What the New Companies Law 2026 Means for Foreign Investors, M&A and Corporate Governance in Saudi Arabia

The new Companies Law in Saudi Arabia, enacted through Royal Decree No. (M/132) and progressively implemented since January 2023, has entered its most consequential phase with the April 2026 implementing regulations now in force. These amendments introduce mandatory beneficial-ownership disclosure, a unified national commercial register, tightened approval thresholds for related-party and material transactions, and restructured board and shareholder voting mechanics. For general counsel, CFOs, corporate development teams and foreign investors evaluating or structuring joint ventures, acquisitions, restructurings or IPOs in the Kingdom, the practical effect is immediate: every live transaction and every entity already on the register must now be assessed against a materially different compliance baseline.

Executive Summary: What Changed and Why It Matters

The reforms touch virtually every dimension of corporate life in Saudi Arabia. Deal teams and boards should focus on four headline changes:

• Beneficial-ownership disclosure. Every company registered in Saudi Arabia must now identify, verify and file its ultimate beneficial owners with the national commercial register. Failure to comply exposes the entity to financial penalties and potential suspension of commercial registration services.
• Unified national commercial register. The Ministry of Commerce now operates a centralised digital register that consolidates entity data, beneficial-ownership records and filing histories. This replaces the fragmented, city-level registration system and makes corporate transparency searchable by regulators and, in defined circumstances, by counterparties.
• Related-party and material transaction thresholds. The law imposes new value-based and percentage-based triggers that require independent director review, board approval or extraordinary general assembly (EGA) approval before a related-party transaction can proceed. Transactions that bypass these procedures face voidability.
• Board and shareholder approval mechanics. Quorum rules, voting majorities and director conflict-of-interest protocols have been recalibrated, with specific carve-outs for independent directors and mandatory cooling-off periods for conflicted board members.

Quick Takeaway for Deal Teams

• Map every target company’s beneficial-ownership chain before signing a letter of intent.
• Confirm whether any element of the proposed transaction triggers related-party thresholds under the new law.
• Build regulatory approval timelines (MISA, CMA, sectoral regulators) into conditionality schedules.
• Budget additional time for board and shareholder approvals where independent director sign-off is required.
• Update standard SPA representations and warranties to address beneficial-ownership accuracy and related-party procedural compliance.

Legislative Background and Timeline of the New Companies Law in Saudi Arabia

Understanding the legislative arc is essential for determining which version of the rules applies to a given transaction. The new Companies Law was not a single event but a phased programme of primary legislation, implementing regulations and successive ministerial amendments.

Royal Decree No. (M/132), published through the Board of Experts, replaced the 2015 Companies Law and introduced the foundational framework. The Ministry of Commerce subsequently issued implementing regulations that gave operational detail to the primary articles. A further round of amendments in April 2026 refined the beneficial-ownership disclosure regime, tightened the related-party approval mechanics and introduced the unified national commercial register.

Timeline of Key Legislative Milestones

Industry observers expect further refinement as the Ministry of Commerce processes the first wave of BO filings and identifies compliance gaps. Deal teams should treat the April 2026 regulations as the current operative baseline while monitoring the Ministry portal for supplementary guidance.

What Foreign Investors Must Know: Ownership, MISA and Sector Rules

Foreign ownership in Saudi Arabia has undergone a structural liberalisation. The Ministry of Investment (MISA) now permits 100% foreign ownership across most sectors, removing the historic requirement for a Saudi partner in many industries. However, a MISA investment licence remains a prerequisite for any foreign entity establishing a commercial presence in the Kingdom, whether through a wholly-owned subsidiary (WOS), a joint venture or an acquisition of an existing company.

Sector-specific restrictions persist. Defence, certain upstream hydrocarbons, security services and specific real-estate activities remain subject to caps or outright prohibitions on foreign participation. The practical considerations for foreign investors now centre less on whether ownership is permitted and more on the regulatory process: obtaining the MISA licence, aligning the company’s articles with the new Companies Law, completing BO filings and, where the target is listed, navigating CMA shareholding thresholds.

