In Saudi Arabia, the scope of a general manager’s responsibilities and powers may be limited, particularly if they are not the ultimate owner of the parent company.
The general manager of a newly incorporated foreign entity must always act within the powers granted to them by the company’s shareholders, as stipulated in the articles of association (AoA). These responsibilities must align with the company’s business plans and growth objectives in Saudi Arabia.
Common Powers and Responsibilities of a General Manager in Saudi Arabia
To successfully manage and ensure the continued operations of the Saudi-incorporated entity, the general manager must fulfill certain responsibilities.
Common powers include:
- Commercial Records: Issuing and renewing commercial records.
- Chamber of Commerce:
- Signing and authenticating documents.
- Opening and renewing subscriptions.
- Handling transfer, amendments, and management of commercial registrations.
- Adding activities to commercial registrations.
- Banking:
- Opening and updating accounts.
- Managing deposits and withdrawals.
- Processing letters of credit.
- Renewing, amending, and opening new branch licenses.
- Transferring existing licenses.
- Articles of Association (AoA):
- Signing and canceling articles of association and their amendments.
- Signing partner resolutions.
- Amending the company’s objectives.
- Changing partner nationality.
- Employee Management:
- Hiring new employees.
- Managing dismissal and cancellation processes.
- Canceling visas.
- Issuing and renewing work permits.
- Transferring sponsorships.
- Handling lost Iqama replacements.
- Amending job titles.
- Modifying nationalities.
- Updating employee information.
- Managing exit/re-entry and visit visas (issuance, renewal, and extension).
- Ministries: Managing the company’s interactions with all government ministries.
By understanding and abiding by these duties, general managers can not only fulfill their legal obligations but also steer the business towards sustainable success.
Legal Procedures for Changing the General Manager’s Responsibilities
Changes to the general manager’s powers must be documented in the company’s memorandum of association (MoA) and articles of association (AoA). Subsequently, it is mandatory to file a request with the Saudi Business Center (SBC), obtain approval, and then re-attest the AoA, whether through the SBC’s portal or an in-person visit to their premises.
Amending the company’s MoA and AoA can be a time-consuming process that may significantly delay the company’s Saudi business expansion efforts. Therefore, it is important to carefully assess and define the general manager’s responsibilities from the outset.
Avoiding These Don’ts When Selecting GM’s Powers
Here are the common mistakes companies can make when assigning the general manager’s responsibilities. These potential errors may escalate into far-reaching repercussions that can impact the company’s future growth prospects.
Mistake 1: Foreign companies can fall into the trap of appointing a general manager who may not be granted a limited range of powers as they attempt to fast-track their business setup process.
This, in turn, can constrain the general manager’s ability to perform essential tasks, such as opening a corporate bank account, handling checks, opening branches, amending the AoA, recruiting employees, and managing the company’s government portals in Saudi Arabia.
Solution: To counteract this, it is recommended to consult a company services firm like AstroLabs to guide the company through selecting the essential minimum number of powers of responsibilities and avoid pitfalls that can lead to delays and extra costs.
Mistake 2: One of the biggest misconceptions is that a CEO or the individual owner of the shareholder company is authorized to act on behalf of the Saudi entity. While both the CEO and the general manager are involved with handling the company’s day-to-day activities, there’s a distinction between the roles.
For instance, if the GM’s scope of powers doesn’t extend to banking, they will be unable to manage the functions of the company’s bank account as a whole. This restriction creates difficulties in signing contracts, transferring or receiving funds from vendors, and processing other financial transactions.
Solution: It is advisable to give full authority to the general manager so that they can act independently without requiring approval from other board members.
What is the Possible Impact of Restricted Powers of General Managers on the Company’s Operations?
Limitations on general managers’ powers lead to noncompliance, which can show up in various aspects of the business, as demonstrated below.
Some of the immediate consequences are
- Additional expenses that are associated with renewing the MISA license and the firm’s CR prior to their expiration dates.
- The company cannot open a bank account for managing financial transactions and government fees.
- The company lacks access to government portals, hindering its ability to effectively manage its business and workforce.
Frequently Asked Questions (FAQs) About the General Manager’s Responsibilities and Powers in Saudi Arabia
1- Why is defining GM powers important in Saudi Arabia?
Selecting the general manager’s responsibilities and powers represents the cornerstone of the first phase of a successful Saudi market expansion process.
2- What happens if GM responsibilities aren’t properly defined?
Without thorough diligence in defining these powers in the company’s AoA, a company might prevent operational disruptions such as the inability to open and manage the business bank account.
3- What regulatory tasks does a GM handle?
The role of General Managers in Saudi Arabia typically includes, but is not limited to:
- MISA license issuance and renewal
- Chamber of Commerce (CoC) matters, including obtaining the CR certificate.
- Regulatory compliance issues related to banking and managing employees
4- Does the General Manager have to be in Saudi Arabia?
For a company to be validly incorporated in Saudi Arabia, it needs to have an individual ordinarily resident in Saudi Arabia to hold the position of general manager of its foreign-owned business.