stopped repaying their outstanding debts.

Here, legal intervention regulates the relationship between the company and its creditors, helping the company recover, overcome the crisis, and continue its operations, or liquidating its business if that is the only viable option. On the other hand, it also prevents the company from evading its debts and compels it to repay all debts to creditors in a legally regulated manner, overseen by a specialized committee.

Bankruptcy Law in the Saudi System

The Saudi Bankruptcy Law was issued by Royal Decree No. (M/50) dated 28/5/1439 AH, following approval by the Shura Council and the Council of Ministers. With the issuance of this law, previous related regulations were repealed.

The law primarily aims to improve the business environment, attract foreign investment, and achieve a balance between creditors' rights and enabling companies to continue their operations. This is accomplished by regulating bankruptcy procedures and handling the entire process legally. The law supports companies in all procedures, including preventative settlement, financial reorganization, and administrative liquidation.

Bankruptcy Procedures in the Saudi System

The Saudi Bankruptcy Law establishes a set of fixed and integrated procedures to protect the rights of both companies and creditors. These procedures are summarized in seven main steps for dealing with a bankruptcy crisis:

(1) Preventive Settlement: This allows the company the opportunity to settle debts with creditors through negotiation. During this stage, the company continues to operate normally.

(2) Financial Reorganization: This procedure aims to enable companies to restructure their financial obligations and reach an agreement with creditors. The procedure is carried out under the supervision of the Financial Reorganization Trustee.

(3) Liquidation: This involves identifying and determining all debts, selling assets, and distributing the proceeds to creditors. The distribution is carried out according to the priority set by the Bankruptcy Law, and the debt distribution process is supervised by the Liquidator.

(4) Preventive Settlement for Small Debtors: This procedure ensures that the debtor settles their debts easily by reaching an agreement with creditors.

(5) Financial Reorganization for Small Debtors: This procedure aims to reach a flexible agreement between small debtors and creditors to help the debtor reorganize their business.

(6) Liquidation for Small Debtors: This procedure aims to sell the debtor's assets and distribute the proceeds to creditors in an organized manner. This procedure is carried out under the supervision of a competent trustee.

(7) Administrative Liquidation: This procedure focuses on selling assets whose value may not be sufficient to repay debts. The procedure is implemented by the Bankruptcy Committee.

Benefits of Complying with the Saudi Bankruptcy Law for Companies

The bankruptcy law is not only a legal framework that regulates the relationship between companies and creditors, but it is also a highly supportive system that transforms financial distress and severe crises from a real threat to the company's existence into a stage that can be easily overcome. Therefore, your company's compliance with the bankruptcy law provides it with a range of benefits and advantages, most notably:

First: Legal Protection

Entering the bankruptcy proceedings leads to the suspension of individual claims and lawsuits filed against the company, giving it more time to reorganize its affairs without pressures that would exacerbate the situation.

Second: Ensuring Continuity

The procedures established by the system, such as judicial marketing and financial reorganization, allow the company to continue operating instead of ceasing or closing suddenly.

Third: Flexible Debt Repayment

Adherence to the system's provisions regarding debt scheduling, distribution, and repayment methods, as well as reaching agreements with creditors, achieves a fair balance between the company's interests and those of its creditors.

Finally, remember that bankruptcy does not mean the end of a company, especially with the flexible procedures and provisions offered by the Saudi Bankruptcy Law, which ensure business continuity and guarantee creditors' rights.

If your company is experiencing financial difficulties or is even on the verge of bankruptcy, contact us in Mohammed Al-Khliwi Law Firm office to assist you in easily completing all the procedures stipulated by the system, tailored to your company's size and financial situation.

Compliance with the Saudi Bankruptcy Law does not mean the end of the company; rather, it represents a strategic tool for protection, restructuring, and business sustainability within a clear and fair legal framework.

Disclaimer: The above content does not constitute legal advice, and the author of this article assumes no legal responsibility. For legal advice, please contact us.

The Saudi Labor Law is one of the most comprehensive and integrated legal systems in the region, distinguished by its organization and precision in regulating the relationship between the employee and the employer. It aims to achieve balance and ensure justice and the protection of rights in the workplace.

The Labor Law sets out clear and detailed regulations that define the employee’s rights in every case of employment termination—whether by mutual agreement, dismissal, unfair dismissal, resignation, or reaching the retirement age. In all these cases, the Saudi system guarantees the employee’s full rights to ensure their financial and social security even after the termination of their employment.

Below, we will explain in detail each case of employment termination, along with the rights and regulations governing it under the Saudi Labor Law.

Types of Employment Contracts in the Saudi Labor System

Before explaining the types of employment relationships, it is important to first understand some of the most important types of employment contracts under the Saudi system, which are classified into three main categories:

• Fixed-term employment contracts: These contracts automatically terminate upon the expiration of the period specified in the agreement.
• Indefinite-term employment contracts: These contracts remain in effect until one of the parties decides to terminate them in accordance with the applicable legal procedures.
• Project-based employment contracts: These contracts end upon the completion of the specific work or project agreed upon in the contract.

Cases of Termination of Employment in the Saudi Labor System  

Employment may be terminated in several ways, each governed by specific regulations and legal provisions. Below, we discuss the cases of employment termination and the legal details of each according to the Saudi Labor Law.

First: Termination upon Expiration of the Contract Term or Completion of Work

Fixed-Term Contract:
Article 74 of the Labor Law outlines the circumstances under which employment is terminated upon the expiration of the contract term, as follows:

1. When both parties agree to terminate the contract, provided that the employee’s consent is given in writing.
2. Upon the expiration of the period specified in the contract, unless the contract has been explicitly renewed in accordance with the provisions of this Law—in which case it continues until its new expiration date.
3. When either party wishes to terminate an indefinite-term contract.

