1Second Edition | April 2020

Introduction to Non-Profit Companies On 1 Dhul-Hijjah 1443 AH (corresponding to 30 June 2022), Royal Decree No. (M/132) was issued approving the Companies Law. Chapter Seven of the Law contains the provisions relating to non-profit companies. Pursuant to Article 185 of the Companies Law, a non-profit company is defined as follows: y Public Non-Profit Company: A company that must take the form of a joint stock company and may not adopt any other form. Its profits derived from business activities must be spent exclusively on general non-profit purposes and fields intended solely to serve society at large. Such purposes and fields are determined by the Ministry in coordination with the National Center for the Development of the Non-Profit Sector (NCNP). y Private Non-Profit Company: A company that must take the form of a limited liability company, a joint stock company, or a simplified joint stock company, and may not adopt any other form. Its profits derived from business activities must be spent on non-profit purposes and fields. Article 196 of the Companies Law provides for exemptions applicable to this type of company, stating: “By way of exception to the relevant laws, ZATCA, in coordination with the Ministry, shall establish the necessary conditions to exempt non-profit companies from the provisions of Zakat collection and from taxation, and to allow the deduction of donations made to such companies when determining a Zakat payer’s tax base.” Furthermore, the Implementing Regulations of the Companies Law were issued pursuant to Ministerial Resolution No. (284) dated 23 Jumada II 1444 AH (corresponding to 16 January 2023). Article 70 of the Regulations specifies the purposes and fields of public non-profit companies, Article 72 permits the use of profits for investment growth or business expansion within specified limits, and Article 73 sets out the rules governing profit distribution.