The Saudi Ministry of Sports is expected to 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, according to a draft of the 'Regulations for Clubs Taking the Form of a Company' project.

The ministry presented the project on the public 'Istitlaa' platform to receive views and observations from those interested in the sports and investment sector, a step aimed at enhancing governance and raising levels of sports investment.

The ministry extended the electronic survey period for the project until August 16 next, in preparation for approving the regulations and bringing them into official effect 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 the 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 regulations also require obtaining prior written approval from the Minister of Sports before commencing any incorporation procedures with the relevant authorities.

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

It also obligated companies to separate accounts, financial records, and bank accounts 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 project prohibits ownership, management, or contribution in these companies by employees of the Ministry of Sports, employees of other sports clubs, members of the Saudi Sports Arbitration Center, and the Saudi Anti-Doping Committee.

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

The project dedicates a full chapter to regulating legal and operational exceptions 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 procedures in cooperation with courts and relevant judicial authorities.