New Commercial Register Law of Saudi Arabia

Introduction

As part of its vision to establish a thriving and competitive business environment and achieving a leading role for the Saudi commercial sector in a fair and stimulating environment, significant efforts have been made to enhance the commercial legislative framework. Over the past seven years, the Ministry of Commerce has developed and reformed over 70 key laws, including the Companies Law, Franchise Law, E-Commerce Law, and Anti-Concealment Law.

The latest milestone in this initiative is the issuance of the Commercial Register Law, issued on September 22, 2024, and published in the Official Gazette on October 4, 2024. The law will become effective 180 days after publication and will replace the previous Commercial Register Law issued on July 19, 1995.

What is the Purpose of the New Commercial Register Law, and How Does it Impact the Business Environment in Saudi Arabia

The new Commercial Register Law aligns with Saudi Arabia’s Vision 2030 goals by promoting a more business-friendly environment and ensuring the legal framework supports sustainable trade and investment. Specifically, it aims to simplify commercial activities, streamline registration procedures, and enhance transparency and data reliability.

To ensure the law reflects the needs of all stakeholders, The Ministry of Commerce engaged stakeholders through (16) workshops with various government entities to discuss key challenges related to the draft law and gather insights, including the Ministry of Investment, Ministry of Municipalities and Housing, Ministry of Human Resources and Social Development, Capital Market Authority, General Authority for Competition, Saudi Authority for Intellectual Property, Small and Medium Enterprises General Authority, General Organization for Social Insurance, Saudi Central Bank, Bankruptcy Commission and the Board of Grievances.

The issuance of the new Commercial Register Law is expected to significantly enhance Saudi Arabia's global standing in Business Environment index. According to the IMD World Competitiveness Yearbook 2023, Saudi Arabia ranks 17th globally among the 26 most competitive economies, marking the first time the Kingdom has entered the top 20, this milestone was driven by strong economic and financial performance in 2022 alongside progressive updates to business legislation, which contributed to Saudi Arabia ranking seventh globally in the Legislative Support for Starting Businesses indicator. The new Commercial Register Law aligns with the Kingdom’s broader goals under Vision 2030, aiming to further simplify and modernize the business landscape. This positions Saudi Arabia to maintain or improve its global ranking, fostering a competitive, transparent, and investor-friendly environment.  

Key Reforms Introduced by the New Commercial Register Law

Centralized Commercial Registration

Businesses will now be able to operate across all regions of Saudi Arabia with a single commercial register. eliminating the need for region-specific registrations (Subsidiary commercial register). Previously, businesses had to obtain separate registrations for each region (e.g., Riyadh, Makkah, Eastern Province). For instance, a company operating in Riyadh and Al-Jawf would previously require two separate registrations. The new law simplifies this by covering the entire Kingdom with one nationwide commercial register.

Single Registration for All Activities

Businesses can now conduct all their activities under one primary commercial register. The requirement to issue additional registrations for each activity, as mandated under the old law, has been abolished.

No Fixed Duration for Commercial Register or renewals

The new Commercial Register Law eliminates fixed validity periods and the requirement for periodic renewals of commercial register. Instead, businesses are required to submit an annual confirmation statement for their registration details through a straightforward process, this measure is designed to ensures the quality, accuracy, and transparency of business data while upholding the public’s right to access these records.

The new law provides businesses with a grace period to completing the annual confirmation, if a business fails to confirm its registration details withing 90 days of the due date, its registration is suspended for one year. If confirmation is not provided during this suspension period, the registration is cancelled.  Notably, the law identifies three possible statuses of the commercial register: existing, suspended and cancelled.

For instance, if the commercial register entry is dated April 1, 2025, the start of the annual data verification period will commence on April 2, 2026. Should the confirmation remain uncomplete by July 1, 2026, the registration will be suspended. During the suspension period the merchant can reinstate the registration by completing the annual confirmation, if this action is not completed by July 1, 2027 - the end of the suspension period - the registration will be cancelled.

It is worth noting that in addition to the suspension of the commercial registrar as described above, a fine will also be imposed on the merchant.

Reform-Oriented Penalties and alternative measures

The law introduces alternative corrective measures under article (24) instead of traditional punitive actions. These include warnings, mandated corrective actions, and future compliance measures, providing flexibility and focusing on rehabilitation rather than punishment.

Mandatory Business Bank Accounts

Under the new Commercial Register Law merchants are required to operate through bank accounts specifically linked to their businesses. The detailed provisions governing this requirement will be outlined in the executive regulation issued under the law. This amendment addresses a challenge that existed under the previous framework, where bank accounts could be linked to a merchant’s personal name. such practices reduced reliability and made it difficult for stakeholders to establish a clear connection between the merchant and their bank accounts. therefore, this amendment fosters trust and credibility both among businesses and between businesses and consumers.

What Businesses with Existing Subsidiary Commercial Registers Need to Know

Many businesses today operate with a primary register and several subsidiary commercial registers, and one might ask what will happen to these subsidiary registers, especially given their potential connection to contracts, obligations, or assets, and what legal obligations do businesses now face under the new framework?

In fact, The Law grants businesses—whether companies or individual establishments —a five-year grace period, starting from the law’s effective date, to rectify the status of the existing subsidiary commercial register. This extended timeframe is designed to ensures businesses have sufficient time to comply with the new law, review their current structures, evaluate their operations involving subsidiary commercial registers, and adopt the necessary measures including restructuring the business operations. It also ensures that the transfer of rights, obligations, and assets connected to these subsidiary commercial registers is properly managed.

The Ministry of Commerce has outlined the requirements for addressing the existing subsidiary commercial registers, as follows:

• For Companies:
• Convert subsidiary commercial registrar into a unified company registration, or
• Cancel the subsidiary commercial register.
• For Individual Establishment
• Transfer ownership to another entity, or
• Convert the registration into a new company, or
• Cancel the subsidiary commercial register.