Commercial Register Law ("CRL")
The CRL was released on 19/3/1446 and issued pursuant to Royal Decree m/83. The main purpose of the CRL is to enhance Transparency and Reliability of the data contained in the Commercial Register, thus facilitating commercial activity in the Kingdom of Saudi Arabia (Art 2 of CRL).
Furthermore, the Saudi Business Center -in coordination with the Ministry of Commerce, the Ministry of Investment, and the Saudi Authority for Intellectual Property have been instructed to consider the appropriateness of establishing a comprehensive and unified economic platform suitable for all business sectors in the Kingdom. The establishment of a single unified commercial register for the entire Kingdom is a key theme of the CRL.
In practical terms, the key takeaways are:
a) time period of 15 days to update the data contained in the Commercial Register in the event of a change / modification of such data;
b) issuance of an annual statement confirming the data contained in the Commercial Register (and suspension of the registration if the merchant fails to provide such confirmation), noting that the consequences for companies / branches of foreign companies could lead to a demand by the Ministry of Commerce to request such company / branch to be dissolved;
c) the commercial registration data needs to be displayed at the business premises in a conspicuous place;
d) Data that is required to be registered or updated shall not have evidentiary force against a third party unless registered or updated, but such data shall have evidentiary force against the merchant.
e) Any person may access the basic data contained in the Commercial Register, as specified in the Regulations and any person may request from the registrar a detailed extract of the data recorded in the Commercial Register or any other specific data;
f) the merchant must submit their bank account details to the Registrar within ninety (90) days from the date of registration, along with any subsequent updates;
g) those registered in the Commercial Register are granted a period of (five) years starting from the date of enforcement of the CRL, to rectify their commercial register statuses of branches. All their branch registers will be cancelled at the end of that period according to a mechanism determined by the Ministry of Commerce.
The last point has significant impact on the business community operating in the Kingdom. The requirement means that over the next 5 years those operating in the Kingdom need to consider how they are established and how they need to re-structure their operations in the Kingdom to comply with the CRL. Whilst this may seem burdensome, this is a positive move as previously registration of branches were used to have different Commercial Registration certificates reflecting different types of activities. Under the CRL, and subject to any other laws, it will now be possible to register different types of activities even if those activities are not related to each other.
Law of Tradenames ("Trade Name Law")
The Trade Name Law was issued to:
" …promote trust in the business environment by regulating the
procedures for reserving tradenames and registering them in the Commercial Register, optimizing their value, and ensuring the protection of such names and the rights associated therewith"
The key takeaways of the Trade Name Law are:
a) a tradename may be derived from the merchant's personal name, be a distinctive name, or be a combination of both. It may consist of Arabic or Arabized words, Arabic letters or numbers, or a combination thereof;
b) a tradename may consist of words, letters, or numbers, or a combination thereof, in a language other than Arabic;
c) it controls the trade name that includes "Saudi" or the name of cities, regions, public places and family names;
d) if more than one application for reserving or registering the same tradename is filed, priority shall be given to the application filed earlier;
e) subject to the provision of other laws, no person may use the tradename a merchant has reserved or registered and compensation may be available;
f) it is prohibited to reserve or register a tradename that is contrary to public policy or public decency, is deemed misleading, or is prohibited to be used under relevant legal provisions;
g) the tradename must be displayed on the exterior of the place of business according to the nature of the exterior, and the tradename shall be included in all documents, correspondence, and publications;
h) the tradename may be disposed independently of the business premises;
i) it sets out a mechanism for liability (as between successor and predecessor) if the tradename is transferred together with the business;
j) The Ministry of Commerce shall promote the use of the Arabic language to enhance the database of Arabic tradenames; and
k) trade names in English must be assessed based on their corresponding Arabic representations.
In conclusion the CRL and the Trade Name Law are clearly part of the overall vision of the Kingdom to facilitate business operations (for Saudi nationals and foreign investors alike), and to provide more certainty, reliability and transparency. Whilst the practical implications of the CRL and the Trade Name Law remain to be seen, these laws are significant milestones in the enhancement of the investment and business environment of the Kingdom.
For further information please contact Leopold Zentner.
