The Saudi Ministry of Sports is expected to require that the capital of any company wishing to establish a sports club or convert an existing club be no less than 500,000 riyals, according to a draft of the 'Regulations for Clubs Taking the Form of a Company'.

The ministry put the draft up for public consultation through the 'Istitlaa' platform to receive input and comments from those interested in the sports and investment sector, a step aimed at strengthening governance and raising levels of sports investment.

The ministry has extended the electronic consultation period on the draft until August 16 next, in preparation for approving the regulation and its official implementation after reviewing the submitted proposals.

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What are the details of the new requirements?

The new rules require that the capital of a company wishing to establish a sports club or convert an existing club be no less than 500,000 riyals, with the legal forms of companies limited to three models.

The models include joint-stock companies, simplified joint-stock companies, and limited liability companies.

The regulation also requires obtaining prior written approval from the Minister of Sports before initiating any incorporation procedures with the relevant authorities.

The draft also imposes on commercial sports clubs setting aside a financial reserve earmarked for sports activity of no less than 20% of their capital to meet essential obligations such as player salaries and technical staff wages.

It also obligated companies to separate accounts, financial and bank records related to sports activity from any other commercial activities of the company, and to submit quarterly financial reports and audited annual statements to the ministry.

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Strict provisions to ensure integrity

It included strict provisions to ensure integrity and prevent conflicts of interest; the draft prohibits ownership, management, or shareholding in these companies by employees of the Ministry of Sports, staff of other sports clubs, members of the Saudi Sports Arbitration Center, and the Saudi Anti-Doping Committee.

It also required obtaining prior ministry approval before any action regarding ownership of the club or its shares amounting to 5% or more of the capital.

The draft devotes a full chapter to regulating legal and operational exemptions for clubs, including mechanisms and controls for mergers, divisions, and statutory transformations, in addition to establishing strict legal frameworks for dealing with cases of financial distress, voluntary dissolution, and bankruptcy proceedings in cooperation with courts and relevant judicial authorities.