THE LAW FIRM OF HAZIM AL MADANI ATTORNEYS AND LEGAL CONSULTANTS

Simplified Joint Stock Companies According to the new Companies Law issued in 1443 H / 2022 AD

When the new Companies Law take effect and apply?

The new Companies Law was published in the Official Gazette (Umm Al-Qura Newspaper) No. 4940, dated 12/23/1443 AH corresponding to 07/22/2022 AD. This law shall be effective after 180 days from the date of its publication in the Official Gazette.

What is meant by simplified joint stock companies?

A company established by one or more persons and it does not require a minimum capital in its articles of association and has the possibility of issuing multiple types and classes of shares with varying rights, obligations and restrictions. its management shall be by one or more directors, a board of directors, or otherwise and it doesn’t require general assemblies. the shareholders exercise these competencies and determine who will carry out them. The quorum required for the validity of shareholders’ meetings and the issuance of decisions shall be determined in the company’s articles of association. It is one of the most modern types of companies in the world nowadays.

What are the advantages of simplified joint stock companies?

● No minimum capital shall be required in its articles of association.
● Possibility of issuing multiple types and classes of shares with different rights, obligations and restrictions.
● Its management shall be by one or more directors, a board of directors, or otherwise.
● It does not require general assemblies. the shareholders exercise these competencies and determine who will carry out them.
● The quorum required for the validity of shareholders’ meetings and the issuance of decisions shall be determined.

What is expected of simplified joint stock companies?

● Many limited liability companies turn into simplified joint-stock companies as soon as the new corporate law takes effect and they can also turn into closed sharing holding companies as well.
● It will be the best entity for family businesses.
● It would also be a suitable option for individual companies.
● It will be the best entity for entrepreneurs.
● It will be the best entity for professional corporations.

Can a sole proprietorship turn into a simple joint stock company?

Yes, it can very easily and without any consequences.

What are the most important positive effects that simplified joint stock companies will have?

● The simplified joint stock companies will eliminate all types of the mutual fund.
● They will issue multiple types and classes of shares.
● They will stimulate the technology sector particularly and stimulate the entire venture investment and financing through convertible bonds.
● Simplified joint stock companies will simplify shareholding companies and combine limited liability companies with shareholding companies.

What data should be available in simplified joint stock companies?

The articles of association of a simplified joint stock company must include particularly the following data:

A- The company’s name.
b- The company’s head office.
C- The company’s purpose.
d- The company's authorized capital, if any, the issuer and payer.
e- The shares’ number, their types and classes, if any, the nominal value, and the rights related to each type or class.
f- The company’s term
g- The company’s management and the relevant provisions.

h- Transfer of shares.
i- Shareholders’ meetings, and the quorum required for their validity.
J- Shareholders’ decisions and the quorum required for their issuance.
k- The start and end date of the fiscal year.
L- Any other terms, conditions or statements that the founders or shareholders agreed to be included in the company’s articles of association and do not conflict with the provisions of the law

The following shall be attached to the articles of association upon applying for the company’s establishment:

A certificate of deposit of the paid amount of the issued capital with one of the banks licensed in Saudi Arabia.
A decision by the founders to appoint the company’s director or board of directors, as the case may be, including their names, nationalities, addresses and dates of birth.
The founders' declaration of commitment to all the law requirements related to the company’s establishment.

How to manage the simplified joint stock companies:

1. The method of managing a simplified joint-stock company shall be stated in its articles of association, it may be managed by one or more directors, a board of directors or otherwise. The company's articles of association shall specify the method of the director’s employment and dismissal, his powers and authorities and his method of work. If the company's articles of association are devoid of provisions in this regard, the shareholders shall undertake that.
2. The director or board of a simple joint-stock company, as the case may be, shall have the widest powers to manage the company to achieve its objectives, except for acts or actions excluded by a special provision of the law or the company’s articles of association within the competence of the shareholders. The director - within the limits of his competence- may authorize third parties to one or more specific duties. The board of directors - within the limits of its competencies - may authorize one or more of its members or third parties to carry out one or more specific duties.
3. The director of the simple joint-stock company, or the chairman of its board of directors - as the case may be – shall represent the company before the courts, arbitration entities and others. it may delegate someone else to represent it if its articles of association stipulate that.
4. A simplified joint-stock company shall be bound by all acts carried out by the director or board of directors, as the case may be, in its name, even if they are not his jurisdiction unless the person dealing with him acts in bad faith or knows that such acts aren’t his jurisdiction.

What are the responsibilities of the board of directors in simplified joint stock companies?

The provisions on liability of the board of directors of the shareholding company shall apply to the director or board of directors of a simple joint-stock company, as the case may be.

Are there new simplified joint stock companies consisting of one person?

Yes, a simple joint stock company can be established by one person. If the simplified joint stock company is established by one person, or if all of its shares are transferred to one person, the following shall result:

Is it permissible to impose restrictions on me on the disposal of shares?

Yes, it is permissible to:

Any disposal of shares in violation of these restrictions shall be null and void.

Can disputes be settled in simplified joint stock companies?

Yes, Except for the criminal acts, the company’s articles of association may provide for the settlement of disputes of whatever nature that may occur between shareholders or between the company and its director or any of its board members – as the case may be – by resorting to arbitration or other alternative means to settle the dispute.

What is the minimum capital for a simplified joint stock company?

The minimum capital of a simplified joint-stock company is only 20 thousand Saudi riyals.

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