Legal developments

Required amendments to Saudi-incorporated companies’ articles of association

After a one-year grace period, companies established in Saudi Arabia are now required to amend their articles of association (AOA) or bylaws (as appropriate) in order to come into compliance with the new Companies Law (CL), which came into force in May 2016.

Some of these changes include, for example, reductions in the statutory reserve requirements, the dissolution process resulting from losses, fixing the par value of shares, and general assembly meeting and board requirements, as well as correcting cross references to specific articles in the CL.

In order to avoid potential repercussions in the future, companies should not delay in amending their constitutional documents to come into compliance with the CL.

90-day amnesty period for illegal workers

The Saudi Arabian Passport Department announced a 90-day amnesty period for persons living in Saudi Arabia in violation of residency and employment laws to correct their status without any fines or penalties, beginning on 29 March 2017.

In addition, illegal and undocumented workers will be exempt from the deportee fingerprint system (which previously prevented them re-entering the country) and will be able to return to Saudi Arabia by pursuing legal methods of gaining entry.

Arab News – 20 March 2017; 21 March 2017

Allowing expatriates to practise business without Saudi sponsors 

New procedures are being studied to license expatriates to invest in free trade areas without the need to have a Saudi sponsor, partly in order to combat the practice of tasattur (doing business in the name of a Saudi to avoid foreign investment restrictions).

The study proposes applying two types of taxes on expatriates participating in this programme. The first type of tax will be assessed on the accounts the expatriates may present including revenues, expenditures, and profits. The second type of tax will be assessed on the estimated profits in the event that no dividends are announced. This will depend on the area of practice; the tax will be fixed at 15 per cent for the contracting sector and around 25 per cent on consultancy services.

Saudi Gazette – 20 March 2017