The Capital Market Authority has separately been expanding access for non-resident foreign investors to the Saudi Main Market (Tadawul), as outlined in the CMA’s draft regulatory framework. Early indications suggest this will reduce the minimum asset-under-management thresholds for qualified foreign investors and streamline the registration process for institutional participation. For M&A involving listed targets, these changes affect both the mechanics of stake-building and the mandatory offer thresholds.

Practical Steps: Entering Saudi Arabia via JV, WOS or Acquisition

• Joint venture (JV). Under joint venture law in Saudi Arabia, partners typically incorporate an LLC or a JSC. The new Companies Law adds the Simplified JSC as a lighter-touch option suited to venture-stage partnerships. JV agreements must now address BO disclosure obligations for each partner and allocate responsibility for ongoing filings. The SAMA Rulebook imposes additional requirements where the JV involves a regulated financial activity.
• Wholly-owned subsidiary (WOS). A foreign investor applying for a MISA licence to establish a WOS must demonstrate minimum capital adequacy, submit a BO declaration as part of the licence application and register the entity on the unified national commercial register.
• Acquisition of an existing entity. Share deals require the buyer to conduct BO due diligence on the target pre-signing, obtain MISA approval for the transfer of foreign-owned shares and file updated BO information post-closing. Asset deals avoid some of these requirements but may trigger separate transfer-tax and licensing considerations.

Beneficial-Ownership Disclosure in Saudi Arabia: Obligations, Process, Timelines and Penalties

The beneficial-ownership disclosure regime is the single most impactful change for transaction due diligence. Under the Companies Law and the April 2026 implementing regulations, every Saudi-registered company must identify and disclose its ultimate beneficial owners, the natural persons who ultimately own or control the entity, to the national commercial register.

A beneficial owner is defined as any natural person who directly or indirectly holds a qualifying ownership interest or exercises effective control over the company through voting rights, board appointment powers, contractual arrangements or other means. The implementing regulations specify that companies must maintain up-to-date records of BO information, including full identification details, nationality, the nature and extent of the beneficial interest, and supporting documentary evidence.

For M&A transactions, the practical effect of beneficial ownership disclosure in Saudi Arabia is significant. Sellers must now be prepared to produce verified BO records during due diligence. Buyers, in turn, must verify that the target’s BO filings are current and accurate before closing, because inheriting a company with deficient BO records exposes the buyer to enforcement action and potential suspension of commercial registration services.

Due Diligence Checklist, Beneficial Ownership

• Request a certified copy of the target’s current BO filing from the national commercial register.
• Obtain the target’s internal BO register and cross-reference it against the filed record.
• Verify the identity of each disclosed beneficial owner through independent searches (passport copies, corporate registry extracts for intermediate holding entities, powers of attorney).
• Map the full ownership chain from the target to each ultimate beneficial owner, identifying any nominee or trust arrangements.
• Confirm that the target has filed BO updates within the statutory period following any change in ownership or control.
• Review board minutes and shareholder resolutions for evidence that BO information has been considered and approved by the appropriate corporate organ.

Model SPA Representation and Warranty, Beneficial Ownership

Deal teams should consider including a representation along the following lines in share purchase agreements:

“The Seller represents and warrants that the Company has identified, verified and filed with the national commercial register full and accurate information regarding all beneficial owners as required by the Companies Law (Royal Decree No. M/132) and the implementing regulations in force as at the date of this Agreement. The Seller undertakes to cooperate with the Buyer in updating beneficial-ownership filings to reflect the change in ownership resulting from Completion and to provide all information reasonably required for this purpose within [agreed number] business days of Completion.”

