Saudi Arabia- New Commercial Registry and Trade Names System Approved by the Council of Ministers
On September 17, 2024, a decision was issued by the Council of Ministers approving both the Commercial Registry System and the Trade Names System. The Trade Names System aims to regulate the procedures for reserving and registering trade names to protect and enhance their value.
The new system introduces several provisions, most notably the establishment of a centralized electronic database to record traders’ names and details and outline the roles and procedures of commercial registration. Under this system, subsidiary records for companies will be eliminated, and only a single commercial record covering all activities of the establishment will be maintained across the Kingdom.
As a result, a five-year grace period is provided for correcting existing subsidiary records for both individual enterprises and companies. This can be done by either relinquishing the subsidiary record for a sole proprietorship, converting the subsidiary record for a company or institution to a new company, or canceling the subsidiary record and transferring its assets and activities to the main record.
Additionally, the system mandates that commercial establishments open bank accounts linked to the business to promote trust and ensure the safety of transactions.
The new system also removes the requirement for renewing the commercial registration and eliminates the expiration date, replacing it with an “annual electronic confirmation requirement” for commercial registration details. Traders must confirm these details annually, and failure to complete the annual electronic confirmation will result in the record being suspended for three months, with automatic cancellation one year from the start date of the suspension.
Regarding the new Trade Names System, it permits reserving a trade name before its registration for a specified, extendable period. The system also expands the scope of trade names, allowing Arabic, non-Arabic, transliterated terms, or names composed of letters and numbers.
To strengthen protection, the new system prohibits the use of a reserved or registered trade name in the commercial registry without the owner’s consent and requires that the trade name be appropriate and not misleading. Additionally, it forbids the reservation or registration of a trade name for an establishment that is like another, even if the activities differ.
The new system also permits trade names to be transferred independently from the business through trade name assignment. Traders are required to correct the status of existing subsidiary commercial records, whether for companies or sole proprietorships, within five years.
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