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Overview on Company Liquidation in Saudi Arabia
In Saudi Arabia, the most widely used legal structure for businesses is the limited liability company (LLC). While other formats such as joint stock companies or branch offices of foreign entities exist, most foreign investors choose LLCs due to their flexibility and limited liability protections, where liability is limited to each shareholder’s capital contribution. Learn More on company liquidation in Saudi Arabia.
This guide explains the voluntary winding-up procedure for a limited liability company in Saudi Arabia. The governing law for company operations is the Saudi Companies Law of 1965, while bankruptcy and creditor-related matters are overseen by the Commercial Companies Disputes Settlement Panel and the 1996 Bankruptcy Preventive Settlement Law, supervised by the Board of Grievances.
Note: The steps here do not apply to insolvent or bankrupt firms, which follow a different process.
Why Choose Voluntary Liquidation?
Voluntary liquidation occurs when partners decide to dissolve a company proactively. This approach reduces court intervention and allows the partners greater control over the process. It involves asset distribution, debt settlement, and official closure of the business.
10 Key Steps to Liquidate a Company in Saudi Arabia
Step 1: Establish the Reason for Dissolution
As per Article 15 of the Companies Law, a company may be dissolved if:
It has fulfilled its original business purpose, or it becomes impossible to achieve it.
All shares have been transferred to one person, reducing the number of partners below the legal minimum of two.
The term of the company expires.
A merger takes place.
Company funds are fully or largely lost.
Partners mutually agree to dissolve the business early.
A competent authority issues a dissolution ruling based on evidence .
Step 2: Partner Resolution
A formal resolution must be passed by the partners, either at a general assembly or unanimously in writing. The resolution must:
Approve the dissolution and liquidation.
Appoint a liquidator or name the partners as liquidators.
Define the powers and responsibilities of the liquidator.
This resolution must be notarized and published in the Um Al-Qura official gazette.
Step 3: Appointing the Liquidator
A Power of Attorney (PoA) should be issued in favor of the liquidator, enabling them to:
Conduct a full audit of the company’s assets and liabilities.
Handle outstanding contractual obligations.
Address employment-related liabilities, including end-of-service benefits and visa cancellations.
Settle or transfer existing leases and vendor contracts.
If multiple liquidators are appointed, they share joint liability.
Step 4: Government Coordination
To complete the company’s closure, various Saudi government departments must be notified and cleared:
Department of Zakat & Income Tax (DZIT): Confirm no tax dues remain.
Ministry of Foreign Affairs: Provide proof of employee visa cancellations.
Labour Office: Close the company file.
SAGIA (now part of MISA): Cancel the investment license (if applicable).
Social Insurance (GOSI): Terminate company records.
Municipality: Revoke the business license.
Chamber of Commerce: End membership.
Ministry of Commerce: Cancel the Commercial Registration (CR).
Step 5: Inventory of Assets & Liabilities
Within three months of appointment, the liquidator (alongside the company’s auditor) will:
Compile a complete inventory of assets and liabilities.
Review all requested business records provided by company management.
Step 6: Financial Reporting
At the end of the fiscal year, the liquidator and auditor will prepare:
Financial statements
A liquidation progress report
These will be submitted to the partners for approval.
Step 7: Asset Distribution
The liquidation proceeds are distributed in this order:
Liquidation expenses and fees
Outstanding debts and creditors (according to legal preferences)
Repayment of shareholders’ capital contributions
Distribution of remaining funds among the partners (as per Articles or pro rata)
Step 8: Final Report
Once all steps are completed:
The liquidator submits a final report.
Partners formally approve the conclusion of the liquidation.
Step 9: Public Declaration
The final resolution is published in Um Al-Qura, though it doesn’t need notarization like the initial resolution.
Step 10: Legal Time Limit for Claims
Following the completion of liquidation, legal claims may still be made:
Against liquidators (for up to 3 years)
Against partners, managers, and auditors within the same timeframe
Regulatory Updates & Governing Documents
Saudi Arabia’s Shoura Council is currently reviewing potential reforms to the Companies Law, which may impact dissolution procedures in the future. However, these updates have not yet been enforced.
A company’s governing documents, including its Articles of Association and any legally accepted shareholder or joint-venture agreements — also shape how liquidation is executed, provided they comply with Sharia law and Saudi regulations.
Need Help with Company Liquidation in Saudi Arabia?
J K Management Consultancy offers complete assistance with company closure and liquidation across Saudi Arabia. From partner resolutions to regulatory filings and final reporting, we ensure the entire process is smooth, compliant, and stress-free.
