PattonBoggs.com General Corporate Client Alert  1

 JUNE 4, 2013

 This Alert provides only general

information and should not be

relied upon as legal advice. This

 Alert may be considered attorney 

advertising under court and bar 

rules in certain jurisdictions.

For more information, contact your 

Patton Boggs LLP attorney or the

authors listed below.

 JIHAD TURKISATNI 

 jturkistani@pattonboggs.com 

 ABU DHABI

 ANCHORAGE

DALLAS

DENVER

DOHA

DUBAI

NEW JERSEY 

NEW YORK 

RIYADH

WASHINGTON DC

GENERAL CORPORATE CLIENT ALERT 

SAGIA ISSUES NEW RULES FOR

CONTRACTING AND CONSTRUCTION

 ACTIVITIES 

 The Saudi Arabian General Investment Authority (“SAGIA”) has recently issued

new rules for companies contemplating investment in the Saudi Arabian market to

conduct contracting and construction activities. The new rules will be in addition

to the existing rules which are already in place, and although not confirmed, will

most likely apply to all current and pending applications.

 The main additions to the requirements for the construction activity are:

1. Qualified applicants for contracting licenses shall be juristic persons that are

either limited liability or joint-stock companies.

2. Classifications issued by the Ministry of Municipal and Rural Affairs shall be

adopted as the standard for the description of the activities related to building,

construction, management, maintenance, operation and cleaning, in accordance to

the Kingdom’s international commitments.

3. Submitting a detailed business plan that explains accurately the ability of the

project to achieve the goals of investment, including the contribution of the

project to increasing the income inside of the Kingdom; the jobs that the project

 will provide for Saudis; the contribution of the project to increasing competition,

enhancing services and providing alternatives to consumers; the strategic

dimensions of the project on investment in the Kingdom; the benefits to the city 

in which the project will be located.

4. Proving the financial capability to invest in comparison to the capital of the

project and the share of each partner, and in comparison to the abovementioned

business plan. The applicant company must have executed in the past a project in

its home country or another country with a value that exceeds the value limits of a

 

 

PattonBoggs.com General Corporate Client Alert  2

third class classification adopted by the Ministry of Municipal and Rural Affairs, or its equivalent.

5. Submitting financial statements of the foreign entity not less than three years and not exceeding 10 years. The

financial statements shall demonstrate the good standing of the financial situation of the entity and such entity shall be

profitable in all years. The financial statements shall be prepared by an approved accounting firm, legalized by the

relevant authority having jurisdiction over trade and tax in the home country, and attested by the Saudi embassy in the

home country of the applicant.

6. Not exceeding 25 percent of employment of foreigners and only when necessary. The 25 percent foreign employees

shall include executive managers, executives, and specialists who have experience no less than three years in the same

activity that the company contemplates conducting after obtaining a license from the authority.

7. The activity of construction and building shall not be joined with the activity of operation and maintenance in one

license. Companies that have more than 300 employees in their home countries are exempted from this condition.

8. The applicant company must submit a bank guarantee to the benefit of the authority, which shall be renewed

annually, against the issuance of the license. The value of the bank guarantee shall be two percent of the financial

limits for the third class classification adopted by the Ministry of Municipal and Rural Affairs, or its equivalent for the

same activity that the applicant contemplates conducting. The bank guarantee shall be unconditional and irrevocable

and shall be valid until the deletion of the commercial registration.

9. Obtaining insurance against any wrongdoing by the company when executing any project after issuing the license or

after renewal of the same.

10. A commitment by the licensed (whether newly licensed or renewed) company to submit an annual report for all

projects that have been awarded to it, and executed by the same, including the value of each project.

11. A commitment by the licensed company (whether newly licensed or renewed) to submit all financial information,

lists and accounts to any financial auditor identified by the authority to review the accounts of the licensed company.

SAGIA is a self-regulated governmental body, and we anticipate further requirements to be imposed on other

activities and industries. SAGIA has been going through a restructuring exercise which was initiated by the

introduction of an additional layer of review before issuing the investment license. Our law office will be conducting 

meetings with SAGIA officials soon to have a clear understanding of the above requirements, and we will be updating 

our clients with how such requirements will affect their applications.