The most important amendments to Saudi commercial legislation

In continuation of the efforts made by the Saudi government to update the commercial legislation system, which is close to twenty legislative documents, the Saudi government, represented by the Ministry of Commerce, announced the updating of the Commercial Records Law and the Trade Names Law. In this article, we will review the most prominent features of the legislative amendments:

Historical overview of the Saudi Commercial Register Law:

The first commercial registry law in the Kingdom of Saudi Arabia was issued by Royal Order No. 21/1/4470 dated 11/9/1375 AH, where the legislation addressed all individuals engaged in trade, and obligated all types of companies to register in the commercial registry. This law was then amended by Ministerial Resolution No. 151 dated 08/17/1403 AH, and after that amendment by Royal Order No. (M/1) dated 02/21/1416, which included a comprehensive update, while the Ministry of Commerce recently announced the new structural update to the commercial registry legislation.

Five fundamental amendments to the new commercial registry law:

• AThe new commercial registry system has cancelled the sub-registers, and is satisfied with one commercial registry to practice all activities, unlike the previous system, which required the existence of sub-registers for the main registry.In the previous legislation, any person could extract sub-registers to practice different commercial activities. However, in the new legislation, there is now one commercial register for each person practicing trade, whether an individual or a company. This register can be modified in terms of the activities included in it in terms of addition and deletion. This does not prevent the establishment of new legal entities to practice different projects, provided that this entity takes the form of a company in accordance with the Saudi Companies Law.
• CancelNew legislationSpecify the city of recordAs in legislationThe previous system was satisfied with one commercial register at the level of the Kingdom, after the previous system required the issuance of a commercial register according to the administrative region.This means that any company based in Riyadh can conduct business in various cities in the Kingdom of Saudi Arabia.
• Cancelling the expiry date of the commercial register, and sufficing with annual confirmation of the data, after the expiry date of the register was specified in the previous systemThis amendment is consistent with the principle that a merchant continues to practice his trade until he notifies the relevant authorities of his cessation of doing so, and thus practicing trade has become an eternal profession.
• made availableNew legislationAlternative measures to penalties such as warning and correction of the violation, in addition to or instead of the prescribed penalty, instead of financial fines in thePrevious legislation, and this amendment comes in line with the Saudi government’s orientations to support and stimulate the commercial sector.
• The commercial register shall be cancelled after one year of its suspension period, whereas it used to be cancelled after 30 days of notification to the merchant who had stopped practicing the activity.Legislationthe previousThe purpose of this text is to give creditors a generous period of time to refer to the merchant and submit their financial claims to him through official channels, including activating one of the various bankruptcy law procedures.

The purpose of the recent fundamental amendments:

From our point of view, the legislator aims to enhance the stability of the commercial environment more than before, by assuming that the principle is for the merchant to remain practicing his profession. The new legislation also seeks to integrate the economies of the administrative regions into the national economy by abolishing the geographical jurisdiction of the commercial register. The legislator also aims to attract new commercial projects by reducing administrative penalties for violators of the commercial register legislation, which reinforces the main objective of considering Riyadh the capital of regional headquarters in the region.

Features of the amendments to the Saudi Trade Names Law:

• Allowing the trade name to be in a language other than Arabic or to consist of letters and numbers, unlike the previous legislation, which limited this matter to foreign companies or companies with mixed capital, while under the new legislation, the name may be foreign for both national and foreign commercial projects, and this supports what the new investment law has stated, which equates the local investor with the foreign investor.
• Allowing the trade name to be disposed of independently from the commercial establishment by transferring its ownership, after the trade name was linked to the establishment and was not allowed to be disposed of independently according to the previous legislation. The purpose of this procedure is to enhance the intangible assets of commercial projects and enable intellectual property more in commercial legislation.
• The system has set clear and precise criteria for prohibited names, whereas the criteria were general in the previous legislation..
• Not allowing the reservation or registration of a trade name for an existing establishment even if the activity is different, after the registration of the identical or similar name for an existing establishment in the event of a difference in the activity in the previous legislation, and this approach is intended to protect the consumer from any misleading that may occur to him as a result of the similarity of the names of commercial establishments, and it is worth noting that this procedure will enhance the value of the commercial identity of commercial projects more than before, and competition will become based on equal legitimate opportunities and limiting unfair competitive practices.

Closing comments

The general trend of commercial legislation aims to create sustainable entities and enhance the empowerment of intangible assets and equality and justice between local and foreign investments. This may come as a continuation of the efforts made by the Kingdom of Saudi Arabia by equating GCC citizens with Saudi citizens in terms of formal procedures for starting businesses, and following up on these businesses remotely through specialized government digital platforms. All these capabilities and facilities will make the Kingdom of Saudi Arabia the most suitable headquarters for starting stable, long-term businesses. If you have any inquiries, please contact Attorney Khalaf Bandar Khalaf.