4. Upon the employee reaching the retirement age, which is sixty years.
5. Force majeure refers to a cause beyond the control of either party to the contract that makes it impossible for one or both parties to fulfill their obligations. Examples include an earthquake resulting in the complete collapse of the facility, an employee suffering a disability that prevents them from performing their work, and other similar situations.

The parties to a fixed-term contract may agree to renew the contract for another period; in such a case, the fixed-term contract terminates upon the expiration of the renewed period, provided that the following conditions are observed:

• Employment contracts for non-Saudis must always be in writing and for a fixed term.
• For Saudi employees, if a fixed-term contract is renewed three consecutive times, or if the duration of the original contract combined with the renewal periods reaches four years (whichever is shorter), and both parties continue to perform under the contract, it shall be deemed an indefinite-term contract.

Indefinite-Term Contracts:

Regarding indefinite-term contracts, Article 75 of the Labor Law stipulates that if the contract is for an indefinite period, either party may terminate it for a legitimate reason, which must be stated in a written notice given to the other party prior to termination.

If the party terminating the contract fails to observe the required notice period, they shall be obligated to pay the other party compensation equivalent to the worker’s wage for the notice period, or the remaining portion thereof. The worker’s last wage shall be used as the basis for calculating the compensation for employees who are paid on a time-based system.

For workers who are paid on a different basis, the provisions of Article 96 of the Law shall apply, which states:

1. If the worker’s wage is determined on a piece-rate basis, the average wage received by the worker for their actual working days during the last year of service shall be used for calculating any rights due under this Law.
2. If the worker’s wage consists entirely of commissions or similar variable amounts, the average daily wage shall be calculated based on the total amount received by the worker divided by the number of actual working days.

However, if the termination of employment occurs for an unlawful reason, the party harmed by such termination shall have the right to compensation, which shall be determined by the Labor Disputes Settlement Committee, taking into account both material and moral damages incurred—whether actual or potential—as well as the circumstances surrounding the termination.

Notice Period: 

The notice period is the legally prescribed duration during which an employee must continue working after being notified of the termination of their contract, or during which the employer must retain the employee after the employee decides to terminate the contract.

According to Article 75 of the Saudi Labor Law, the length of the notice period varies depending on the type of contract concluded between the two parties:

• For indefinite-term contracts: The notice period is typically 60 days for employees paid on a monthly basis and 30 days for other workers.
• For fixed-term contracts: The notice period does not apply unless the contract specifically includes a clause stipulating otherwise.

Secondly: Termination by Mutual Agreement between the Two Parties

In this case, both parties to the contract agree to terminate the employment relationship. It is required that the employee’s consent to the termination be in writing, as this serves as the most reliable form of proof. This written consent enables the employer, in the event of a dispute and the employee’s denial of having agreed to the termination, to present the written document as evidence of mutual agreement, unlike other less definitive methods of proof.

Thirdly: Termination of Employment by Dismissal

There are two types of dismissal: lawful dismissal and unfair dismissal, each governed by specific conditions and resulting in different employee entitlements depending on the circumstances.

(1) Lawful Cases of Dismissal

Article 80 of the Saudi Labor Law stipulates that an employer may not terminate an employee’s contract without compensation, notice, or severance pay except in the following cases, provided that the employer gives the employee the opportunity to present their objections to the termination. The article lists the legitimate grounds for dismissal as follows:

• Assaulting the employer, the responsible manager, or supervisors during work.
• Failure to fulfill obligations or comply with legitimate orders.
• Intentionally disregarding safety instructions at work.
• Misconduct or committing an act that violates honor or integrity.
• Intentionally causing material damage to the employer.
• Resorting to forgery to obtain the job.
• Termination during the probationary period.
• Absence without a valid reason for more than 30 days in one year or 15 consecutive days.
• Misusing one’s position for personal gain or disclosing industrial or commercial secrets related to the work.
• In such cases, the employee is not entitled to any rights or notice prior to dismissal.
• The article also specifies that the employer must allow the employee to present their objections before termination. This ensures fairness and protects the worker’s rights in accordance with the principles of justice outlined in the Labor Law.

(2) Unfair Dismissal 

Unfair dismissal is one of the most concerning issues for employees, as it results in job loss without legitimate cause. It occurs when the employer terminates the employment contract without a lawful reason. For this reason, the Saudi Labor Law includes provisions guaranteeing fair compensation for unfair dismissal to protect the employee’s rights and compensate them for the damages suffered as a result of wrongful termination.

• The most common causes and motives for unfair dismissal include:
• Dismissal for expressing an opinion or due to conflicts with subordinates.
• Dismissal for requesting annual or sick leave.
• Dismissal due to marriage, pregnancy, or childbirth.
• Dismissal due to personal incompatibility between the manager and the employee.
• Top of Form

Rights of an Employee Who Has Been Unjustly Dismissed

Articles 77 of the Saudi Labor Law stipulate that an employee who has been unjustly dismissed is entitled to compensation for the damages suffered as a result of the termination of their employment without a legitimate reason. The amount of compensation is calculated according to the following rules:

• For indefinite-term employment contracts: The employee is entitled to compensation equivalent to 15 days’ wages for each year of service with the employer, provided that the compensation is not less than two full months’ wages.
• For fixed-term employment contracts: The employee is entitled to compensation equivalent to the wages for the remaining period of the contract, provided that the compensation is not less than two full months’ wages.

