A Permanent Branch is a conventional branch which would be considered as an extension of the parent office. The minimum start-up capital to satisfy MISA ‘s initial requirements would commonly be approximately SAR 500,000.
The main advantages of a Permanent Branch are:
- Depending on the circumstances, it may be the quickest to establish
- The formation process is generally similar to that of a limited liability company
- No new articles of association are needed
- It can have the full range of activities
- It can engage in projects in both the public and private sector (in accordance with approved objects)
- It may promote and solicit approved business throughout KSA
The main disadvantages of a Permanent Branch are:
- Requires a minimum share capital of SAR 500,000 which may increase depending on the business activities.
- Saudi-owned entities, or entities involving substantial Saudi participation, are likely to be preferred for government contracts
- Its activities are limited to the licensed objects approved by MISA
- There is a general expectation that substantive income producing activities will be undertaken
- It is not able to conduct promotion, marketing and trading activities (as a minimum 25% Saudi equity participation is required for these activities together with significantly greater capitalization)
- It cannot be formed solely to engage in representation or promotional activities
- The parent company cannot quarantine liability in KSA and may be exposed in its place of incorporation
- No other shareholders share the financial burden of capital requirements and setting up costs.