The Authority for Cities and Special Economic Zones has issued the rules for companies in special economic zones, which apply to companies established in the zone, Saudi companies established in another region of the Kingdom, and branches of Gulf or foreign companies registered in the same economic zone.

Distribution of profits and their review 40 days before the general assembly meeting

The rules included regulations for company incorporation, most notably that companies must ensure each company has a trade name in Arabic or another language, and the name may be derived from its purpose, or a distinctive name, or the name of one or more of its current or former partners, or both, provided it does not violate trade name rules. The consent of the partner or their heirs in writing must be obtained if the partner is deceased, in case the trade name includes any of the names of former partners in the company. The trade name may be amended in accordance with the regulatory procedures, and the amendment shall not affect the company's rights or obligations prior to the amendment.

The rules stipulate that the company's articles of incorporation or its bylaws must include a set of basic data, including the names and details of the partners, the company name, its main headquarters, its purpose, the capital and its distribution among the partners, the partners' commitment to pay the value of shares, the duration of the company if any, its management mechanism, provisions for the transfer of shares, means of sending notices to partners, their decisions, how to distribute profits and losses, the beginning and end of the fiscal year, cases of dissolution of the company, in addition to any other data or conditions agreed upon by the partners, provided they do not conflict with the provisions of the rules.

The rules require the company's manager or board of directors to prepare annual financial statements and a report on the company's activities and financial position, attaching recommendations regarding profit distribution and subjecting them to the auditor's review at least 40 days before the date of the annual general assembly meeting. It also requires providing partners with the financial statements, activity report, and auditor's report at least 21 days before the general assembly meeting, and depositing these documents with the authority according to the legally approved procedures and means, provided that the founders commit to all incorporation requirements, along with submitting a report from a certified appraiser in case the in-kind shares are owned by more than one person, determining their fair value, and a declaration from the remaining founders approving that value, and that the data submitted in the registration application does not conflict with data previously submitted to the competent authorities for licensing purposes.

It is also permissible to amend the company's capital or its bylaws, including increasing or decreasing its capital, with the approval of one or more partners representing at least three-quarters of the capital. Partners have priority in subscribing to new shares issued against cash contributions in proportion to their ownership in the company's capital when approving a capital increase through the issuance of new shares. It is not permissible to increase capital by raising the nominal value of partners' shares or suspending preemptive rights except by unanimous consent of the partners. Apart from criminal acts, the articles of incorporation may provide for the settlement of disputes or disagreements, of any nature, that may arise between the partners or between the company and its managers or board of directors, by recourse to arbitration or other alternative means of resolution.

It is not permissible to increase capital by raising the nominal value of shares

Regarding liquidation, the company enters into liquidation if it is dissolved in accordance with the provisions of the rules. The partners or the general assembly must take liquidation procedures, and the company retains legal personality to the extent necessary for liquidation. If the company is dissolved for any of the reasons for dissolution stipulated in the rules, the partners or the company's manager, board of directors, or board of directors must prepare a statement indicating that they have examined the company's status, including confirmation that the company's assets are sufficient to pay its debts by the end of the proposed liquidation period, and that the company is not insolvent according to the Bankruptcy Law, unless it was prepared before its dissolution and does not exceed 30 days from the date of its preparation.

If it appears that the assets are insufficient to pay its debts or it is insolvent, it must apply to the competent judicial authority to initiate any of the liquidation procedures according to the Bankruptcy Law. If the company is dissolved in violation of this article, the partners or the company's manager, board of directors, or board of directors shall be jointly liable for any remaining debt owed by the company.

The rules also stipulate that in case the company does not carry out its activity, the partners or the general assembly may issue a unanimous decision to dissolve the company if it has not carried out any activity or performed any work. The decision is submitted to the authority and must include: a declaration from the company's manager or board of directors that it has not carried out any activity or performed any work, that it has no assets or properties, and that it has no debts or obligations, whether due, deferred, or contested, towards third parties, and that no taxes or fees are due to the state or the relevant or competent authority, and a joint undertaking from all partners to pay any debts or obligations that may appear against the company towards third parties from their own funds. After this undertaking, the liquidation period ends, and the company is financially closed with its final account. This also constitutes a request to strike off the company's registration from the company register.

It is prohibited to announce obtaining a license before completing the procedures

The rules also stipulate a set of prohibited acts that constitute violations, most notably recording false data or information in the company's records, financial statements, or reports, or submitting misleading data to partners or the general assembly, misusing the company's funds, assets, or powers for personal benefit or harming the company's or creditors' interests, or exploiting the company's investment opportunities for personal benefit or for the benefit of others without right. The rules also prohibit the auditor from failing to report violations discovered during their work, as well as any person obtaining benefits, guarantees, or promises in exchange for influencing or refraining from voting in a way that harms the company's interests.

The rules also prohibit announcing or implying that a company has obtained registration or a license before completing its registration procedures, or disclosing or exploiting the company's secrets, or establishing fictitious companies or using names of persons contrary to reality, in addition to distributing profits or returns in violation of regulations or based on incorrect financial statements, and failing to disclose substantial losses or making decisions that harm the rights of partners or creditors. It also obligates officials to report losses that require such reporting legally, and prohibits exploiting confidential information to harm the company, or preventing those with legal standing from accessing the company's records, documents, and papers when they have the right to do so according to the regulations.