Related-Party Transactions in Saudi Arabia: Approvals, Independent Director Role and Valuation

The new Companies Law introduces a structured approval regime for related-party transactions that materially increases the procedural burden on boards and shareholders. The reforms aim to protect minority shareholders and align Saudi practice with international governance standards.

Under the revised framework, a related-party transaction is any agreement or arrangement between the company and a party that has a direct or indirect relationship with the company through board membership, senior management, significant shareholding or family connection. The implementing regulations define material thresholds by reference to both absolute value and the transaction’s proportion relative to the company’s net assets or annual revenue.

Where a transaction meets or exceeds the applicable threshold, the following procedural steps are required:

• Disclosure and abstention. The conflicted director must disclose the interest and abstain from voting on the transaction at the board level.
• Independent director review. The board’s independent directors (or an independent committee where one exists) must review the transaction and confirm that it is on arm’s-length terms.
• Board approval. The board must formally approve the transaction by resolution, with the conflicted director excluded from the quorum and vote.
• Shareholder approval. Where the transaction exceeds a higher threshold, typically a specified percentage of net assets, an extraordinary general assembly resolution is required, with the interested shareholder excluded from voting.
• Independent valuation. For particularly large transactions, an independent third-party valuation may be required to support the arm’s-length characterisation.

Worked Example: Cross-Border Related-Party Acquisition Workflow

Consider a Saudi JSC whose controlling shareholder proposes to sell a foreign subsidiary to the JSC. Under the new rules, the workflow proceeds as follows:

1. The controlling shareholder discloses the interest to the board secretary, who circulates the disclosure to all directors.
2. The board’s independent directors convene separately to assess the terms. They commission an independent valuation of the target subsidiary.
3. The full board meets. The controlling shareholder’s nominee directors abstain. The remaining directors approve the transaction subject to shareholder ratification.
4. Notice is given for an EGA. The circular includes the independent valuation report and the independent directors’ recommendation.
5. At the EGA, the controlling shareholder abstains from voting. The resolution passes by the required special majority of disinterested shareholders.
6. The transaction is filed with the Ministry of Commerce and, if applicable, notified to the CMA.

Transactions that fail to follow this procedure are voidable at the instance of the company or any shareholder. The likely practical effect is that deal teams structuring board approvals in Saudi Arabia must now build these procedural steps into their transaction timetables from the outset, rather than treating them as a post-signing administrative exercise.

M&A and JV Deal Structuring Under the New Companies Law in Saudi Arabia

The companies law implications for M&A are pervasive. Every stage of a transaction, from due diligence through signing, conditionality, closing and post-closing integration, is affected by the 2026 reforms.

Model Transaction Timetable and Conditionality

Negotiation Playbook: Seller and Buyer Obligations

Sellers should expect buyers to require comprehensive BO representations, indemnities for undisclosed RPTs and covenants obligating the seller to procure all necessary board and shareholder approvals before closing. Escrow mechanisms are increasingly used to hold a portion of the purchase price pending confirmation that BO filings have been accepted by the register and that no enforcement action is pending.

Buyers, for their part, should insist on walk-away rights if BO due diligence reveals undisclosed beneficial owners, if RPT approvals cannot be obtained within the conditionality period or if a MISA licence amendment is refused. Conditions precedent should be drafted to address each of these scenarios explicitly, with long-stop dates calibrated to realistic regulatory processing times.

For joint venture structuring, the new law requires that the JV agreement itself address BO reporting responsibilities, allocate costs for ongoing compliance and specify the consequences of a partner’s failure to provide accurate BO information. Industry observers expect that standard-form JV agreements in the Kingdom will be substantially redrafted over the coming months to incorporate these provisions.

Corporate Governance, Board Readiness and IPO Readiness in Saudi Arabia

The corporate governance reforms under the new Companies Law extend well beyond transactional compliance. Board composition, director duties, the role of independent directors and the emerging practice of family governance charters all require attention.