For an employee who has been unjustly dismissed to be eligible for these rights, the following conditions must be met:

1. The dismissal must be unjust, meaning that the employer did not have any legitimate reason for terminating the employment.
2. There must be a valid employment contract between the employer and the employee, whether in written or electronic form. In the absence of a contract, proof of salary payment must be provided through any means, such as bank transfers or payment receipts.
3. The employee must not have left the job voluntarily without any action or decision from the employer.

Therefore, employees are strongly advised not to leave their jobs unless they receive a written dismissal notice from the employer, and not to rely solely on verbal notifications from a manager or the company owner.

Fourth: Termination of Employment by Resignation     

Resignation is one form of employment termination based on the employee’s desire to end the contract. It is a right guaranteed to employees by law, in accordance with the principle of freedom of will in terminating the contractual relationship. In this case, the employee ends the employment contract voluntarily by submitting a written request to the employer expressing their intention to leave the job.

According to Article 79 of the Saudi Labor Law, for a resignation to be valid, it must be submitted in writing, and it is required that the employee submit it in person or through a legal representative to ensure its authenticity.

It is noted that a resignation becomes effective upon the expiration of the statutory notice period stipulated in Article (75). However, the point of contention lies in the extent of the employer’s acceptance and its effect on the resignation.

However, in the case of a conditional resignation—that is, when an employee resigns due to abuse, mistreatment, or the employer’s violation of the contract terms—Article 81 grants the employee the right to leave work without prior notice while retaining all statutory rights. 

Fifth: Termination of Employment upon Reaching Retirement Age

Another reason for the termination of employment is the employee reaching the retirement age. According to Article 74 of the Labor Law, the retirement age for both male and female employees is 60 years. The retirement age may be lowered in cases of early retirement as stipulated in the work regulations.

If the employment contract is for a fixed term, and its duration extends beyond the retirement age, then in this case, the contract terminates upon the expiration of its term.

End-of-Service Gratuity

Article 84 of the Saudi Labor Law defines the end-of-service gratuity as a sum of money paid by the employer to the employee upon the termination of their service or the expiration of their employment contract, whether fixed-term or indefinite. This payment is based on specific criteria and conditions, calculated according to the employee’s last salary, as a token of appreciation for their efforts and as compensation for their period of service. It is considered a fundamental financial right of the employee, guaranteed by the Saudi Labor Law, and cannot be waived or forfeited under any agreement.

The gratuity is calculated according to the type of employment termination, with each case having its own specific rules and criteria, as follows:

1. In case of contract termination or lawful  termination by the employer :
   • Half a month’s salary for each year of service during the first five years.
   • A full month’s salary for each year of service thereafter.
2. In case of resignation:
   • If the service period is less than two years: No gratuity is due.
   • If the service period is from two to five years: One-third of the gratuity.
   • If the service period is from five to ten years: Two-thirds of the gratuity.
   • If the service period is more than ten years: The full gratuity.

Exception: Working women who terminate their contract within six months of marriage or three months of giving birth are entitled to the full gratuity, regardless of the length of service.

3. In case of unfair dismissal:
   • The employee is entitled to the full end-of-service gratuity as stipulated in Article 84, in addition to compensation for the unfair termination.
4. In case of death or disability:
   • The employee (or their heirs) is entitled to the full gratuity, regardless of the length of service.

Conclusion

In conclusion, after outlining and detailing the provisions governing the termination of employment under the Saudi Labor Law, it is essential to understand your rights clearly.
If you require further clarification, or if you are involved in a dispute and are uncertain about how to claim your rights, we in Mohammed Alkhliwi Law Firm can help you complete the procedures properly and lawfully, ensuring that you receive all your entitlements, including your end-of-service gratuity.

Disclaimer: The above content does not constitute legal advice, and the author of this article assumes no legal responsibility. For legal advice, please contact us.

Registering employees in social insurance is not optional; it is a fundamental pillar in protecting employee rights, enhancing job security, and achieving a stable work environment, as stipulated by the Saudi Labor Law.

Due to the importance and sensitivity of this topic, this article will cover everything related to social insurance in Saudi Arabia, including registration procedures, employer contribution rates, and insurance coverage for both Saudi and non-Saudi employees.

What is social insurance in Saudi Arabia?

Social insurance in Saudi Arabia is a system established by the General Organization for Social Insurance (GOSI), which was founded by Royal Decree No. (M/22) dated 6/9/1389 AH (corresponding to 15/11/1969 AD). Its insurance, social systems and legislation have since evolved to protect employees in both the private and public sectors, whether Saudi or foreign.

GOSI is committed to ensuring the financial stability of employees and protecting their families upon retirement, in cases of disability or death, and in the event of any work-related risks, accidents, or injuries. The General Organization for Social Insurance (GOSI) requires all employers to register their employees with social insurance and pay the monthly contribution rate determined by GOSI. This rate is equal to or greater than the percentage deducted from the employee's salary. Penalties and fines are imposed on any company or employer who fails to comply with this system or commits violations against their employees.

What are the employer's contribution rates?

GOSI has specified, in its regulations and bylaws, the monthly contributions that employers must pay for their employees, based on the employee's salary and the type of insurance applied to them. Generally, however, the contributions are calculated as follows:

For Saudi employees:

(1) Social Insurance Contributions: A specific percentage is deducted from the employee's salary, as determined by GOSI, and the employer is required to pay a similar percentage from their own account to the Social Insurance fund.

(2) Pension Insurance (retirement, non-occupational disability, and death): In the case of retirement, 9% is deducted from the employee's monthly salary, and the employer is also required to pay 9%.

(3) Occupational Hazard Insurance (work-related injuries and occupational diseases): 2% of the monthly salary is the employer's responsibility.

