Saudi Arabia modernises business landscape with new Commercial Register and Trade Names Laws

On 17 September 2024, Saudi Arabia’s Cabinet approved the Commercial Register Law and the Trade Names Law, set to replace existing laws and become effective 180 days after publication in the official gazette. The new laws mark a significant step towards improving the ease of doing business and streamlining regulatory procedures for both local and international stakeholders. With these updates, Saudi Arabia aims to enhance its business environment, aligning with Vision 2030 goals to make the Kingdom a competitive hub for investment and commerce.

Key features of the Commercial Register Law
The Commercial Register Law, consisting of 29 articles, simplifies business operations and reduces administrative burdens by consolidating and modernising commercial registration requirements:

1. Unified national registration
   The new law introduces a single national commercial register for each business, eliminating the need for separate registrations in each city. This centralisation reduces costs and administrative burdens, as businesses no longer need multiple registers for branches or stores across different cities.
   
   
2. Grace period for transitioning subsidiary registers
   Businesses have a five-year grace period to either merge branch commercial registrations (CRs) into the main CR, transfer them to another entity, or close the linked business activities. This transition eases the shift to the new system without disrupting ongoing operations.
   
   
3. Electronic platform for registration
   As under previous requirements, businesses must register electronically via the Ministry of Commerce’s digital platform, detailing essential information such as entity name, trade name, entity type, and capital. Updates to this information must now be submitted within 15 days of any change, an improvement over the prior 30-day requirement.
   
   
4. Annual confirmation in place of renewal
   CRs now have no expiration date and do not require renewal. Instead, businesses must confirm their registration information annually. If confirmation is not completed within three months after the due date, the CR will be suspended and automatically cancelled if not updated within a year. Businesses have five years to request reinstatement of a cancelled CR by clearing all fees and fines. 
   
   
5. Financial penalties for incorrect information
   The law introduces a maximum fine of SR 500,000 for providing inaccurate information, failing to notify changes within the specified period, or omitting required registration details on official documents.
   
   
6. Single CR for diverse business activities
   Businesses can now conduct multiple activities under a single CR without requiring similarity in business types, enhancing operational flexibility.
   
   
7. Bank account requirement linked to CR
   Businesses must link their CR to a designated bank account, promoting transparency and reinforcing regulatory oversight across financial transactions.
   
   

Noteworthy updates in the Trade Names Law
The Trade Names Law, comprising 23 articles, provides businesses with more flexibility and protection in branding while fostering a distinct marketplace identity:

1. Expanded naming options
   Businesses can adopt trade names in Arabic, non-Arabic, or Arabised forms, and use letters or numbers, allowing for unique and globally resonant brand identities. Trade names may not, however, include misleading terms or words that contravene local norms, religious values, or public policy.
   
   
2. Trade name reservation and transfer
   Businesses can reserve trade names in advance for a specified period, with extensions available. A unique feature allows the transfer or sale of a trade name independently from the business itself, enabling entities to monetise their brand value while maintaining their core operations.
   
   
3. Grace period and restrictions on reuse of trade names 
   Businesses have a two-year grace period after CR cancellation to request reinstatement of their trade name, after which it becomes available for use by other entities. Additionally, reserved or registered trade names may not be used without owner consent, protecting brand integrity.
   
   
4. Increased penalties for violations 
   Unauthorised use of a registered or reserved trade name incurs penalties up to SR 500,000. This protection extends to trade names with similarities to internationally recognised organisations, political, military, or religious terms, and famous trademarks already registered in Saudi Arabia.
   
   
5. Legal and financial accountability for trade name transfer 
   The purchasing entity of a trade name assumes all associated liabilities from the date of transfer. However, claims against the trade name expire five years from the transfer date.
   
   
6. Arabic Language Experts Platform 
   To encourage Arabic-language trade names, the law establishes the Arabic Language Experts Platform, supporting businesses in creating distinct Arabic names and enriching local linguistic culture in the commercial sector.
   
   

Alignment with Vision 2030 and broader economic impact
These new laws support the Kingdom’s Vision 2030 goal of fostering a business-friendly environment by simplifying regulatory requirements and enhancing transparency. By eliminating outdated procedures, these updates align with international best practices, creating a more efficient system that promotes local and foreign investment. The Commercial Register and Trade Names Laws work in tandem with other regulatory updates in Companies Law and Investment Law, underscoring Saudi Arabia's commitment to fostering a robust commercial and investment landscape. Together, these laws represent a holistic approach to creating an accessible, cost-effective, and streamlined business environment in Saudi Arabia.