SAUDI ARABIA Law and Practice Contributed by: Zain Satardien, Chadi Hourani and Hayel Hourani, Hourani & Partners
2. Recent Developments and Market Trends 2.1 Current Economic, Political and Business Climate Saudi Arabia’s recent legal reforms continue to enhance its business environment and attract foreign investment. The Investment Law, now fully in force, has replaced the previous MISA foreign investment licensing system with a unified investor registration regime and a national register that covers both Saudi and non-Saudi investors. It codifies equal treatment for local and foreign investors under comparable cir - cumstances, strengthens protections against direct and indirect expropriation, and clarifies investor rights to repatriate profits and capital. These reforms sit alongside the new Companies Law and the Civil Transactions Law, creating a more predictable and codified framework for corporate, commercial and civil relationships in the Kingdom. The new Companies Law, enacted in December 2022, modernises corporate governance and shareholder rights, introducing new corporate structures, formal - ising shareholder agreements (SHAs), and allowing flexibility in share classes for JSCs. It also strength - ens shareholder protections including mechanisms for mergers, acquisitions, and remedies against misman - agement. The Saudi Arabian Civil Transactions Law (CTL) codi - fies over 700 articles to govern contracts, obligations, and property rights. Rooted in Sharia principles, the law prioritises fairness and practicality, applying ret - roactively to harmonise past and future agreements. Key provisions include prioritising intent over literal interpretation and ensuring debts remain until fully paid, bringing clarity and consistency to civil dealings. Complementary initiatives, such as the RHQ pro - gramme and the Anti-Concealment Law, further strengthen the business landscape. The RHQ pro - gramme attracts multinational corporations with tax incentives and exclusive government contract - ing opportunities, while the Anti-Concealment Law ensures market transparency by targeting hidden eco - nomic arrangements. These reforms position Saudi
Arabia as a central hub for international business in the MENA region.
3. Mergers and Acquisitions 3.1 Transaction Structures
Saudi Arabia offers a dynamic legal and regulatory environment for structuring business transactions, with the most common options being share acquisi - tions, asset acquisitions, and joint ventures (JVs). In some cases, a principal–agent relationship can also be considered. These structures allow investors to design their entry into the Saudi Arabian market based on sectoral regulations, foreign ownership laws, and the unique needs of their business. The choice of structure for these transactions, whether a share purchase, asset purchase, or JV, depends on various legal, tax, and operational considerations. Share Purchase Deals The majority of private transactions in Saudi Arabia are structured as share purchase deals, in which the buyer acquires the share capital of the target company from the seller for an agreed consideration under a share purchase agreement. This approach is preferred for its simplicity and continuity of business and avoids the need to transfer or reapply for licences, permits, or employment sponsorships. However, one of the key considerations in share acquisitions is the potential assumption of existing liabilities, including tax and labour considerations. As a result, due diligence is critical to identifying these risks, as they may influence the valuation and final structure of the transaction. Asset Purchase Deals Asset purchases involve acquiring specific assets and liabilities from the target company. An asset purchase is often used when the buyer wishes to exclude certain liabilities or focus on particular business operations, such as acquiring a single factory or line of business. For foreign investors interested in acquiring specific business lines, assets, or intellectual property (IP), asset acquisitions may be a preferred option. Unlike share acquisitions, asset deals allow buyers to selec -
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