Company liquidations in Saudi Arabia are effectuated according to the Regulations for Companies and to the different circulars issued by the Ministry of Commerce and Industry in the country. In this article, our company formation consultants in Saudi Arabia analyze different aspects related to the company liquidation in this jurisdiction.
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Types of liquidation procedures in Saudi Arabia
Company liquidation in Saudi Arabia is divided into:
- a voluntary procedure;
- a judicial or mandatory procedure.
There are both common points and differences in terms of steps when winding a company in Saudi Arabia one way or the other.
Regulations for company liquidation in Saudi Arabia
The Ministry of Commerce and Industry has forwarded a policy that the company liquidation in Saudi Arabia according to the Regulations for Companies is not valid for insolvent companies.
Therefore, under the voluntary liquidation and dissolution procedure set in the Regulations for Companies, there is only a little judicial supervision of this procedure.
In a solvent legal entity liquidation, the shareholders, in a general meeting, name the liquidator. The liquidator has to pay the debts of the entity that have resulted from the liquidation first and then pay the other debts of the legal entity.
Any extra has to be distributed among the shareholders, according to the articles of association or the bylaws of the entity. Our company registration advisors in Saudi Arabia can provide further details on this matter. We can also advise you on how to open a company in Saudi Arabia.
New company liquidation rules in Saudia Arabia
In 2023, legislators updated the Companies Law with new provisions related to the conditions related to the continuation and the winding up of a company in Saudi Arabia. Specifically, the new amendments provide for:
- the possibility for a company to continue carrying out its activities even after termination;
- the possibility for a company to continue completing its activities even if it no longer complies with all the legal requirements of the Company Act.
In other words, the requirements to close a company in Saudi Arabia are no longer as stringent as before. Still, there are two types of proceedings when liquidation cannot be avoided.
Our company formation agents can explain in detail the provisions of the Commercial Law in relation to setting up a company in Saudi Arabia, as well as terminating one.
Procedures for liquidation of legal entities in Saudi Arabia
Partnerships and limited partnership liability companies in Saudi Arabia have to effectuate the following procedure for their liquidation:
- file a request to liquidate the business, attached to the partners’ decision and signed by the partners;
- file an updated financial report, accredited by a chartered accountant, setting the liquidation date;
- announce the company liquidation in Saudi Arabia and name a liquidator;
- present the final account for the business liquidation, accredited by the partners and authorized by a chartered accountant;
- present a clearance certificate from the Income and Zakat Department, which allows the cancellation of the commercial registration of the business;
- other documents: our Saudi Arabia company formation agents can offer more information on what these other documents consist of.
How to close a company in Saudi Arabia voluntarily
Voluntary company dissolution in Saudi Arabia rests on a decision of the shareholders. In this case, all business owners must convene a meeting during which a resolution to terminate the company must be adopted. Following that, a liquidator must be appointed to complete the stages of the liquidation procedure.
Our Saudi company registration consultants can advise during this type of procedure. We can also assist the financial side of the termination procedure through our accountants in Saudi Arabia.
Judicial company liquidation in Saudi Arabia
Another way to close a company in Saudi Arabia is at the request of one or more creditors upon the failure of an enterprise to pay its debts. In this case, creditors can file a petition with a Saudi court provided that:
- the debt of the company starts at SAR 50,000;
- the total debt of the company exceeds SAR 2 million;
- the company cannot complete activities that generate income as you to pay its debts;
- through the sale of the indebted company, both the debt and the expenses associated with the company winding up procedure are covered.
Feel free to address our local agents for details about the judicial liquidation procedure.
Saudi company liquidation in numbers
Here are a few facts about winding up a company in Saudi Arabia:
- during the judicial proceedings, the debtor has the right to file for a moratorium with the Commercial Court which may allow for the suspension of the proceedings for a maximum of 90 days;
- this period may be extended for another 30-day period;
- the moratorium period cannot exceed 180 days.
In our office, you can also work with Saudi immigration lawyers. They can help you apply for Saudi iqamas (residence permits).
If you require more details about a business liquidation in Saudi Arabia, or for help in setting up a company in Saudi Arabia, please contact us.