{"id":9401,"date":"2025-08-10T09:12:56","date_gmt":"2025-08-10T09:12:56","guid":{"rendered":"https:\/\/sarihlaw.com\/?p=9401"},"modified":"2025-08-10T09:12:56","modified_gmt":"2025-08-10T09:12:56","slug":"%d8%a7%d9%84%d8%b4%d8%b1%d9%83%d8%a7%d8%aa-%d8%ba%d9%8a%d8%b1-%d8%a7%d9%84%d8%b1%d8%a8%d8%ad%d9%8a%d8%a9-%d9%81%d9%8a-%d8%a7%d9%84%d8%b3%d8%b9%d9%88%d8%af%d9%8a%d8%a9-%d8%af%d9%88%d8%b1%d9%87%d8%a7","status":"publish","type":"post","link":"https:\/\/sarihlaw.com\/en\/%d8%a7%d9%84%d8%b4%d8%b1%d9%83%d8%a7%d8%aa-%d8%ba%d9%8a%d8%b1-%d8%a7%d9%84%d8%b1%d8%a8%d8%ad%d9%8a%d8%a9-%d9%81%d9%8a-%d8%a7%d9%84%d8%b3%d8%b9%d9%88%d8%af%d9%8a%d8%a9-%d8%af%d9%88%d8%b1%d9%87%d8%a7\/","title":{"rendered":"Non-profit companies in Saudi Arabia: their role, regulatory framework, and opportunities in the commercial sector"},"content":{"rendered":"

Introduction:<\/strong><\/h3>\n

The non-profit sector in the Kingdom of Saudi Arabia is witnessing rapid qualitative development, as these entities have become a pivotal player in supporting social and economic development, in line with Saudi Vision 2030. The new Companies Law and its Implementing Regulations have been issued to frame this type of company within a robust legal framework that balances non-profit work with corporate governance.<\/p>\n

 <\/p>\n

First: Definition of Non-Profit Companies According to Saudi Law<\/strong><\/h1>\n

According to Article (185) of the Saudi Companies Law issued by Royal Decree No. (M\/132) dated 1\/12\/1443 AH<\/strong>, 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 practice activities that benefit the public and does not aim to distribute profits to partners or shareholders, but rather to reinvest them in non-profit sectors and fields stipulated in its articles of association or its bylaws.<\/p>\n

 <\/p>\n

Second: Forms and Types of Non-Profit Companies<\/strong><\/h2>\n

The law stipulates two main types<\/strong>:<\/strong><\/h3>\n
    \n
  1. The Public Non-Profit Company:<\/strong> It serves public interests and requires approval from the competent authorities for its establishment.<\/li>\n
  2. The Private Non-Profit Company:<\/strong> It can be established by natural or legal persons for specific non-profit purposes.<\/li>\n<\/ol>\n

    These companies are prohibited from adopting other legal forms, and their shares are also prohibited from being offered for public subscription.<\/strong>.<\/strong><\/p>\n

     <\/p>\n

     <\/p>\n

    Third: Areas of operation for non-profit companies.<\/strong><\/h2>\n

    According to the Implementing Regulation of the Companies Law, the areas of operation for non-profit companies include the following:<\/strong>:<\/strong><\/h3>\n
      \n
    • Education, training, and vocational qualification.<\/li>\n
    • Healthcare and medical services.<\/li>\n
    • Support for families, children, and social development.<\/li>\n
    • Environmental and wildlife protection.<\/li>\n
    • Support for entrepreneurship and small projects.<\/li>\n
    • Artificial intelligence and information technology.<\/li>\n
    • Support for volunteer work and social investment.<\/li>\n<\/ul>\n

       <\/p>\n

      Fourth: Financial Regulation and Profit Governance<\/strong><\/h2>\n

      The law prohibits the distribution of profits to partners, but it permits the use of financial surpluses for the development of endowments and non-profit areas, with the possibility of paying bonuses to board members or employees for their services, without these being considered commercial profits.<\/p>\n

       <\/p>\n

      Fifth: Obligations of Non-Profit Companies under the Law<\/strong><\/h2>\n

      The most prominent statutory obligations include the following:<\/strong>:<\/strong><\/h3>\n
        \n
      • The Sarih text in the contract on endowments and non-profit areas.<\/li>\n
      • Submitting periodic reports to the competent authorities.<\/li>\n
      • Maintaining and periodically updating the membership register.<\/li>\n
      • Adherence to financial accounting and transparency standards.<\/li>\n
      • Ministry approval for amending the objectives or administrative structure of public companies.<\/li>\n<\/ul>\n

