Law of Commercial Agencies

Purpose and scope

• Regulates commercial agency and distribution in the Kingdom, reserves it to Saudis, and protects consumers by requiring agents and distributors to provide spare parts and maintenance.
• It applies to anyone who contracts with a producer, or its representative in its home country, to carry on commercial business, whether as agent or distributor in any form (amendment to Article 6).

Key rules, rights and obligations

• Non-Saudis may not be commercial agents in the Kingdom; a company carrying on agency business must be wholly Saudi-owned, and its board members and authorised signatories must be Saudi (Article 1).
• Only those entered in the commercial agencies register at the Ministry of Commerce may act as commercial agents (Article 3).
• Agents and distributors must keep in stock the spare parts consumers usually need and supply other parts within a reasonable time (amendment to Article 6).
• Agents and distributors must provide maintenance and guarantee manufacturing quality throughout the agency and for one year after it ends or a new agent is appointed, whichever is earlier (amendment to Article 6).
• The spare-parts and maintenance duty also applies to importers who are not agents or distributors, and to anyone who sells for profit as a trade (amendment to Article 6).
• The Ministry of Commerce issues model contracts setting out the parties, scope in time and place, renewal and termination, and the parties' duties toward consumers.

Violations, penalties and common problems

• Breach of the law or its regulation: a fine of SAR 5,000 to 50,000, published at the violator's expense, without prejudice to the injured party's right to compensation (Article 4 as amended).
• Where the violator is a foreigner or a company with a non-Saudi partner: administrative liquidation of the business, a possible permanent or temporary ban from trading, and possible deportation of the foreigner (Article 4 as amended).
• Common problems: dealing with an unregistered agent, no spare parts or maintenance after sale, and ending an agency without arranging the transfer of obligations to the new agent.

Procedures and key deadlines

• The agency is entered in the commercial agencies register at the Ministry of Commerce; the one-off registration fee is SAR 500 (Article 5 as amended).
• Penalties are decided by a committee at the Ministry; its decisions may be challenged before the Minister within fifteen days of notification, otherwise they become final (amendment to Article 6).
• The agency contract should state its term, renewal, grounds for termination and compensation on termination, and be reviewed before signing.

An advisory summary prepared by Al-Bayan Al-Wadih Law Firm. It is not an official text and does not replace the law, its implementing regulations, or advice from a specialised lawyer. The official published text and its amendments prevail.