(4) Unemployment Insurance (SANED): The employer and the employee each contribute 0.75%.

Therefore, the total contribution borne by the employer for a Saudi employee is 11.75% (9% pension + 2% occupational hazard + 0.75% SANED). The total contribution for Saudi employees is 9.75% (9% pension + 0.75% unemployment insurance).

For foreign employees:

The mechanism differs for foreign employees. Contributions are limited to occupational hazard insurance, with the employer only responsible for a 2% fee. Foreign employees are not required to pay any contribution.

What happens if an employer fails to register employees with social security?

To ensure that companies and employers comply with its regulations and bylaws, the General Organization for Social Insurance (GOSI) has established a set of penalties to protect workers' rights and ensure fairness in the workplace. These include:

(1) Financial penalty: A financial penalty is imposed on the employer if they are late in paying social security contributions or fail to register employees.

(2) Retroactive registration: GOSI requires the employer to register the employee retroactively from the date they actually started work and to collect all contributions due for that period.

(3) Late payment penalties: In addition to the basic penalty for the violation, a late payment penalty is imposed on contributions that were not paid on time, at a rate of 2% per month of the outstanding contributions.

(4) Penalty for disbursing compensation without entitlement: If the violation (such as failing to register an employee who was entitled to "Sanad" compensation after leaving work) results in the disbursement of compensation without entitlement, the penalty is more severe.

It is worth noting that if an employer fails to register an employee, the employee has the right to notify the relevant social security office and request to register themselves. According to the "Overview of Social Security in the Labor Law," the relevant office is obligated to compel the employer to register the employee once the registration requirements are met. This is the direct, official procedure for protecting the employee's rights before resorting to any legal action.

How to Register Employees with Social Insurance

With the Kingdom's digital transformation across all sectors, it has become easy to register employees with social insurance electronically through the General Organization for Social Insurance (GOSI) website.

For Saudi employees, the steps are as follows:

- Access the GOSI website.

- Start by registering the company if it is not already registered.

- Add the new employee and enter their data, including their ID number, date of birth, contract type, and salary.

- Specify the employee's actual start date.

- Review the data and confirm registration to begin monthly contributions.

For non-Saudi employees, the registration process is usually automatic once the employee transfers to the Ministry of Human Resources and Social Development.

The employer's responsibility here is to "complete the data," not "register from scratch." They can access their "My Insurance" account and select the "Complete Data for a Non-Saudi Subscriber Registered Automatically" service.

This applies to exceptional cases requiring manual registration where automatic registration is not available, such as (GCC citizens, nomadic tribes, and private expatriates not sponsored by the establishment).

In this case, the employer uses the "Add a non-Saudi subscriber who has not previously been registered with insurance" service, and manually enters the residence number, border number, or passport data and completes all the data.

In conclusion, we have covered the details of social insurance in Saudi Arabia, which is important for all employees, whether Saudi or foreign, and is also a concern for employers who are keen to comply with labor laws and regulations.

If you wish to register your employees with social insurance, or if you are facing any legal issues related to insurance, please do not hesitate to contact us at Mohammed AlKhliwi Law Firm. We will be happy to assist you. 

Disclaimer: The above content does not constitute legal advice, and the author of this article assumes no legal responsibility. For legal advice, please contact us.

Governance is a fundamental pillar that ensures the sustainability and continuity of companies, helping them achieve their long-term goals. It revolves around how companies are managed, the decision-making process, and performance monitoring mechanisms to guarantee transparency and protect the rights of all stakeholders, including shareholders, the board of directors, and employees.

This article will explore the concept of governance, how to implement internal and external governance, and its impact on companies.

What is meant by corporate governance?

Corporate governance refers to the rules that regulate the interests and relationship between the board of directors and business stakeholders. These rules are established by the government or through an agreement between the board of directors and the company's stakeholders. Therefore, each company has its own governance system, but the goals of governance remain the same: achieving transparency, accountability, and oversight to ensure business continuity.

 Corporate Governance in Saudi Arabia

Since this article discusses corporate governance in Saudi Arabia, it is essential to clarify the regulations and legislation governing internal and external corporate governance in the Kingdom. These include:

• The new Companies Law issued by Royal Decree No. (M/132) of 1443 AH.
• The Corporate Governance Regulations issued by the Capital Market Authority under Resolution No. (8-16-2017). Most provisions of these regulations are guidelines for companies listed on the parallel market (Nomu), with the exception of a specific number of articles that the regulations mandate for these companies.
• The Capital Market Law issued by Royal Decree No. (M/30) of 1424 AH.
• Financial institutions (such as banks and finance companies) are subject to a specific and detailed governance framework issued by the Saudi Central Bank (SAMA).

What are the implications of implementing corporate governance?

Governance is a vital and pivotal element in the success and sustainability of companies. Its importance lies in achieving the following:

- Enhancing Transparency

Good governance contributes to providing investors and stakeholders with the necessary and reliable information, helping them make informed decisions based on accurate data.

- Achieving Accountability

Governance ensures that all parties are held accountable for their performance and decisions, significantly reducing errors and transgressions.

- Improving Performance

Governance contributes to raising the efficiency of operational processes and reducing risks and errors through the mechanisms it employs in management and oversight.

- Increasing Trust

When companies implement governance and adhere to its standards, it increases the trust of shareholders and customers, strengthening the company's reputation in the market and among competitors. - Achieving Sustainability

Governance aims to manage company resources responsibly, thereby achieving sustainable development.

