Introduction:
The non-profit corporate sector in the Kingdom of Saudi Arabia is witnessing rapid qualitative development, becoming a key player in supporting social and economic development in alignment with Saudi Vision 2030. The new Companies Law and its Executive Regulations have introduced a robust legal framework that governs this type of company by balancing non-profit objectives with institutional governance.
First: Definition of Non-Profit Companies Under Saudi Law
According to Article (185) of the Saudi Companies Law issued by Royal Decree No. (M/132) dated 1/12/1443H, a non-profit company is defined as a joint-stock company, a limited liability company, or a simplified joint-stock company whose purpose is to engage in activities that serve the public interest. These companies do not aim to distribute profits to partners or shareholders; rather, profits must be reinvested in the non-profit channels and fields specified in the articles of association or bylaws.
Second: Forms and Types of Non-Profit Companies
The Law Provides Two Main Types:
- Public Non-Profit Company: Serves public interests and requires approval from the competent authorities to be established.
- Private Non-Profit Company: May be established by natural or legal persons for specific non-profit purposes.
These companies may not take any other legal form, and their shares may not be offered for public subscription.
Third: Scope of Activities of Non-Profit Companies
According to the Executive Regulations, the activities of non-profit companies include:
- Education, training, and professional development.
- Healthcare and medical services.
- Family support, childcare, and social development.
- Environmental protection and wildlife conservation.
- Support for entrepreneurship and small enterprises.
- Artificial intelligence and information technology.
- Support for volunteer work and social investment.
Fourth: Financial Regulation and Profit Governance
The law prohibits the distribution of profits to partners; however, it allows the use of financial surpluses to develop non-profit activities and channels. It also permits paying remuneration to board members or employees in return for actual services rendered, provided such payments are not considered commercial profit distributions.
Fifth: Legal Obligations of Non-Profit Companies
The main statutory obligations include:
- Explicitly stating non-profit channels and fields in the founding documents.
- Submitting periodic reports to the competent authorities.
- Maintaining and regularly updating the membership register.
- Complying with financial accounting standards and transparency requirements.
- Obtaining ministerial approval for amendments to objectives or organizational structure in public non-profit companies.
Sixth: Statutory Exemptions and Privileges
Non-profit companies benefit from tax and zakat exemptions in accordance with regulations issued by the Zakat, Tax and Customs Authority, in coordination with the Ministry of Commerce. Donations made to such companies may also be deductible when calculating taxable income.
Seventh: Role of the Public Sector in Establishing Non-Profit Companies
Government entities, universities, and public authorities may establish or participate in non-profit companies, enhancing partnerships between the public and non-profit sectors to achieve development goals.
Eighth: Relationship with the Commercial Sector and Collaboration Opportunities
Although these companies do not seek profit, the law permits them to enter into commercial contracts and receive financial compensation for their services, provided that such revenues are allocated to achieving their non-profit objectives. This creates significant opportunities for partnership with the private sector in corporate social responsibility initiatives and social investment programs.
Ninth: Governance and Oversight of Non-Profit Companies
Non-profit companies must adhere to principles of sound governance, including:
- Forming an independent and effective board of directors.
- Defining membership categories and voting rights.
- Monitoring profit utilization and expenditures.
- Ensuring transparency in disclosing revenues and expenditures.
Tenth: Dissolution of the Company and Disposal of Assets
Upon liquidation, the assets of a non-profit company must be transferred to other non-profit entities specified in the articles of association or bylaws, or to competent authorities as determined by the court. Under no circumstances may assets be distributed to members or partners.
Conclusion:
Non-profit companies in Saudi Arabia represent an advanced legal instrument for achieving sustainable development and supporting community welfare, while preserving financial discipline and institutional governance. The Saudi legislator has ensured a comprehensive legal framework that grants these companies the necessary flexibility and privileges to broaden their impact without compromising their non-profit objectives.
Frequently Asked Questions (FAQ):
- 1. Can non-profit companies operate in the field of information technology?
Yes, provided that revenues are directed toward clearly defined non-profit objectives stated in the founding documents. - 2. Can a for-profit company be converted into a non-profit company?
Yes, with the approval of all partners or shareholders and in accordance with legal requirements.
- 3. Are non-profit companies subject to zakat?
Non-profit companies are exempt from zakat and taxes according to regulations issued by the Zakat Authority in coordination with the Ministry of Commerce.
- 4. Can a non-profit company pay remuneration to its members?
Yes, for actual services rendered and within reasonable limits that are not considered profit distribution.
- 5. Are non-profit companies allowed to engage in commercial contracts?
Yes, provided that generated revenues are spent on non-profit channels stated in their governing documents.
Practical Guide for Decision-Makers: Steps to Establish an Effective Non-Profit Company
- حدد الهدف غير الربحي بوضوح في النظام الأساس.
- تأكد من توافق أنشطة الشركة مع المصارف والمجالات المسموح بها.
- استعن بمحامٍ خبير لصياغة عقد التأسيس بما يتماشى مع الأنظمة.
- بادر بالتسجيل لدى وزارة التجارة والحصول على الموافقات اللازمة.
- حافظ على الشفافية المالية والحوكمة الرشيدة في جميع الإجراءات.
