Partnership Agreement in Saudi Arabia

21 May Partnership Agreement in Saudi Arabia

Partnership agreements are an essential aspect of business operations. As a foreign investor or entrepreneur looking to do business in Saudi Arabia, it is important to understand the basics of partnership agreements in the country.

Under Saudi Arabian law, there are two primary types of partnerships: limited partnerships (LPs) and joint-stock companies (JSCs).

Limited Partnerships (LPs)

Limited partnerships in Saudi Arabia consist of a general partner and one or more limited partners. The general partner is typically responsible for managing the LP`s day-to-day operations while the limited partners contribute capital and only incur a limited liability.

LPs are often used in the construction and real estate industries, where large amounts of capital are required for development projects.

Joint-Stock Companies (JSCs)

JSCs in Saudi Arabia are public companies that are traded on the Saudi Stock Exchange (Tadawul). These companies are owned by shareholders who hold stock in the company. Like LPs, JSCs have a board of directors, but the directors are elected by the shareholders and are responsible for running the company on behalf of the shareholders.

The formation of a JSC requires a minimum of five founding shareholders and a minimum capital of SAR 10 million ($2.7 million).

Partnership Agreements

Partnership agreements in Saudi Arabia are legal agreements between the partners that govern the relationship between them. The agreement outlines each partner`s responsibilities, contributions, and the way profits and losses will be shared.

The agreement should also specify the duration of the partnership and the means of its termination. It should be noted that the duration of the partnership can be extended by mutual agreement of the partners.

Foreign investors and entrepreneurs looking to do business in Saudi Arabia are required to have a local partner. This local partner can be an individual or a company registered in Saudi Arabia. The local partner must own a minimum of 51% of the shares in the partnership.

In conclusion, partnership agreements in Saudi Arabia are essential for conducting business operations. Foreign investors and entrepreneurs must understand the types of partnerships available in the country and the legal requirements for conducting business. A well-drafted partnership agreement can help ensure a successful business relationship between partners.