Internal Corporate Governance

Internal governance refers to the policies and organizational framework established by a company to regulate internal relationships, which includes the following:

- The Board of Directors and its Committees: The Board of Directors is considered one of the most important pillars of corporate governance. It plays a pivotal role in guiding the company, setting its strategies, and determining its management methods.

- Disclosure and Transparency Policy: This refers to the company's periodic disclosure of all financial and non-financial information to ensure transparency and protect shareholders' rights. It is a fundamental part of the company's internal policy.

- Internal Control Systems: These are a set of procedures implemented to verify the accuracy and reliability of financial reports and prevent errors or fraud.

- Internal Committees: Governance requires companies to establish an audit committee, a compensation committee, and a risk assessment committee to assist the Board of Directors in making sound and informed decisions.

- Governance Culture: This requires the company to cultivate a governance culture within the company, encompassing ethical standards and values, and promoting transparency and accountability. It is worth noting that all these elements are included in the Corporate Governance Regulations issued by the Capital Market Authority Board Resolution No. (8-16-2017), which obliges companies to prepare internal policies that ensure their compliance with governance principles.

External Corporate Governance

External governance refers to the regulatory framework imposed on companies by regulatory bodies in Saudi Arabia, such as the Ministry of Commerce, the Capital Market Authority (CMA), the Zakat, Tax and Customs Authority,

. External governance is implemented through the following:

- Financial Disclosure: Companies are required to provide reliable financial reports to investors and stakeholders.

- Compliance with Standards and Regulations: Companies are obligated to comply with Saudi regulations as well as international laws.

- Relationships with Investors: Building strong relationships with investors enhances investor confidence.

- External Audit: Independent firms are engaged to conduct financial audits to ensure the accuracy of financial data and verify compliance with applicable standards.

- Dealing with External Parties: This involves effectively managing relationships with regulatory bodies.

Finally, if you wish to implement governance in your company accurately and systematically, contact Mohammed Alkhliwi Law Firm to handle all governance procedures for you and professionally implement both internal and external corporate governance.

Disclaimer: The above content does not constitute legal advice, and the author of this article assumes no legal responsibility. For legal advice, please contact us.

Listing companies on the Saudi Stock Exchange is a pivotal strategic step that many companies aspire to. It elevates companies to a higher level of trust, maturity, and growth in the eyes of investors and businesspeople. Once a company is accepted into the stock market, it signifies that it is a strong entity that has met all the governance, financial, and legal standards set by the Capital Market Authority.

Due to the importance of this step, the Saudi Stock Exchange has established a set of essential conditions and requirements for company acceptance. Any company that adheres to these standards can easily achieve its listing aspirations. Therefore, in this article, we will explore these conditions and the mechanisms for listing on the Saudi Stock Exchange in detail.

What does listing companies on the Saudi Stock Exchange mean?

Simply put, listing a company means officially listing its shares on the stock exchange (Tadawul), making them available for trading among investors. In other words, it transforms the company from a private company into a public joint-stock company whose shares, or a portion thereof, are offered for public subscription and traded on the Saudi Stock Exchange (Tadawul).

To reach this stage, a company must fully comply with the regulations and bylaws issued by the Capital Market Authority to ensure transparency and fairness in the Saudi market.

Listing Paths in the Saudi Market

The Capital Market Authority (CMA) offers two listing paths, each with its own criteria and target companies. These are:

(1) Listing on the Main Market (Tadawul)

This type of listing targets large companies with a strong financial track record, substantial assets, and a long operational history. It helps companies quickly access a large segment of investors and provides them with higher liquidity in stock trading.

Furthermore, it enhances the company's reputation and market position, and increases its chances of obtaining financing compared to companies that are unable to list.

(2) Listing on the Parallel Market (Nomu)

This type of listing targets startups and small and medium-sized enterprises (SMEs), offering them fewer requirements and less stringent conditions compared to listing on the Main Market, which targets only large companies.

It also helps companies access capital to finance growth and expansion, and allows them the possibility of transferring to the Main Market after fulfilling the listing requirements of this type of market.

Why do companies in the Saudi market seek listing?

Many companies in Saudi Arabia aspire to the dream of listing on the stock exchange, because once a company is listed, it enjoys tremendous advantages not available to other companies. The most prominent of these are:

- Enhanced trust and transparency: Being listed on the Saudi Stock Exchange (Tadawul) is a sign of a company's transparency and commitment to standards, reflecting its strength and credibility in the eyes of investors and businesspeople.

- Easier access to financing: Companies listed on the Saudi Stock Exchange have greater ability to attract capital.

- Access to financing more easily.

- Improved reputation and credibility: Listing raises the company's standing with clients, suppliers, and both government and private entities.

- Increased shareholder liquidity: Shareholders can easily sell their shares, giving them greater flexibility and freedom.

- Significant government support: The Saudi government provides numerous incentives and facilities to companies listed on the stock exchange.

- The ability for listed companies to use their shares as currency to complete acquisitions or mergers with other companies.

- Financial benefit for founders: Listing allows founders and shareholders to sell a portion of their shares on the market. - Special advantages in property ownership: Saudi listed companies receive significant exemptions regarding property ownership, even within the boundaries of the holy cities of Mecca and Medina, which are subject to restrictions on non-Saudi ownership.

- Attracting foreign investment and strategic partnerships: Listed companies are better positioned to attract foreign capital, whether in the form of equity investments or long-term strategic partnerships.

Basic Listing Requirements

First: Listing Requirements on the Main Market (TASI)

The Main Market targets large and mature companies and is characterized by its stringent requirements, which reflect the size and financial strength of these companies. According to the Listing Rules, the most prominent requirements are as follows:

1. Legal Form: The company must be a "Joint Stock Company," as per Article 7(a) of the Listing Rules.

2. Market Capitalization: The total expected market capitalization of all the company's shares upon listing must not be less than SAR 300 million. This requirement reflects the size of the companies targeted by this market.

