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A Charter Agreement sets out the formal structure, rules, and operating principles of an organization or business venture in Saudi Arabia. It's similar to a company's constitution, defining key elements like management powers, shareholder rights, and decision-making processes in line with the Kingdom's Companies Law.

In Saudi business practice, these agreements play a crucial role when establishing new entities, joint ventures, or restructuring existing companies. They must align with Shariah principles and the Saudi Capital Market Authority's regulations, while clearly outlining governance frameworks, profit distribution methods, and dispute re����ֱ�� procedures that all parties agree to follow.

A Charter Agreement becomes essential when launching new business ventures or restructuring existing operations in Saudi Arabia. Companies need this document when establishing joint ventures, forming subsidiaries, or creating special purpose entities—particularly for large-scale projects or investments requiring clear governance structures.

The timing is critical: draft your Charter Agreement during initial business planning, before operational activities begin. This helps prevent future disputes by clearly defining ownership stakes, management roles, and profit-sharing mechanisms upfront. It's particularly valuable for international partnerships, where Saudi regulatory compliance and Shariah principles must align with foreign business practices.

• Basic Company Charter: Sets up fundamental governance rules and shareholder rights for standard Saudi corporations, following Companies Law requirements
• Joint Venture Charter: Tailored for partnerships between Saudi and foreign entities, with detailed profit-sharing and management provisions
• Investment Fund Charter: Specifically structured for Saudi investment vehicles, incorporating CMA regulations and Shariah compliance measures
• Non-Profit Charter: Designed for charitable organizations, aligning with Ministry of Human Resources and Social Development guidelines
• Project-Specific Charter: Used for special purpose vehicles in major infrastructure or development projects, with customized operational frameworks

• Business Founders: Initiate and sign the Charter Agreement when establishing new companies or joint ventures in Saudi Arabia
• Legal Counsel: Draft and review the agreement to ensure compliance with Saudi Companies Law and Shariah principles
• Board Members: Operate within the framework set by the charter and enforce its governance provisions
• Shareholders: Bound by the charter's terms regarding voting rights, profit distribution, and ownership transfer rules
• Government Regulators: Review and approve charters, especially the Ministry of Commerce and Capital Market Authority

• Business Details: Gather full legal names, commercial registration numbers, and contact details of all founding parties
• Capital Structure: Define initial capital, share distribution, and types of shares to be issued
• Governance Model: Outline board composition, voting mechanisms, and management responsibilities
• Operational Framework: Specify business objectives, permitted activities, and profit distribution methods
• Compliance Check: Ensure alignment with Saudi Companies Law, Shariah principles, and relevant industry regulations
• Documentation: Collect founding shareholders' IDs, proof of capital deposit, and necessary ministry approvals

• Company Identity: Legal name, registration number, business type, and registered address in Saudi Arabia
• Capital Structure: Detailed breakdown of share capital, classes of shares, and shareholder contributions
• Management Framework: Board composition, decision-making processes, and management authorities
• Shareholder Rights: Voting procedures, profit distribution, and share transfer restrictions
• Dispute Re����ֱ��: Arbitration procedures aligned with Saudi law and Shariah principles
• Exit Mechanisms: Procedures for company dis����ֱ��, liquidation, or shareholder withdrawal
• Compliance Statement: Declaration of adherence to Companies Law and CMA regulations

A Charter Agreement differs significantly from an Business Acquisition Agreement in both scope and purpose within Saudi Arabia's legal framework. While both documents are crucial for business operations, they serve distinct functions in corporate governance and transactions.

• Timing and Duration: Charter Agreements establish ongoing operational rules from company formation, while Business Acquisition Agreements govern one-time ownership transfers
• Scope of Coverage: Charters outline fundamental company structure and governance rules, whereas Acquisition Agreements focus specifically on purchase terms and asset transfers
• Regulatory Requirements: Charter Agreements must align with Saudi Companies Law and CMA regulations for continuous operations, while Acquisition Agreements primarily follow contract law and M&A regulations
• Modification Process: Changing a Charter requires shareholder approval and regulatory filing, but Acquisition Agreements typically only need mutual consent of the transaction parties