16 January 2023
Immigration
Impact Medium
Summary
Additional information on the Regional Headquarters initiative, which encourages businesses to establish their regional headquarters in Saudi Arabia by obtaining a Regional Headquarters’ business licence, has been issued by the Saudi Ministry of Investment (MISA).
Background
International companies without regional offices in Saudi Arabia may not be permitted to enter into contracts with organisations, institutions, and funds owned by the Saudi government as of 1 January 2024, according to a January 2021 announcement from Saudi Arabia. The ability of new or existing investors to access the Saudi market or to carry on their business with the private sector, however, will not be impacted by this new condition.
The Detail
If a company is operating in more than one jurisdiction and wants to establish a presence in Saudi Arabia for the purpose of supporting, managing, and giving guidance to its branches, subsidiaries, and affiliates operating in the Middle East and North Africa region, it may do so under the new Regional Headquarters initiative, these countries, include Algeria, Bahrain, Egypt, Iraq, Jordan, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Saudi Arabia, Syria, Tunisia, United Arab Emirates, and Yemen.
Depending on the applicant company’s preference, the business licence will be awarded for a term of one to five years that is renewable.
To be eligible for a business licence from Regional Headquarters, businesses must fulfil the following requirements:
● The investor must be present in at least two countries other than Saudi Arabia and the country in which its headquarters was incorporated, either through subsidiaries or branches;
● Within six months of getting the licence, the Regional Headquarters is required to carry out strategic direction and management tasks (including developing and monitoring the regional strategy, assisting mergers and acquisitions, and evaluating financial performance); and
● The Regional Headquarters may execute a limited number of other activities, such as sales and marketing, training, and consulting services, but it may not engage in any commercial activity.
The law is anticipated to encourage businesses to establish regional headquarters in Saudi Arabia before the law takes effect in 2024. Companies that get a business licence from the Regional Headquarters may be free from certain Saudisation regulations and may be eligible for government fee waivers, though no specifics or methods have yet been made public.
Exemptions
As its new Companies’ Law takes effect on January 19, 2023, Saudi Arabia has granted some exclusions for government organisations and funds seeking to engage with foreign companies that do not have a regional headquarters in the Kingdom.
The new Companies’ Law, which the Saudi Cabinet adopted on June 28, 2022 and which was published on July 4 in the official publication Umm Al-Qura, outlines the exceptions.
The new law allows agencies, institutions and funds to deal with foreign companies without headquarters in the Kingdom as one of the exclusions, in the absence of any other technically suitable offer.
Additionally, institutions and funds will be permitted to deal with the offer made by a foreign company that does not have a regional headquarters in the Kingdom if it turns out to be the best one after all other offers have been reviewed technically.Furthermore, it said that the company’s offer had to outperform the second-best offer by a financial margin of at least 25% and the limits do not apply to works or acquisitions that are made outside the Kingdom or whose anticipated cost does not exceed SR1 million ($266,063).
Only two conditions must be met in order for government organisations to invite businesses with headquarters outside of the Kingdom or any linked parties to take part in the few competitions they are permitted to hold.
The first need is the lack of more than one eligible rival, excluding businesses with regional headquarters in the Kingdom or affiliated parties, to conduct business with or make the necessary acquisitions. The second prerequisite is the existence of an emergency that can only be resolved or handled by contacting enterprises without regional headquarters in the Kingdom or the appropriate parties.
How we can help
We are closely monitoring these changes in Saudi Arabia, and can advise you with respect to the impact of those changes as well as conduct any assessments your business might need to comply with the new requirements.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
● Anir Chatterji, EMEA Immigration Partner | anir.chatterji@vialto.com
● Ali Ibrahim, Director, KSA and Bahrain Lead | ali.a.ibrahim@vialto.com
● Ahmed Amer, Manager | ahmed.amer@vialto.com
Further information on Vialto Partners can be found here: www.vialtopartners.com
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