3. Public Ownership: Public ownership must not be less than 30% of the class of shares to be listed, to ensure sufficient liquidity for the shares in the market.

4. Number of Shareholders: The number of public shareholders must not be less than 200 upon listing. This is another requirement aimed at enhancing the share's liquidity.

Second: Listing Requirements for the Parallel Market (Nomu)

The Parallel Market is designed as a gateway for small, medium, and emerging companies, and therefore features more flexible requirements compared to the Main Market. The basic requirements, according to the "Listing Rules" and the "Registration and Listing Rules for the Parallel Market," are:

1. Legal Form: The company must be a "Joint Stock Company," just like the Main Market.

2. Minimum Market Capitalization: The company's total market capitalization must not be less than SAR 10 million. This lower threshold facilitates entry for startups and small companies.

3. Public Ownership: This requirement is more flexible, requiring that public ownership be at least 20% of the shares, or that the value of shares owned by the public be at least SAR 30 million (whichever is lower).

4. Number of Shareholders: A minimum of 50 public shareholders is required upon listing.

5. Operating History: The company must have been operating as a primary business for at least one fiscal year, which allows relatively new companies the opportunity to list. 6. Financial Statements: The company must have prepared its audited financial statements for the fiscal year preceding the application.

Third: Common and Procedural Requirements

In addition to the specific requirements for each market, there are general and procedural requirements, including:

• Appointing a Financial Advisor: Appointing a financial advisor licensed by the Capital Market Authority is a prerequisite. The financial advisor is responsible for advising the company, preparing the application file, and ensuring compliance with all regulatory requirements.
• Submitting a Complete Application: The company must submit an application to the Capital Market Authority that includes all required documents, such as the Board of Directors' resolution approving the listing, the prospectus, financial statements, and other documents specified by the regulations.

In short, the two tracks (main and parallel) represent strategic options for companies based on their size, growth stage, and ambitions. Each market provides requirements tailored to the nature of the companies it targets.

Listing Stages

The company goes through three main stages to list on the Saudi Stock Exchange (Tadawul), each with specific steps. These are as follows:

Preparation and Evaluation Stage

Submission and Approval Stage

Offering and Trading Stage

Stage 1: Preparation and Evaluation Stage

This stage requires a set of steps, including:

- Appointing a specialized financial advisor to manage the listing process.

- Preparing a comprehensive valuation of the company, including audited financial statements and the company's legal status.

- Developing a detailed listing plan that includes the offering percentage, timeline, and marketing strategy for investors.

- Preparing the required essential documents, such as financial statements, audit reports, and important contracts.

Stage 2: Preparing the Listing File, Submitting the Application, and Obtaining Approval

- Preparing the listing file and prospectus, including financial data and shareholder structure.

- Officially submitting the listing file to the Capital Market Authority (CMA) for review and approval.

- Obtaining final approval for the offering and its terms.

Stage 3: Offering, Allocation, and Listing

- Officially listing the shares on the Tadawul platform and commencing trading. - Opening the subscription period for institutions and the public.

- Organizing marketing campaigns for investors, including determining the final offering price.

Finally;

If you wish to prepare your listing file or need legal counsel to represent you in the listing process, please don't hesitate to contact us at Mohammed Al-Khliwi Law Firm. We would be delighted to be your partners in your success journey from the very beginning.

Disclaimer: The above content does not constitute legal advice, and the author of this article assumes no legal responsibility. For legal advice, please contact us.

The Kingdom of Saudi Arabia is working diligently to develop its investment and business environment through the economic and legislative reforms launched as part of Vision 2030. Despite this progress, legal risks persist for companies operating in the Saudi market, both local and foreign.

This article will explore all legal risks, how to manage them, and how to prevent them altogether to ensure business continuity and protect companies from fines and penalties.

Risks of Non-Compliance

One of the most prominent legal challenges and risks facing companies in Saudi Arabia is non-compliance with the regulations and systems established by government entities such as the Ministry of Commerce, the Zakat and Tax Authority, the Customs Authority, the Saudi Authority for Data and Artificial Intelligence, and other regulatory bodies that define the rules and frameworks for operations in this field.

These regulations are designed with the sole purpose of protecting all stakeholders—employees, workers, customers, investors, and even the company owners themselves. Violating or failing to comply with them poses a threat to business continuity and the company's financial stability. It also causes disruptions and confusion in operational processes, as well as legal and regulatory disputes.

Therefore, compliance with regulations is the only way to avoid these problems. In the event of any disputes, compliance ensures that you can address and resolve them in a way that safeguards your rights and the rights of your stakeholders.

Solution:

- Establishing a dedicated legal department within the company to ensure legal compliance.

- Hiring a reputable lawyer specializing in corporate law with the necessary experience to handle any of these risks.

- Staying informed about all regulations and keeping up with updates issued by official authorities.

Contract-Related Risks

Legal risks related to contracts are among the most common types of legal risks in companies. This is simply because companies often fail to adhere to the terms of the contract signed with the other party, whether intentionally or unintentionally. Sometimes, a company withdraws from a contract or fails to fulfill one of its conditions due to a dispute with the other party.

Other times, a contract may be terminated due to disagreements regarding project or product specifications upon delivery, resulting from a lack of clarity in the contract and a failure to include all necessary details for reference in case of a dispute.

Solution:

- Consult a lawyer specializing in contracts and Saudi commercial law.

- Register contracts with official government agencies.

