Understanding Harmonization When Setting Up a Business in Saudi Arabia

Learn how harmonization updates your GM’s passport to Iqama in the AoA, enabling full authority and compliant business operations.

Completing the harmonization process is a critical regulatory requirement for finalizing your business setup in Saudi Arabia.

This comprehensive guide explains the harmonization process, why it matters to your operations, and key factors to consider when drafting your company's Articles of Association (AoA).

What Exactly is Harmonization?

Prior to a General Manager's (GM) entry into Saudi Arabia, the company's Articles of Association (AoA) must reference the GM's passport number as their official identification.

Once the GM enters the Kingdom and receives their Iqama, this passport number must be replaced with the newly issued Iqama number in the Articles of Association.

This procedure is known as "harmonization"—a critical administrative step that enables the GM's Iqama to be linked to government portals and systems.

Until the GM's Iqama number is properly reflected in the company's Articles of Association, they cannot fully exercise their authority and fulfill their operational duties.

These duties encompass establishing government portal accounts, creating subsidiary entities, recruiting employees, and initiating corporate banking relationships, among other essential functions.

How the Harmonization Process Works

The procedure for updating the passport number to the Iqama number follows a similar workflow to the initial AoA preparation.

The harmonization process typically requires 3-5 business days and is processed through the Saudi Business Council (SBC).

To ensure proper completion of harmonization, it's essential to understand the Articles of Association and its fundamental requirements.

Related read: MoA and AoA Requirements in Saudi Arabia: Handbook for Global Businesses

Why Articles of Association Matter for Your Saudi Business

For foreign entities establishing operations in Saudi Arabia, properly drafting and maintaining the current Articles of Association is crucial for several reasons:

Business Registration: Companies must have their AoA authenticated by the Ministry of Commerce before completing the establishment process in the Kingdom.

Banking Services: Banks require verification of GM authorities and capital structure documented in the AoA before opening corporate accounts.

Visa Applications: Government departments reference the AoA to confirm the company structure and process visa requests.

Subsequent Modifications: Any changes to GM powers, ownership arrangements, or the GM appointment must be formally updated in the AoA.

Government Contracting: Maintaining compliant and current documentation ensures eligibility for government tenders and contracts.

Updating AoA Updates Under the New Companies Law

Companies established before January 19, 2023, are required to update their Articles of Association to align with the New Companies Law (Royal Decree No. M/132 dated 01/12/1443H). This represents more than a procedural formality—it offers businesses an opportunity to modernize corporate structures, strengthen governance frameworks, and incorporate greater operational flexibility.

Prerequisites for AoA Amendment

Before initiating the update process, companies must verify the following:

• Valid Commercial Registration (CR) and MISA license: Both documents must be current and in good standing
• No pending amendments: Ensure no outstanding amendment requests exist with the Ministry of Commerce
• Registered external auditor: An external auditor registered with the relevant Saudi authority must be appointed

The Amendment Procedure

The update process starts with a comprehensive review of existing Articles of Association to ensure alignment with current legal requirements. After internal approval of necessary modifications, the updated document is submitted through the digital platform. Following regulatory review, changes receive official registration. Depending on the company structure, additional authorities may require notification.

Benefits of AoA Harmonization Under New Companies Law

Updating the Articles of Association provides several practical advantages beyond compliance:

• Enhanced operational flexibility: Previously mandatory provisions, such as statutory reserves, are no longer required
• Modernized governance structures: Opportunity to implement contemporary management practices
• Regulatory alignment: The Ministry of Commerce has standardized and templated the new AoA format while permitting customization based on company needs, creating uniformity across entities
• Simplified future modifications: Updated documents facilitate smoother subsequent amendments

Understanding both the harmonization process and the broader AoA update requirements under the New Companies Law is fundamental to establishing and maintaining a compliant, operationally efficient foreign business presence in Saudi Arabia.

These foundational elements enable your General Manager to fully execute their responsibilities while ensuring your company aligns well with Saudi’s evolving business regulations.

Proactive management of your Articles of Association, whether through initial harmonization, routine updates, or mandatory legal compliance, positions your business for sustained success in the Kingdom's dynamic economic environment.

Should you need assistance with drafting the AoA, consider reaching out to the Setup in Saudi team.