DESRIPTION COMPANY · Foreign companies are permitted to

DESRIPTION

Joint Stock Company (JSC) is limited liability company that has an option to sell its shares to the Saudi public. In addition, it considers to be the most regulated form of business in Saudi Arabia and this derived from the regulatory requirements for incorporation, the degree of control and involvement of the Ministry of Commerce and Industry. The JSC can be open or close. Open JSC can sell its shares immediately while close JSC has holding period of two years before selling its shares. All JSC companies that are listed in Saudi Stock Exchange are open JSC.

FORMATION AND FUNDING JOINT STOCK COMPANY

The Saudi new law announces the new requirement of forming and funding the joint stock company. The JSC are formed based on the resolution of Ministry of Commerce and Industry (MOCI). A license is required from MOCI. In addition, if the company want to receive state assistance or to undertake public sector project, insurance or banking activities a license from the Royal Decree is required. Minimum of two shareholders are required to form JSC and there is no restriction in maximum numbers with minimum capital of SAR 500,000, but Saudi Arabian General Investment Authority (SAGIA) can set additional minimum. JSC must paid up 25% of the capital at the time of incorporation and the balance must be paid within 5 years. On other hand, closed JSC with single shareholder can be formed by certain government entities or companies with capital greater than SAR 5 million.

ADVANTAGES OF JOINT STOCK COMPANY

·       Foreign companies are permitted to offer for government contract, and it can run its business in the Kingdom without a Saudi agent.

·        Foreign companies have freedom to import equipment, tools and spare parts for Industrial projects

·       A joint stock company provides its employee with residencies.

·       In most cases, the joint stock company deals with an industrial project to get financing from Saudi Industrial Development Funds. (JSC can get financing from Saudi Industries Development by dealing with an Industrial project).

·       The joint stock company can conduct projects in both sectors (public and private sectors). Moreover, The company can support business throughout the country

·       Comparing with limited liability company JSC is more flexible. It provides flexibility in transferring the shares with two years lock-up period.

·       It has easy access to the capital through the issuance of shares and bonds.

DISADVANTAGES OF JOINT STOCK COMPANY

·       The initial capital the is required might be large comparing with the company’s objects.

·       The foreign partner will not have a full control over the management or the employees unless the other partners are affiliate.  

·       The dissolution process is costly if the partners are not cooperating.

·       The foreign company can not be a partner with other company if it is participating in joint stock company with Saudi partner as a result of SAGIA’s general policy.

·       Joint stock company has less flexibility in management structure.

·       The MOCI attends all general assemblies.

MANAGEMENT OF JOINT STOCK COMPANY

The Joint stock company is managed by the board of directors who are selected by the general meetings. The minimum number of the board of director is 3 and the maximum number is 11. The board of director must be selected from its members a chairman and a vice chairman. The chairman cannot hold any executive position. In addition, the board must select the company’s secretary who is not board of director member.

LIABILITY OF THE JOINT STOCK COMPANY

The shareholders are liable for the company’s debt only up to their capital contribution.