- Draft contracts clearly and comprehensively, including all project details and explicit clauses for resolving disputes should they arise.

Labor-Related Risks

Labor-related issues are among the most significant legal risks facing Saudi companies. This category encompasses a long list of problems, such as termination of employment, delayed salaries, and non-compliance with the terms of the employment contract.

It also includes issues of discriminatory treatment, failure to adhere to the minimum wage, and failure to meet the quotas for employing Saudi nationals. All of these issues arise when Saudi labor laws are violated. Therefore, if a company fails to comply with the regulations.

Solution:

- Adhere to all labor laws within the company.

- Train the company's human resources department on proper employee relations and the application of labor regulations.

- Appoint a lawyer specializing in labor law to handle any such issues should they arise.

- Establish a dedicated department to address and prioritize employee complaints.

Risks of Intellectual Property Rights Infringement

With the massive digital transformation in Saudi Arabia and worldwide, trademark, copyright, and patent rights are sometimes infringed, whether intentionally or unintentionally. This exposes companies to hefty fines or, in some cases, the withdrawal of their products from the market.

Solution:

- Commit to the immediate registration of trademarks with the Saudi Authority for Intellectual Property.

- Monitor competitors to prevent the unauthorized use of trademarks.

- Ensure that any software or content used in company activities complies with the required licenses.

Tax and Financial Risks

Failure to comply with the regulations issued by the Zakat, Tax and Customs Authority is the primary reason Saudi companies face tax and financial risks. These risks include late payments, failure to maintain required records, and misinterpretation or miscalculation of taxes.

Companies often find themselves facing substantial fines or additional taxes due to late payments or non-compliance with the tax system in general, along with other financial and legal repercussions that place them in a difficult position.

Solution:

- Use modern electronic systems and software to manage taxes, zakat, and invoices.

- Utilize the electronic services offered by the Zakat and Tax Authority to facilitate the calculation process.

- Train the company's accounting department to enable them to address financial risks.

Data Protection Risks and Cybercrime

Unfortunately, some companies still lack sufficient depth in this area, despite the Kingdom's efforts to achieve digital security for individuals and companies through the implementation of the Personal Data Protection Law (PDPL). This law protects the company from potential data breaches or leaks in any form, or exposure to cybersecurity attacks, which could later lead to financial penalties, damage to its reputation, and loss of customers.

Solution:

- Adhere to the PDPL and implement all its standards within the company.

- Train employees in cybersecurity and personal data protection.

- Report immediately any breach or security vulnerability before the problem escalates.

Finally;

To ensure the continuity of your business without any legal risks or financial problems, you should consult a specialized lawyer who is an expert in the legal risks facing Saudi companies. And as for the office of Mohammed Al-Khalawi, with its experience that extends for many years in corporate cases of all kinds, it can help with legal guidance and direction.

Disclaimer: The above content does not constitute legal advice, and the author of this article assumes no legal responsibility. For legal advice, please contact us.

Companies sometimes face problems and crises that force them to liquidate their operations. Undoubtedly, this is a difficult and painful choice, especially for companies that have been established for many years. However, in some situations, there may be no other solution to overcome the crisis except liquidation.

In this article, we will explore the concept of company liquidation in the Saudi system and how the Saudi business environment guarantees the rights of all parties—partners, creditors, and investors—through the company liquidation system. This system regulates the relationship between all parties and defines the legal procedures for dissolving the company and disposing of its assets in a fair and precise manner.

The Concept of Company Liquidation

Company liquidation refers to the set of procedures that follow the dissolution of a company, the cessation of its commercial activity, and the legal termination of its existence. The liquidation process includes inventorying its assets, settling its receivables, and distributing its assets to partners and shareholders according to the agreed-upon percentages, after settling its debts and obligations.

The company cannot be liquidated without legal intervention. Liquidation procedures such as valuation, settlement, and asset distribution all require an expert, known as the liquidator, who is the person responsible for managing the liquidation in a legally sound manner. This person can be from inside or outside the company, provided that they possess the necessary skills and experience to carry out this difficult task quickly and transparently.

Types of Company Liquidation in the Saudi Arabia

Company liquidation is divided into two types according to the provisions stipulated in the Companies Law: voluntary or judicial. Each case has its own specific circumstances, as follows:

First: Voluntary Liquidation:

Voluntary liquidation is carried out by a decision of the partners themselves, upon their agreement to dissolve the company. A general assembly meeting is held, and during this meeting, a resolution to liquidate the company is issued. The liquidator is also appointed, and their powers, fees, and all details of the liquidation process are determined.

Second: Judicial Liquidation:

Here, liquidation is carried out by a court order. This occurs in the event of a dispute between the partners, where any shareholder files a lawsuit demanding the company's liquidation, or in the event of the company becoming bankrupt or violating any regulations. The court issues a liquidation order, appoints the liquidator, and determines their powers, fees, and the timeframe required for the liquidation process.

Reasons for Company Liquidation

The Saudi Companies Law issued in 2022 outlines a set of administrative and legal reasons that lead companies to liquidate, as detailed in Articles 282 to 296. The most prominent of these reasons are:

A. Legal Reasons:

1. Expiration of the term specified in the company's articles of incorporation without renewal.

2. Achievement of the company's objective, or its inability to be achieved.

3. Agreement of the partners to dissolve the company and cease its operations.

4. Significant loss of capital, or the majority thereof, rendering continuation an unwise decision.

5. Issuance of a court ruling to dissolve the company or declare its bankruptcy.

B. Practical Reasons:

7. Failure of management to attract investments to the company.

8. Mismanagement, depletion of resources, and continuous exposure to losses.

9. Differences in vision among the partners, and the occurrence of disputes that hinder management and impede the achievement of objectives.

