Saudi Arabia makes exceptions for firms dealing with companies based outside Kingdom
Saudi Arabia has made some exceptions for government institutions and funds seeking to deal with foreign firms that do not have a regional headquarter in the Kingdom, as its new Companies’ Law comes into force on Jan. 19, 2023.
The exceptions are part of the new Companies’ Law which was approved by the Saudi Cabinet on June 28, 2022 and published in the official newspaper Umm Al-Qura on July 4, 2022.
As part of the exceptions, the new law states that in the absence of any other offer that is technically acceptable, agencies, institutions, and funds can deal with foreign firms with no headquarters in the Kingdom.
In addition to this, if the offer submitted by a foreign firm with no regional headquarters in the Kingdom is the best offer — after all other offers are evaluated from a technical point of view — institutions and funds will be able to deal with them.
It also added that the offer submitted by the company must be financially less than 25 percent or more than the value of the second-best offer.
Moreover, works and purchases whose estimated cost does not exceed SR1 million ($266,063) or that are carried out outside the Kingdom are excluded from the restrictions.
According to the controls set by the Kingdom, there are only two conditions under which government agencies may invite companies that are headquartered outside the Kingdom or any related party to participate in the limited competitions they offer.
The first condition is the absence of more than one qualified competitor other than the companies with a regional headquarters in the Kingdom or related parties to carry out the business or secure the required purchases. The second condition is the existence of an emergency situation that can only be overcome or dealt with by inviting those companies that do not have a regional headquarters in the Kingdom or from the relevant parties.
The new law – the mechanism for whose implementation was revealed by the Saudi Ministry of Commerce and the Capital Authority Market on Jan. 4 – seeks to spur the business environment and attract investment.
Back in 2021, the Kingdom announced that it will stop signing contracts with foreign companies from 2024 unless their regional headquarters are based in the Kingdom.
The decision aimed to incentivize foreign companies that deal with Saudi Arabia’s government to base themselves in the Kingdom.
The decision also targeted creating jobs, increasing spending efficiency, and guaranteeing that the main goods and services purchased by government agencies are from the Kingdom.