Saudi Arabia
JordanAl Madani & Co. Law Firm & Legal Consultants
Developments in the Saudi Commercial Registry System: A Quantum Leap from Past to Present
I. Differences between the Old and New Systems
a. Challenges in the Old System The old commercial registry system required the issuance of sub-registries for each commercial activity or branch of an establishment, which increased administrative complexities and financial burdens. In addition, merchants were required to renew their registries periodically, consuming additional time and effort. This system relied heavily on paperwork and traditional procedures, affecting the speed and accuracy of commercial transactions and hindering the flow of information related to commercial establishments.
b. Improvements Introduced by the New System The new Saudi commercial registry system has been designed to keep pace with the significant transformations in the business environment, relying on a centralized electronic database that encompasses all commercial information. This development enables rapid access to accurate data, enhancing market transparency and assisting government and private entities in obtaining reliable information more quickly.
1. A Single Commercial Registry for the Entire Kingdom One of the most significant differences between the systems is the elimination of the sub-registry system for establishments and companies. Under the old system, establishments and companies were required to obtain a sub-registry for each branch or activity in a different city or region. However, the new system allows for a single commercial registry that covers all commercial activities across the Kingdom, reducing bureaucratic complexities and facilitating business management.
2. Centralization of the Commercial Registry The new system has abolished the need to limit the commercial registry to a specific geographical location. Under the old system, a merchant had to issue a commercial registry for each region or city where they wished to conduct business. In the new system, a merchant can conduct their business with a single registry in all regions of the Kingdom. This change saves a significant amount of time and effort and enhances flexibility in expanding business activities.
3. Ownership of a Single Sole Proprietorship Under the new system, each individual is entitled to own only one sole proprietorship through which they can conduct all the commercial activities they desire, regardless of the diversity of those activities. This contributes to reducing the costs and effort associated with establishing multiple establishments for different activities and allows merchants to manage their businesses more easily through a single commercial entity.
4. No Fixed Term for the Commercial Registry Among the key differences is also the elimination of the expiry date for the commercial registry in the new system. Merchants are no longer required to specify a time period for the validity of the commercial registry but are only required to confirm their establishment’s data annually. This helps to reduce the administrative burdens associated with renewing commercial registries and gives merchants greater flexibility in managing their businesses.
5. Mandatory Commercial Bank Account The new system mandates that every commercial establishment open a commercial bank account linked to the commercial registry. This account is used to manage all financial transactions related to the commercial activity, contributing to increased transparency and the regulation of financial transactions, and assisting in combating tax evasion and improving financial oversight.
c. Period for Correcting Sub-Registries To facilitate matters for holders of existing sub-registries under the old system, the new system grants a five-year correction period. During this period, establishments and companies can cancel sub-registries or transfer ownership in accordance with the new requirements. This grace period aims to facilitate the gradual transition from the old to the new system without negatively impacting businesses.
In conclusion, the new Saudi commercial registry system represents a quantum leap in the regulation of the commercial market. Through the use of an advanced electronic database, the elimination of sub-registries, and the provision of flexible correction periods, it has become easier for commercial establishments to operate in a more organized and transparent environment. These improvements enhance market competitiveness and attracting investment, supporting the future directions of the Saudi economy.