The Commercial Court Law issued by the Royal Order No. 32 dated 1350/1/15 AH in its first article defined the merchant as: (one who engages in commercial transactions and takes it as a profession), and subjected him to a number of obligations aimed at organizing commercial activities, such as the obligation to keep commercial books and register in the commercial register. The Commercial Court Law in Article Four allowed anyone who is of sound mind or has reached the age of majority to engage in trade of all kinds. Therefore, the Law of Commercial Register, like the Law of Commercial Books and other systems related to the merchant, did not define the merchant subject to its provisions, relying on the definition provided in the Commercial Court Law.
The Commercial Court Law required the merchant to keep certain commercial books and provided a regulation for them. Due to the developments in commercial activities and the resulting inadequacy of the regulation provided by the Commercial Court Law regarding commercial books, a new Law of Commercial Books was issued by Royal Decree No. M/61 dated 1409/12/17 AH, including a comprehensive regulation for commercial books.
In the year 1375 AH, the Law of Commercial Register was issued, and its purpose, as indicated by its provisions, was to list merchants and companies practicing trade in the Kingdom within the jurisdiction of each city, and to provide information about merchants by enabling interested parties to access relevant data about them. The law did not establish any legal effects based on registration in the commercial register, as the data recorded in the register was not considered evidence for or against the merchant, nor did the commercial register have any publicizing function. Additionally, the law failed to mention some data related to commercial activities that others might be interested in accessing. Furthermore, in the state's desire to treat merchants with leniency and gentleness due to the novelty of this system, the law deliberately imposed small financial penalties not exceeding five hundred riyals at most, to be imposed by a decision from the Director General of Internal Trade at the Ministry of Commerce.
In line with modern trends that do not consider the commercial register merely a tool for statistics and information about the status of merchants, but also a tool for legal publicity for those covered by the system, it has become necessary to amend the Law of Commercial Register to respond to these trends and address its shortcomings in mentioning some data that must be registered, along with reconsidering the prescribed penalties and the authority responsible for imposing these penalties.
Article One of the system required the Ministry of Commerce to prepare a register in the cities specified by the Minister of Commerce by a decision, ensuring it covers all regions of the Kingdom. In this register, the names of merchants and companies are recorded, as well as the data stipulated in the system.
Article Two imposed on every merchant whose capital reached one hundred thousand riyals within thirty days from the date of reaching the mentioned threshold or from the date of opening or acquiring a commercial establishment to apply for registration of his name in the commercial register within the jurisdiction of this establishment. This application includes the data stipulated in this article. This article addressed the shortcomings of the previous system in terms of data, requiring the mention of the merchant's capital and the limits of the manager's authorities so that others can recognize them and deal with him accordingly. The purpose of specifying the mentioned threshold in this article is to exempt small merchants from the obligation to register to ease their burden, although this does not mean depriving them of applying for registration in the register whenever they deem it beneficial for them, as this exemption is merely a license granted for their benefit. Article Three also required the managers of companies established in the Kingdom to apply for registration of these companies in the commercial register within thirty days from the date of notarizing their contract with the Public Notary and to apply for registration of any branch within thirty days from its establishment, attaching the documents required by this article and mentioning the stipulated data. This article required the mention of data not included in the previous system, which practical experience revealed to be important, such as the extent of the manager's authorities and the persons authorized to sign on behalf of the company and specifying the actions they are prohibited from undertaking if any, so that others are aware when dealing with them, especially since the system considered the data recorded in the register as evidence for or against the merchant.
To ensure that others are aware of any amendments to the data recorded in the commercial register, the system adopted the idea of continuously updating the data recorded in the register. Article Four required the merchant, company manager, or liquidator to request notation in the commercial register of any amendment to the previously recorded data within thirty days from the date of the amendment.
Since the Chambers of Commerce and Industry Law required every merchant registered in the commercial register to join the chamber of commerce and industry within the jurisdiction of his main establishment, in implementation of this provision and to ensure compliance with this obligation - in addition to the desire to enable the chambers of commerce and industry to rely on their own resources - Article Five required everyone registered in the commercial register to deposit a certificate of their membership in the chamber with the commercial register office within thirty days from the date of registration.
If the system allowed the licensing of a foreign company to open a branch or establish an office representing it to oversee its activities in the Kingdom and facilitate communication with the main center - and to ensure these companies adhere to the licensed activity and do not engage in any other activity - Article Six required these companies to apply for registration of this branch or office within thirty days from its opening, accompanied by the documents specified by the implementing regulation.
Article Seven specified four cases for deleting the registration in the commercial register: the merchant permanently leaving his trade, his death, the liquidation of the company, or the issuance of a judgment or decision from the competent authority to delete the register, as in cases of concealment, for example. This article granted the merchant, his heir, or the liquidator in the first three cases a longer period to apply for deletion, extending this period to ninety days instead of thirty days, to provide them with the opportunity to apply for deletion. If they do not submit this application within this period, the competent commercial register office - after verifying the fact necessitating deletion and notifying the concerned parties and thirty days have passed since the notification - will delete the commercial register on its own unless the office receives from the concerned party what negates the fact. In the fourth case, the commercial register office deletes the register immediately upon being notified of the judgment or decision issued for deletion.
