Analysis of Saudi Arabia's Restriction on the Shareholding Ratio of Foreign Companies

Saudi Arabia's restrictions on the shareholding ratio of foreign companies show diversified characteristics, and different industries have different shareholding ratio regulations based on different considerations. Before foreign investors plan to enter the Saudi market, they must study Saudi Arabia's foreign investment policy in depth, combine their own investment objectives and industry characteristics, and carefully choose investment fields and investment methods, so as to make full use of Saudi investment opportunities and achieve their own development goals. At the same time, with the continuous optimization and adjustment of Saudi Arabia's foreign investment policy, investors also need to continue to pay attention to policy dynamics and adjust their investment strategies in a timely manner.

Saudi Arabia foreign company shareholding requirements

restriction on shareholding ratio of listed companies

1. Ordinary foreign investors

up to 49%: The Saudi Capital Market Authority (CMA) stipulates that foreign investors cannot hold more than 49% of any listed company.

Non-resident investors: a further limit of 10 per cent, prohibiting the conversion of debt instruments into equity unless the investor is in the authorized category or owns a swap contract.

2. Foreign strategic investors

exemption: Not subject to the 49% shareholding cap, subject to the following conditions:

holding period: must hold shares of listed companies for not less than two years.

Approval requirements: Additional review by the CMA is required to ensure that Saudi Arabia's national strategic interests are met.

Specific industry foreign shareholding restrictions

1. Financial services

banking and Insurance: Foreign ownership is subject to approval by the Saudi Central Bank (SAMA) and is usually capped (e. g. local ownership in the insurance industry is not less than 40%).

Fintech: Driven by Saudi Arabia's "2030 Vision", restrictions may be relaxed in some areas of fintech, subject to compliance with SAMA's regulatory framework.

2. The real estate industry

mecca and Medina: Foreign investors may not hold more than 49% of real estate companies operating in Mecca and Medina, and strategic foreign investors may not hold relevant shares or convertible bonds.

Other areas: real estate enterprises in the free zone can be 100 controlled by foreign investors, but they need to operate in the free zone.

3 Other industries

oil Upstream and Military: No Foreign Investment.

Agriculture and fisheries: Saudi partners are required in some areas.

Gene editing technology research and development: foreign ownership is capped at 49%.

Communications and Information Technology: Permission from the Communications and Information Technology Commission (CITC) is required and foreign ownership may be limited.

Air transport: subject to approval by the Civil Aviation Authority (GACA), foreign ownership may be limited.

Free Zone and Special Economic Zone Policy

1. Free zone enterprises

wholly owned: Companies operating in the free zone can be 100 percent owned by foreign investors without the need for a Saudi partner.

Tax benefits: enjoy corporate income tax relief (e. g. 10-year tax exemption) and duty-free (raw materials, equipment import and re-export).

Free repatriation of capital and profits: no exchange controls.

2. Special Economic Zone Enterprises

industry opening: For example, the NEOM Special Administrative Region allows 100 percent foreign ownership and allows the implementation of experimental regulations (e. g., digital currencies, autonomous driving).

Opening up of traditionally restricted industries: In the field of entertainment and tourism projects, foreign investment is allowed to enter traditionally restricted industries (such as hotels and entertainment facilities).

Saudi Arabia Company Registration Key Considerations

1, Language and Legal Environment

all documents must be in Arabic and it is recommended that local lawyers or professional bodies be engaged to assist with translation and compliance.

Adhere to the Saudis Employment Policy (Saudization) and prioritize the hiring of local talent.

2. Funding and audit requirements

trading companies are required to pay in the registered capital of 30000 riyals and manufacturing companies are required to pay in the registered capital of 500000 riyals.

Joint-stock companies are required to have Saudi-accredited auditors for annual audits.

3, Culture and Business Etiquette

respect Sharia Law and avoid eating and drinking in public during Ramadan.

In business meetings, the Saudi side may be more relaxed about the concept of time, but foreign businessmen should attend on time.

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