Article 238 of the Saudi Companies Law

المادة 238 من نظام الشركات · الباب الحادي عشر: الشركات الأجنبية

The article regulates the finances of a foreign company's branch: stating its fiscal year in the registration application, preparing and filing its financial statements with the auditor's report within 6 months, and appointing an auditor.

Official text (Arabic)

This article has not been amended since the law was issued.

1- يجب أن يتضمن طلب قيد فرع الشركة الأجنبية تاريخ بدء وانتهاء السنة المالية للفرع.

2- فيما عدا مكاتب التمثيل، يجب على فرع الشركة الأجنبية إعداد القوائم المالية الخاصة بنشاطه داخل المملكة وفق المعايير المحاسبية المعتمدة في المملكة، وإيداع هذه الوثائق وتقرير مراجع الحسابات عنها، خلال (ستة) أشهر من تاريخ انتهاء السنة المالية الخاصة بنشاط ذلك الفرع وفقًا لما تحدده اللوائح.

3- يجوز أن يكون تعيين مراجع الحسابات بقرار من مدير فرع الشركة الأجنبية بناء على تفويض من الشركة الأجنبية.

This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers

Article 238 explained in plain English

This article sets the financial obligations of a foreign company's branch in the Kingdom, in three paragraphs:

1- The fiscal year: The application to register a foreign company's branch must include the start and end dates of the branch's fiscal year.

2- The financial statements: Except for representative offices, a foreign company's branch must:

prepare the financial statements for its activity inside the Kingdom in accordance with the accounting standards approved in the Kingdom;
file these documents and the auditor's report on them within 6 months of the end of the fiscal year for the branch's activity, as the regulations specify.

The statements required relate to the branch's activity in the Kingdom, not to the whole activity of the foreign company. Representative offices are specifically excluded from this paragraph.

3- Appointing the auditor: The auditor may be appointed by a decision of the manager of the foreign company's branch, based on a delegation from the foreign company.

This rule is linked to Article 237, which requires the branch and the representative office to put specified information on their papers, and to Article 239, which treats the branch or representative office as the foreign company's domicile for its activity inside the Kingdom. For the filing details, the regulations should be consulted, and it is advisable to consult a lawyer specializing in company or foreign investment matters.

Practical example

A branch of a Gulf contracting company in Dammam states in its registration application that its fiscal year begins on January 1 and ends on December 31. It must prepare financial statements for its activity in the Kingdom in accordance with the accounting standards approved there and file them with the auditor's report within 6 months of the end of the year, and the branch manager may appoint the auditor on the parent company's delegation.

Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.

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