To ensure the confidence of others and their reassurance about the accuracy of the data recorded in the commercial register, Article Eight imposed on the commercial register office the obligation to verify the existence of the necessary conditions for registering, noting, or deleting the data. To enable the office to do so, this article authorized it to require the applicant for registration, notation, or deletion to submit documents supporting the accuracy of the data to be registered, otherwise, the office may reject the application with a reasoned decision.
In application of the publicizing function of the commercial register, Article Nine required every merchant or company to mention in all their correspondence, publications, stamps, and signs the registration number in the commercial register and the name of the city where it is registered, and to place this number on the front of the establishment next to its trade name, with all data written in Arabic, to facilitate the task of others in accessing the data recorded in the commercial register. Article Ten also required the judicial authorities issuing any of the judgments or orders specified in this article to notify the commercial register office of this judgment or order, and this article required the office to note the judgment or order in the commercial register immediately upon being notified. Article Eleven also allowed any person - to enable him to know the status of the merchant or company - to obtain an extracted copy from the registration page allocated to each merchant or company from the commercial register office. In the absence of a registration, the applicant is given a certificate of non-registration. However, to preserve the reputation of the merchant or company, this article prohibited the commercial register office from including in the extracted copy the bankruptcy declaration judgments if rehabilitation is granted, and the judgments of interdiction on the merchant or seizure of his assets if they are lifted, based on the fact that disclosing such data harms the merchant's reputation without benefiting others.
Article Twelve entrusted the Minister of Commerce with naming the employees responsible for verifying the implementation of the provisions of the Law of Commercial Register and the decisions issued in implementation of it and detecting any violations, similar to other commercial systems such as the Law of Commercial Books and the Law of Commercial Agencies. To ensure the proper performance of these employees' duties and their knowledge of the limits of their authorities, this article stipulated that the procedures for detection be specified in a regulation issued by the Minister of Commerce, and that the regulation includes some specific matters mentioned in this article and specifies the times when visits to establishments for detection purposes are allowed and the authority entitled to permit entry to establishments for inspection purposes when necessary.
In line with the modern trend of establishing some legal effects on registration in the commercial register, Article Thirteen adopted the evidentiary value of the data recorded in the commercial register from the date of its registration. However, this article allowed any other person to invoke the data required to be registered or noted, even if it was not registered or noted, whenever this other person has an interest in doing so. Accordingly, if a merchant or company registers the name of the manager in the commercial register and specifies his authorities by allowing him to conclude contracts worth one million riyals, for example, all contracts concluded by this manager within his authorities are binding on the merchant or company as long as there is no notation in the register changing the manager's name or modifying his authorities. Conversely, if this merchant or company appoints a new manager without registering his name in the commercial register, and this manager, in his capacity, concludes a contract with another person on behalf of the merchant or company, and this other person is aware of the manager's capacity and the limits of his authorities, this person, if he has an interest in doing so, can insist on the execution of this contract, considering that this manager - despite not having his name registered in the commercial register - is the legal representative of this merchant or company.
To encourage merchants to register in the commercial register, Article Fourteen stipulated that for a person to claim the status of a merchant in his dealings with official authorities, he must be registered in the commercial register.
To prevent merchants from delaying in applying for registration in the commercial register or submitting incorrect data, the penalties prescribed for violating the provisions of the Law of Commercial Register have been amended by increasing the penalty to reach fifty thousand riyals as stated in Article Fifteen of the system, in line with some systems regulating commercial activities such as the Law of Commercial Books and the Law of Commercial Agencies, where the penalty for violating their provisions reaches fifty thousand riyals. This article specified the criteria to be considered in determining the fine, which are the severity of the violation, its recurrence, the merchant's capital, and the harm caused to others due to the violation.
In line with other commercial systems and to achieve the necessary impartiality, Article Sixteen entrusted the application of the penalties stipulated in the Law of Commercial Register to a committee formed by a decision from the Minister of Commerce consisting of three members, at least one of whom is specialized in commercial systems, instead of imposing these penalties by decisions from the Director General of the Internal Trade Department according to Article Nineteen of the previous Law of Commercial Register.
In application of the general principle that prohibits the imposition of fees except by law or based on law and to achieve the necessary flexibility to amend these fees when necessary, and in line with the existing situation of determining the commercial register fees by a decision from the Council of Ministers, Article Seventeen authorized the Council of Ministers to determine the fees due on each registration application or notation to amend previously registered data or on any extracted copy from the register pages as well as on each certificate issued for non-registration.
To safeguard the interests of those covered by this system and to ensure its proper application, Article Eighteen allowed interested parties to object to the decisions of the commercial register office and the decisions of the committee responsible for imposing penalties before the Minister of Commerce and to appeal the minister's decisions regarding their objections before the Board of Grievances.
To avoid any confusion in canceling the old Law of Commercial Register and replacing it with the new system, Article Nineteen stipulated the cancellation of the Law of Commercial Register issued by the Royal Order No.4470/1/21dated 1375/11/9 AH and its implementing regulation and any provisions that contradict it.
Article Twenty specified the time for the system to come into effect after ninety days from its publication in the official gazette, and to enable those registered in the commercial register before the enforcement of this system to adjust their status according to its provisions, they were granted a one-year period from its enforcement to achieve this. This article also authorized the Minister of Commerce to issue the regulations and decisions necessary to implement the provisions of this system.