Definition of a joint-stock company (JSC)
A joint-stock company is a type of company whose capital is divided into shares of equal value that can be easily traded in the Saudi financial market. Shareholders in this company have limited liability, as they are only liable to the extent of the value of their shares. This type of company has a great ability to raise capital through public or private offerings, making it an important tool for boosting the economy.
How to establish a joint-stock company in Saudi Arabia for a Saudi or foreign investor:
- Obtaining a license from the Ministry of Investment (for a foreign investor)
Before applying for any steps, the foreign investor must obtain a license from the Ministry of Investment according to the appropriate license for his business activity to start opening a company in Saudi Arabia and to start the journey of obtaining a company in Saudi Arabia.
- Writing the company's articles of association
The company's articles of association are written by founders or consultants with experience in helping the investor establish his company in Saudi Arabia, and must include all basic data about the company such as name, headquarters, purpose, financial data, commercial activities, the company's general assembly, and others.
- Reserving a trade name for a company in Saudi Arabia:
A request to reserve a trade name for the company that the investor wishes to open in Saudi Arabia is submitted.
- Appointing the Board of Directors
The company's board of directors is appointed by the founders, and other members may be added as needed.
- Submitting the application to the Ministry of Commerce (Saudi Business Center)
The application for establishing the company is submitted to the Ministry of Commerce, attaching the company's articles of association and the names of the shareholders in a table showing the percentages and names. The application must include the name and type of the company to obtain the necessary licenses.
- Offering shares for subscription:
Depending on the type of company (public, private or simple), the shares are offered for subscription. If the company is for public subscription, the shares are offered on the stock market and are on the parallel market before the countries to the Tadawul market, but if it is private, the shares are offered to the specified shareholders.
- Advertising the company
The company is announced by an official announcement that includes the subscription approval and the minutes of the founding meeting.
- Opening a bank account
A bank account must be opened in the name of the company and a portion of the capital must be deposited in it. In Saudi Arabia, at least 25% of the capital must be deposited upon establishment.
Conditions for establishing a joint stock company
To establish a joint stock company in Saudi Arabia, the following conditions must be met:
Capital of not less than 500,000 Saudi riyals.Choosing a name that reflects the purpose of the company.Compliance of the articles of association with the Saudi Companies Law.Depositing 25% of the capital in cash upon establishment.Determining the company's place of residence and its compliance with the conditions.Paying the prescribed establishment fees.
Types of joint stock companies
- Public joint stock company
Its shares are offered for public subscription and any person or entity can buy shares.
- Private joint stock company
Its shares are offered to a specific group of investors who often have personal relationships with the founders.
- Simplified joint stock company
A new type that provides greater flexibility in capital and share transfer conditions, and is suitable for small and medium-sized companies.
Characteristics of a joint stock company
Independent entity
A joint stock company has a legal personality independent of its shareholders, allowing it to conclude contracts and file lawsuits in its name.
Limited liability
Shareholders are only liable for the company's debts to the extent of the value of their shares, which protects them from personal bankruptcy if the company faces financial problems.
Easy stock trading
Shareholders can buy and sell shares at any time, providing high investment flexibility.
Large capital
Joint stock companies can raise large amounts of capital through stock offerings, enhancing their ability to finance major projects.
Centralized management
A joint stock company is managed by a board of directors elected by shareholders, ensuring informed decisions based on experience and competence.