Company Liquidation Procedures

Company liquidation procedures are carried out in accordance with the provisions of the Saudi Companies Law to protect the rights of all parties. Once the liquidation decision is issued, the procedures begin as follows:

(1) Officially publishing the liquidation decision in the Commercial Register to inform all relevant parties and stakeholders.

(2) Identifying and selecting an experienced liquidator to safely liquidate the company. This liquidator is chosen by the partners or the court.

(3) Inventorying the company's assets and prioritizing its accumulated debts and receivables. Government dues are the first priority, followed by employee dues, then creditors, and finally, partners.

(4) Commencing debt repayment and addressing creditors' claims.

(5) Converting assets into cash to begin distribution.

(6) Distributing the remaining funds among the partners according to their respective shareholdings.

(7) Finally, canceling and removing the company from the Commercial Register and announcing the completion of the liquidation by publishing the announcement in an official newspaper.

At this point, the company effectively ceases to exist and disappears as if it had never existed. If you are currently undergoing liquidation and seeking an experienced liquidator to guide your company through this critical phase to safety, do not hesitate to contact Mohammed Alkhliwi Law Firm. We will handle all liquidation procedures for you in a legal, organized, and fair manner that guarantees the rights of all parties.

Disclaimer: The above content does not constitute legal advice, and the author of this article assumes no legal responsibility. For legal advice, please contact us.

Establishing a commercial registration is the first step for anyone wishing to officially and legally launch their own business in Saudi Arabia, whether an individual or a company. A commercial registration grants legal approval to conduct business activities in any field and ensures access to government and financing services directed to the business sector.

If you intend to start your own business in Saudi Arabia, you need to know all the details of the process of establishing a commercial registration. Follow along with us.

First: What is a Commercial Registration?

A commercial registration is a legal document that grants any business the approval to conduct its commercial activities. It is also a database under the supervision of the Ministry of Commerce, containing information on all merchants, companies, and sole proprietorships, such as the merchant's or company's name, type of activity, establishment address, registration number, and other details related to the business.

Second: Requirements for Establishing a Commercial Registration in Saudi Arabia

The Ministry of Commerce in Saudi Arabia sets a number of requirements for establishing a commercial registration, the most important of which are:

- The business owner must be a Saudi citizen.

- The business owner or applicant for a commercial registration must be at least 18 years old.

- The business owner or the business establishment must not be a government employee. - The project owner must not already possess a commercial registration for a sole proprietorship.

- Obtaining an investment license from the Ministry of Investment for foreign investors.

Third: How to Establishing a Commercial Registration

Applications to open a commercial registration can be submitted at service centers located throughout Saudi Arabia. However, with the Kingdom's digital transformation under Vision 2030, an online commercial registration service has been made available through the Ministry of Commerce's electronic service via the Saudi Business Center platform. This service aims to help citizens start their businesses without needing to visit service centers.

- Steps to create a commercial registration via the Saudi Business Center platform:

(1) Access the Saudi Business Center platform.

(2) Select the "Commercial Registration" service from the list of electronic services, specifying that the registration type is "Establishment."

(3) Enter all the required information about the establishment, such as specifying the business activity, capital, and any applicable e-commerce activity details.

(4) Also, fill in your personal information as the establishment owner and your contact information.

(5) Finally, review the information, agree to the declaration, and submit the application.

It's worth noting that if you already have a commercial registration, you can submit a renewal or amendment request through the platform, completing all steps electronically, including paying fees using the various payment methods offered.

- Required Documents for Issuing a Commercial Registration

There are a number of documents that must be attached when submitting a request to open a commercial registration:

1. Proof of approval from the licensing authority if the business activity requires a license before commencing operations.

2. Proof of e-commerce activity if the business activity is conducted electronically.

3. If the application is submitted by a cooperative or charitable organization, the following documents are required from the Ministry of Human Resources and Social Development or the National Center for the Development of the Non-Profit Sector: (A copy of the registration certificate; a copy of the letter approving the organization's board of directors along with a copy of the organization's bylaws; a copy of the cooperative's bylaws; and a document authorizing a Saudi national from the organization's board to complete the registration procedures in the commercial register.)

4. If the application is submitted by a charitable endowment (waqf), the following documents are required: (The endowment deed from the Personal Status Court; and a legal power of attorney from the endower, the endowment administrator, or the board of administrators to obtain a commercial registration using the endowment deed.)

Fourth: Commercial Registration Fees

Commercial registration fees are undoubtedly part of your project or business budget, so it's essential to understand the costs in detail.

(1) When opening or issuing a commercial registration

The cost of opening a new commercial registration for the main register ranges from 200 to 1,200 Saudi Riyals, varying according to the legal entity type. For example, the main registration fee for an Establishment is 200 Riyals annually, and for a branch registration, it's 100 Riyals, while the annual registration fee for a limited liability company is 1,200 Riyals.

(2) When amending the commercial registration

Sometimes, business owners or establishments change their name after launch, change their address, or even change the business activity itself. In such cases, it's necessary to update the commercial registration with the latest data to ensure there are no discrepancies between the information recorded and the actual business activity.

Therefore, if you make any changes to the basic information related to the business activity, you must amend the commercial registration.

The fee for amending the commercial registration is 100 Riyals.

Finally, If you wish to start your own business legally and officially, contact us at Mohammed AlKhliwi Law Frim to help you complete all the procedures related to issuing your commercial registration.

Disclaimer: The above content does not constitute legal advice, and the author of the article bears no legal responsibility. For legal advice, please contact us.