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The Gulf State is set to launch a “radical” overhaul of its company registration system, aiming to enhance corporate transparency and align with international standards.
On April 3, 2025, Saudi Arabia’s new Ultimate Beneficial Ownership (UBO) rules will go live, changing the way that companies register and provide transparency into who is behind them.
Under the new rules, an “ultimate beneficial owner” of a company is defined as any person who:
- Directly or indirectly owns at least 25 percent of the company’s share capital.
- Controls at least 25 percent of the company’s voting rights.
- Has the authority to appoint or remove the company's manager or president, or the majority of the board of directors.
- Exercises significant influence over the company's decisions or business, directly or indirectly.
- Is a representative of any legal person to which any of the above criteria applies.
If an ultimate beneficial owner cannot be identified based on these criteria, the company’s manager, president or members of its board of directors will be regarded as such.
After April 3, 2025, new companies will be required to identify their ultimate beneficial owners when incorporating in Saudi Arabia.
Existing companies will be required to identify their ultimate beneficial owners when filing annual disclosures.
Both new and existing companies are also required to maintain an internal register of ultimate beneficial owners, and must report any changes to the Ministry of Commerce within 15 days of completion.
Wholly state-owned companies are exempt from the requirements, as are companies that are undergoing insolvency proceedings.
Failure to comply can result in fines of up to SAR500,000 (U$133,000).
Two new laws on company formation
The launch of the UBO rules follows the enactment of two new laws on company formation: The Law of Commercial Register and The Law of Trade Names.
Majid bin Abdullah Al-Kassabi, minister of commerce, said the two laws are a key part of Saudi Vision 2030, the government’s push to diversify the Saudi economy away from oil.
The Law of Commercial Register updates procedures for registration in the Commercial Registry, ensuring the accuracy of the data, updating it periodically, and making it easily accessible and searchable.
It also removes the need for subsidiaries to register, making it sufficient for companies to cover all of their activities through only one registration.
The Law of Trade Names aims to regulate the procedures for reserving and recording names in the Commercial Registry, maximise their value and protect the rights of their owners.
For example, it allows a trade name to be reserved for a specific period – which can be extended – before it is used.
It also sets the requirements that must be met for trade names to be registered or reserved, and the criteria for names to be prohibited.
