Introduction

The non-profit companies sector in the Kingdom of Saudi Arabia is witnessing rapid qualitative development, becoming a key player in supporting social and economic growth in line with Vision 2030. The new Companies Law and its Implementing Regulations provide a strong legal structure that balances non-profit activities with institutional governance.

First: Definition of Non-Profit Companies under Saudi Law

According to Article (185) of the Saudi Companies Law issued by Royal Decree No. (M/132) dated 1/12/1443 AH, a non-profit company is defined as a joint stock company, a limited liability company, or a simplified joint stock company whose purpose is to engage in activities that generate public benefit and that does not aim to distribute profits to partners or shareholders. Instead, profits are reinvested into the non-profit purposes stated in its charter or bylaws.

Second: Forms and Types of Non-Profit Companies

The Law identifies two main types:

1. Public non-profit company: Serves public interests and requires approval from the competent authorities.
2. Private non-profit company: Established by natural or legal persons for specific non-profit purposes.

Non-profit companies may not adopt other legal forms, nor may their shares be offered for public subscription.

Third: Areas of Activity of Non-Profit Companies

According to the Implementing Regulations, activities include:

• Education, training, and vocational qualification.
• Healthcare and medical services.
• Support for families, children, and social development.
• Environmental protection and wildlife conservation.
• Support for entrepreneurship and small enterprises.
• Artificial intelligence and information technology.
• Volunteer work and social impact investment.

Fourth: Financial Regulation and Profit Governance

The Law prohibits the distribution of profits but allows the use of financial surpluses to support non-profit activities, and permits reasonable remuneration for board members and employees for actual services.

Fifth: Obligations of Non-Profit Companies

Main obligations include:

• Clearly stating non-profit purposes in the bylaws.
• Submitting periodic reports to authorities.
• Maintaining and updating a membership register.
• Complying with financial transparency and accounting standards.
• Obtaining approval for changes in objectives or governance (for public non-profits).

Sixth: Statutory Exemptions and Privileges

Non-profit companies may receive zakat and tax exemptions, and donations may be deductible when calculating taxable income.

Seventh: Public Sector Involvement

Government bodies, universities, and public authorities may establish or participate in non-profit companies.

Eighth: Relationship with the Commercial Sector

Although non-profit, these companies may enter commercial agreements and receive compensation, provided revenues support non-profit objectives.

Ninth: Governance and Oversight

They must follow good governance principles:

• Independent and effective board.
• Clear membership rights and voting powers.
• Monitoring surplus spending.
• Transparency in expenses and income disclosure.

Tenth: Dissolution and Disposal of Assets

Upon liquidation, assets must be transferred to other non-profit entities or as directed by the court; assets may never be distributed to members.

Conclusion

Non-profit companies represent a modern legal instrument enabling sustainable development and community service under clear governance frameworks.

FAQ

1. 1. Can non-profit companies operate in IT fields?
   Yes, if revenues support non-profit purposes.
2. Can a for-profit company convert to non-profit?
   Yes, with unanimous approval and legal compliance.
3. Are non-profit companies subject to zakat?
   They may be exempt under specific regulations.
4. Can members receive remuneration?
   Yes, for actual services.
5. Can they enter commercial contracts?
   Yes, if revenues support non-profit goals.

Practical Guide for Decision Makers

• Define the non-profit purpose clearly.
• Ensure activities comply with legal requirements.
• Use a qualified lawyer for drafting documents.
• Register with the Ministry of Commerce.
• Maintain transparency and proper governance.