The law mandates that JSCs maintain a minimum proportion of independent directors on the board. Independent directors now have a specific statutory role in reviewing and approving related-party transactions, assessing the adequacy of internal controls, and overseeing the accuracy of BO filings. Directors who fail to exercise reasonable care in these duties face personal liability under the expanded director-duty provisions.

For companies considering an IPO, these governance requirements create an accelerated readiness timetable. The CMA’s listing rules, read together with the new Companies Law, require that prospectus disclosures cover BO structures, RPT histories and governance arrangements in substantially greater detail than was previously the case.

IPO Readiness Checklist

• Board composition. Confirm that the board meets the minimum independent director requirement. Recruit independent directors with appropriate expertise if necessary.
• BO clean-up. Trace and verify the full beneficial-ownership chain. Resolve any nominee or undisclosed arrangements before the prospectus is filed.
• RPT audit. Review all related-party transactions entered into during the track-record period. Confirm that each transaction was properly approved under the prevailing rules at the time.
• Internal controls. Implement or upgrade internal control frameworks to meet the standards expected by the CMA, including BO monitoring, RPT pre-clearance procedures and whistleblower mechanisms.
• Disclosure readiness. Prepare draft prospectus language addressing governance structures, BO arrangements, RPT policies and the company’s compliance with the new Companies Law.

Practical Checklists and Templates for Deal Teams

The following consolidated checklists distil the key compliance actions under the new Companies Law into actionable formats for M&A transactions, JV formations and ongoing corporate governance.

M&A Transaction Due Diligence Checklist

• Obtain certified BO filings and verify accuracy against internal records.
• Audit all RPTs during the relevant look-back period for procedural compliance.
• Confirm MISA licence status and any sectoral restrictions on foreign ownership.
• Review board and EGA minutes for proper approval of material transactions.
• Check that the target’s articles of association have been updated to comply with the new Companies Law.

JV Formation Checklist

• Agree BO disclosure responsibilities and ongoing filing obligations in the JV agreement.
• Allocate compliance costs and specify consequences for a partner’s failure to provide BO information.
• Address RPT procedures in the JV articles where partners or affiliates may transact with the JV entity.
• Obtain MISA approval and register the JV on the unified national commercial register.

Model Board Resolution, Related-Party Transaction Approval

“RESOLVED that, having received and considered the disclosure of interest by [Director Name], and having reviewed the independent valuation report dated [Date] and the recommendation of the independent directors, the Board (excluding [Director Name] who has abstained from the quorum and vote) hereby approves the [description of transaction] on the terms set out in the draft agreement circulated to the Board, and authorises [Officer Name] to execute the agreement on behalf of the Company, subject to [shareholder approval at an EGA / any further conditions].”

Filing Obligations by Entity Type

Conclusion and Recommended Next Steps

The new Companies Law in Saudi Arabia has fundamentally shifted the compliance and deal-structuring landscape. For foreign investors, M&A deal teams, JV partners and companies preparing for a capital markets listing, the reforms demand immediate attention. The beneficial-ownership disclosure regime, the related-party approval mechanics and the enhanced governance standards are not future considerations, they are current obligations that affect every live and prospective transaction.

Deal teams should take three immediate steps. First, conduct a comprehensive BO mapping exercise for all portfolio companies and prospective targets. Second, audit existing RPT approval procedures and align them with the new thresholds and independent-director requirements. Third, engage Saudi-based corporate lawyers with direct experience in the implementing regulations to advise on structuring, conditionality and post-closing compliance.

Sources

1. Ministry of Commerce, Implementing Regulations Announcement
2. Royal Decree No. (M/132), Companies Law (English Translation)
3. Board of Experts, Royal Decree Repository (Arabic Primary)
4. Ministry of Investment (MISA), Companies Law Guidance
5. Capital Market Authority, Draft Regulatory Framework (SPA News)
6. SAMA Rulebook, Joint Venture Entities
7. White & Case, Saudi Arabia’s New Foreign Investment Rules