Why close a company in Saudi Arabia?
The reasons are many. For some it’s a planned exit upon completing a specific project or joint venture; for others it’s a change of strategy or even insolvency. Some companies are structured to operate for a fixed term and will close when that term expires. Whatever the reason, the Companies Law provides a way to dissolve and close a company in a way that respects all parties involved.
Voluntary or Judicial Liquidation
In Saudi Arabia, there are two types of liquidation:
- Voluntary Liquidation: This is when the shareholders or partners decide to close a solvent company. It’s a simple process with minimal court intervention as long as obligations can be met and a liquidator is appointed to handle the details.
- Judicial Liquidation: This is when creditors initiate the process due to unpaid debts, often for companies in financial trouble. In this case the court appoints a liquidator to ensure assets are handled fairly and distributed according to creditor rights.
The Liquidation Process
1. The Decision to Liquidate
The first step is a formal resolution by shareholders or the board to close the company. This decision must be approved, notarised and filed with the Ministry of Commerce and then published in the official gazette. At this point creditors are notified and given 15 days to object. If objections arise and are not resolved creditors can go to court.
2. Appoint the Liquidator
With the decision made, the shareholders appoint a liquidator to manage the winding-up process. This includes auditing assets, settling debts, and ensuring that remaining funds are distributed fairly. The liquidator has a legal duty to handle these responsibilities accurately, with penalties in place for mismanagement or misrepresentation.
3. Audit and Settle Debts
Within 90 days of appointment, the liquidator and auditor prepare a full inventory of the company’s assets and liabilities. This will help to determine what can be paid to creditors. The liquidation law has a clear priority for settling debts: liquidation expenses first, then creditor claims, then payments to shareholders according to their shares in the company.
4. Visas through GOSI - Ministry of Labour (HRSD)
Closure of employee files in GOSI and HRSD. Employee contracts must be settled according to Saudi labour laws which protect employee rights. The company must settle any end of service benefits and cancel visas for expatriate employees in order to close the account. For expat employees, they must either to be transferred to another sponsor or final exit from the country through Muqeem portal including the GM if expat and all registered employees to be removed.
5. Close Accounts - ZATCA, VAT and Bank Account
Closure of the unique number of the entity’s ZATCA account after the settle of any pending filings. The company must close all bank accounts, resolve any outstanding tax matters, and cancel licences from government bodies. Proper documentation at this stage helps prevent future liabilities.
6. Submit Liquidation Application Letter
Once debts are settled and obligations met, the liquidator will issue a final report on the liquidation process. Preparation of Liquidation application letter to be submitted to the Ministry of Commerce (MoC) for closure request. The Ministry of Commerce will then issue a liquidation certificate to close the company.