         <\/p>\n

        Sixth: Regulatory Exemptions and Privileges<\/strong><\/h2>\n

        Non-profit companies enjoy tax and zakat exemptions as determined by the Zakat, Tax and Customs Authority in coordination with the Ministry of Commerce. Donations made to these companies may also be deducted when calculating the taxable base.<\/p>\n

         <\/p>\n

        Seventh: The Role of the Public Sector in Establishing Non-Profit Companies<\/strong><\/h2>\n

        Government agencies, universities, and public bodies may establish or participate in non-profit companies, thereby enhancing the partnership between the public and non-profit sectors in achieving development goals.<\/p>\n

         <\/p>\n

        Eighth: Relationship with the Commercial Sector and Opportunities for Cooperation<\/strong><\/h2>\n

        Although these companies are non-profit, the system permits them to enter into commercial contracts and receive financial compensation for their services, provided that such revenues are spent on achieving their non-profit objectives. This approach offers significant opportunities for partnership with the private sector in social responsibility and social investment initiatives.<\/p>\n

         <\/p>\n

        Ninth: Governance and Oversight in Non-Profit Companies<\/strong><\/h2>\n

        Non-profit companies should adhere to sound governance principles, such as<\/strong>:<\/strong><\/h3>\n
          \n
        • Forming an independent and effective board of directors.<\/li>\n
        • Defining the powers of membership categories and voting rights.<\/li>\n
        • Oversight of profit expenditure.<\/li>\n
        • Transparency in disclosing expenses and revenues.<\/li>\n<\/ul>\n

           <\/p>\n

          Tenth: Dissolution of the company and disposal of funds.<\/strong><\/h2>\n

          Upon the liquidation of a non-profit company, its assets shall devolve to other non-profit entities specified in the contract or bylaws, or to the competent authorities as decided by the court. The assets shall not be distributed to members or partners under any circumstances.<\/p>\n

           <\/p>\n

          Conclusion:<\/strong><\/h3>\n

          Non-profit companies in Saudi Arabia constitute an advanced regulatory tool for achieving sustainable development and contributing to community service, while maintaining financial discipline and corporate governance. The Saudi legislator has been keen to provide an integrated legal framework that grants these companies the necessary flexibility and privileges to expand their impact, without compromising their non-profit objectives.<\/p>\n

           <\/p>\n

           <\/p>\n

           <\/p>\n

          Frequently Asked Questions <\/strong>(FAQ)<\/strong>:<\/strong><\/h3>\n
            \n
          1. 1<\/strong>. Can non-profit companies operate in the field of information technology?<\/strong>
            \nYes, provided that the revenue is directed towards achieving the non-profit objectives specified in the contract.<\/li>\n
          2. Is it permissible to convert a for-profit company into a non-profit company?<\/strong>
            \nYes, with the approval of all partners or shareholders, and in accordance with regulatory conditions.<\/li>\n
          3. Are non-profit companies subject to Zakat?<\/strong>
            \nNon-profit companies are exempted from Zakat and taxes in accordance with controls set by the Zakat Authority in coordination with the Ministry of Commerce.<\/li>\n
          4. Can a non-profit company pay bonuses to its members?<\/strong>
            \nYes, in return for actual services and within reasonable limits that do not constitute a distribution of profits.<\/li>\n
          5. Do non-profit companies have the right to enter into commercial contracts?<\/strong>
            \nYes, provided that the revenues are directed to the non-profit purposes stipulated in their bylaws.<\/li>\n<\/ol>\n

             <\/p>\n

            A Practical Guide for Decision-Makers: Steps to Establish an Effective Non-Profit Company<\/strong><\/h3>\n
              \n
            • Clearly define the non-profit objective in the bylaws.<\/li>\n
            • Ensure the company's activities align with permitted banking and fields.<\/li>\n
            • Engage an expert lawyer to draft the articles of association in compliance with the regulations.<\/li>\n
            • Proceed with registration at the Ministry of Commerce and obtain the necessary approvals.<\/li>\n
            • Maintain financial transparency and sound governance in all procedures.<\/li>\n<\/ul>","protected":false},"excerpt":{"rendered":"

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