In a regulatory move aimed at enhancing transparency and creating a safe and reliable investment environment, the Economic Cities and Special Zones Authority in Saudi Arabia has introduced the “Companies Registry Rules in Special Economic Zones,” which makes disclosing the “beneficial owner” a prerequisite for conducting business activities. These new rules are part of a comprehensive regulatory framework designed to strengthen oversight and facilitate business operations, in line with international best practices.
Global context and national vision
This approach falls within the broader framework of reforms underway in the Kingdom to achieve the goals of Vision 2030 , which prioritizes transparency, governance, and combating corruption. This measure also aligns with international standards adopted by global organizations such as the Financial Action Task Force (FATF), which emphasizes the necessity of identifying beneficial owners of companies and commercial entities as an effective means of combating money laundering, terrorist financing, and other financial crimes. By identifying the natural person who ultimately owns or controls a company, regulatory authorities can prevent the use of complex corporate structures as fronts for illicit activities.
The importance of disclosing the beneficial owner and its expected impact
Requiring companies to disclose beneficial owners is a cornerstone of enhancing the integrity of the investment environment. Domestically, this measure will boost confidence among both local and foreign investors by providing them with clear visibility into their dealings, thereby mitigating investment risks. Regionally and internationally, this step strengthens the Kingdom's position as a leading financial and commercial hub committed to the highest standards of financial transparency, thereby increasing the attractiveness of its special economic zones for high-quality and sustainable investments and improving its ranking in global competitiveness indices.
Key features of the new rules
The draft regulations require all entities wishing to operate within special economic zones to fully disclose the beneficial owner's information, both upon establishment and periodically. Key obligations include the following:
- Special record: Each establishment must prepare a special record that includes sufficient, accurate and up-to-date data about the true beneficiary, supported by the necessary documents.
- Data update: The rules require establishments to notify the authority of any change in the data of the true beneficiary within 15 days of its occurrence.
- Cooperation with relevant parties: Establishments must provide financial institutions and designated non-financial businesses and professions with accurate data about the beneficial owner when they request services.
Registration and enrollment procedures
The regulations specify the mandatory information that must be included in the application for registration in the Companies Register. This includes the applicant's name, address, national identification number or passport number, the company's legal structure, capital, the names and powers of the directors, the address of the head office, and the type of activity related to the economic zone. The regulations also stipulate that the registration is valid for two to five years and must be renewed 30 days before its expiry to ensure the continued legality of the business.
Monitoring violations and penalties
The regulations also included a framework for addressing violations, assigning enforcement to employees with judicial authority. Furthermore, the board of directors was granted the power to define violations and their corresponding penalties, ensuring an effective deterrent mechanism to guarantee full compliance with the new regulations and enhancing the seriousness of their implementation and follow-up.
