SAGIA has issued new rules for companies seeking to conduct contracting and construction activities in Saudi Arabia. The new rules add several qualification requirements including that applicants must be limited liability or joint-stock companies, submit detailed business plans and financial statements, and commit to limitations on foreign employment. The rules also impose additional obligations like annual reporting and allowing financial audits if a construction license is obtained.

1. PattonBoggs.com General Corporate Client Alert 1
JUNE 4, 2013
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jturkistani@pattonboggs.com
ABU DHABI
ANCHORAGE
DALLAS
DENVER
DOHA
DUBAI
NEW JERSEY
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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

2. 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.