Types of companies in the Saudi system

The Kingdom of Saudi Arabia has established a specific model for companies when they are established. Each company must adhere to the laws prepared by the Ministry of the Kingdom of Saudi Arabia. If companies fail to comply with the established laws, the company will be suspended.

Each company carries out specific purposes for the benefit of the Kingdom of Saudi Arabia. The companies were divided according to the needs of the Kingdom of Saudi Arabia, and the companies were issued by the Commercial Law.

Types of companies in the Saudi system

The companies affiliated with the Commercial Law in the Kingdom of Saudi Arabia are as follows:

Solidarity company

A company consists of two or more people who are responsible for the entire company and whose money is used to pay the company's debts.

When a company is in debt, all of the company's assets are sold and the debt is paid off. If the debt is not fully paid, the partners' money is used.

The company is named after one of the partners, with the word "and partners" written on it. The word "partners" indicates that the company is a general partnership. The company is also registered in the commercial register.

A trade name may also be established for the company. The trade name of the company shall be a natural name not associated with the word “partners.” The shares of this company shall not be tradable on the stock exchange.

This type of company declares bankruptcy upon the death of one of the partners or upon the lifting of a judgment of interdiction against him, and the judgment of interdiction is issued.

The company's operations may continue in the event of death or detention, provided that the partners agree at the beginning of the company's operations, and there must be a contract between the partners proving this matter.

The method of distributing profits is written in the contract, and if there is no agreement on how to distribute profits, the distribution is made according to each party’s capital.

No profits are taken from the company until the other partners know.

Joint stock company

This company consists of a number of partners, and the company's capital is distributed among the companies in equal proportions. These proportions are in the form of shares, and these shares are offered for trading on the stock exchange.

In a joint-stock company, the capital owners are fully responsible for all the company's needs, and the partners' own money is used to pay the company's obligations and debts.

A joint-stock company must be established with sufficient capital to cover all of the company's needs. The company's capital must be no less than 15,000 Saudi riyals, and at the company's inception, the capital used for incorporation must be 4,000 Saudi riyals.

Holding company

It is a company consisting of a number of partners, but it is not registered in the commercial register and its shares are not offered for trading on the stock exchange.

Simple limited partnership

This type consists of two different teams. The first team has a guarantor, and the guarantor is fully responsible for the company’s needs, obligations, and debts.

The second group includes a recommender, and the recommender is not responsible for the company’s obligations except to the extent of his share of the capital.

Cooperative company

The idea of a cooperative company is to help other companies and provide their services and needs.

Companies subject to change

In this company, new people are allowed to join the company and increase the capital. It is also allowed for the resignation of old partners and the withdrawal of their capital.

foreign companies

It is a company whose people in charge are foreigners from the Kingdom of Saudi Arabia.

Company Definition

It is an agreement between two or more people through a contract in which the terms are written, to invest capital in a trade or a specific thing. The partnership may be in capital only, a partnership in work only, or a partnership in both elements together.

What are the terms of partnership?

The conditions for partnership must be met, and these conditions are as follows:
● The partners must be intelligent, meaning they must be aware of what they are doing.
● Both partners must be trustworthy.
● The reason for the partnership must be the same between them.

What is the difference between a company and a sole proprietorship?

It includes a group of individuals with the aim of carrying out a specific work. The institution takes many forms, including the social and charitable form. The institution may be owned by the government or privately owned. Institutions are considered more general and comprehensive than companies. The institution includes different forms of companies, each of which has characteristics that distinguish it from others. These characteristics include the following:

1- Legal personality

There is a legal personality for the company and the institution, and the difference is explained below:
Legal personality of the company
It is an independent entity completely separate from the company owners (capital). The partners’ money is not used to pay the company’s debts.
Legal personality of the institution
The corporation does not have its own entity, meaning it cannot sue or prosecute its partners.

2- Individual responsibility

Individuals' responsibility to the company
Individuals in the company have full right to dispose of all the company's assets, and the partners' liabilities are limited to the shares they own in the company.
Individuals' responsibility to the organization

There is no financial liability separate from the institution. The owners of the money are responsible for all the obligations of the institution, which may extend to private funds.

How many types of companies are there?

Before establishing your own company, you must first define the company according to the law, and you must be sufficiently aware of all the information related to each company. The types of companies are as follows:

Individual establishments

It is a company in which one person is responsible for all the needs and obligations of the company, and all profits and rewards related to the company's business are obtained.

If the company is unable to pay its debts, the partner's own funds are used to pay them off. The company's profits are also considered part of its capital.

The company's profits are also subject to taxes as part of the company owner's capital.

personal companies

These are companies consisting of two or more partners, and the basis of this company is that one of the partners is fully responsible for the company.

In this type of company, a partner's share in the capital cannot be transferred to another partner. The business must continue between the partners.

Money companies

This type of company is completely different from other companies. In this company, the partners are not responsible for the debts and obligations of the company and must pay them from their own money.

This company allows one partner to transfer his share of the capital to another partner or a person outside the company.

There must be conditions for one partner to transfer his share of the capital to another partner, and these conditions must be stipulated in a written contract at the beginning of the company’s establishment.

Limited Liability Company Terms

A company that includes a number of partners, and the number of partners must not exceed 50 partners, and each of these partners is responsible for the company’s obligations in proportion to his percentage of the capital.

This type of company is not allowed to borrow to increase its capital, nor is it allowed to trade shares.

The company is allowed to name the company with its own trade name, and it is also allowed to write the company in the name of one of the partners with the word “and partners”.

At the end of the article on types of companies in the Saudi system, we learned about the different types of companies established by the Saudi system. Some of these companies are for one partner, and some are for a number of partners.