Legal Consultant Responsibilities in Drafting Contracts and Agreements to Ensure Legal Compliance under the New Saudi Companies Law 2023
Introduction
Contracts and agreements are the backbone of any successful business. They define rights and obligations and build trust between the parties.
With the implementation of the Saudi Companies Law 2023, the role of the legal consultant has become increasingly important in ensuring that contracts and agreements comply with the provisions of the law and its implementing regulations, especially in light of the updates affecting partnership agreements, family charters, and relationships between companies and external parties.
This article aims to clarify the most prominent responsibilities of the legal consultant in drafting contracts and the most important modern practices that ensure legal compliance and protect the interests of companies.
______________________________________
The Importance of Contracts and Agreements for Companies
Contracts are not merely official documents; they represent a fundamental organizational tool that helps to:
• Protect legal rights by precisely defining obligations.
• Ensure compliance with laws and regulations such as the new Companies Law and related commercial and tax regulations.
• Reduce future disputes by establishing clear settlement mechanisms.
• Enhancing transparency in the business environment in line with the Kingdom's Vision 2030.
Good contracts build a secure and sustainable business environment and reduce legal and financial risks.
______________________________________
The Role of the Legal Advisor in Contract Preparation
1. Drafting Contracts in Precise and Clear Legal Language
The legal advisor is responsible for preparing clear and unambiguous texts that reflect the spirit of the new system, which emphasizes clarity and transparency in commercial transactions. This includes essential clauses that define:
• Scope of obligations.
• Conditions of execution.
• Mechanisms for terminating or amending the contract.
______________________________________
2. Ensuring Compliance with the Companies Law and Related Regulations
The legal advisor is responsible for verifying the contract's compliance with:
• The Saudi Companies Law 2023, particularly clauses related to the Partners' Agreement and the Family Charter.
• The Anti-Commercial Concealment Law and the Personal Data Protection Law.
• Financial and tax regulations issued by the Ministry of Finance, the Zakat, Tax and Customs Authority, and the General Authority of Zakat and Tax.
________________________________________
3. Legal Risk Assessment and Analysis
Before entering into any contract, the legal advisor assesses potential risks, such as:
• Conflict with company law or regulatory bylaws.
• Ambiguity regarding liability in cases of breach or delay.
• Excessive penalty clauses.
The advisor also proposes preventative solutions, such as including legal protection clauses or amending compensation and penalty clauses.
______________________________________
4. Advising Management Before Contract Signing
The legal advisor explains the legal implications of each clause in the contract and suggests necessary amendments to protect the company's interests, taking into account the requirements of regulatory bodies such as:
• Ministry of Commerce.
• General Authority for Competition.
• Capital Market Authority (for contracts related to publicly traded companies).
______________________________________
5. Reviewing International and Cross-Border Contracts
In light of the Saudi market's openness to international partnerships, the legal advisor reviews contracts concluded with foreign parties to ensure:
• Compliance with international laws and trade agreements.
• Protection of the company from any obligations outside the scope of Saudi law.
• Determining the jurisdiction or international arbitration mechanism.
______________________________________
Modern Best Practices in Contract Drafting
To enhance compliance and minimize risks, the following are recommended:
1. Use precise and clear language to avoid legal ambiguity.
2. Clearly define responsibilities and obligations without leaving any room for interpretation.
3. Include dispute resolution clauses (arbitration, mediation, conciliation) before resorting to the courts.
4. Review contracts periodically to ensure alignment with new regulatory updates.
5. Digitalize contract management by electronically archiving and documenting contracts through government platforms such as the Ministry of Commerce platform.
______________________________________
Benefits of Engaging a Professional Legal Advisor
• Protecting the company from legal liabilities and regulatory penalties.
• Enhancing the confidence of partners and investors through contracts that comply with the new regulations.
• Ensuring full compliance with the Companies Law 2023 and its implementing regulations.
• Resolving disputes through legal and effective methods that guarantee business continuity.
FAQs
To ensure that the contract terms comply with the provisions of the new system and to protect the company from potential systemic risks.
Yes, provided that the parties agree and prepare an amendment annex that takes into account the provisions of the new system and is officially documented.
By clearly wording the clauses and identifying alternative dispute resolution mechanisms such as arbitration and mediation.
• Identification of the parties and their legal capacities.
• Statement of financial obligations and rights.
• Contract duration and termination conditions.
• Arbitration or litigation procedures.
• Confidentiality and regulatory compliance obligations.
