Overcoming Bank Account Setup Delays in Saudi Arabia: Key Pitfalls Businesses Must Avoid

Learn about the common pitfalls in setting up a business bank account for a foreign-owned business in Saudi Arabia and how to avoid delays.

This is part of a series of articles focused on enabling foreign businesses to effectively navigate the bank account setup in Saudi Arabia as a crucial aspect of a successful business expansion.

Setting up a bank account is a part of the third phase of the 20-step process of expanding to Saudi Arabia. Global businesses entering this market for the first time need to be aware of key common pitfalls when setting up their bank account.

In this article, we summarize the key takeaways and common mistakes that can lead to delays in bank account setup and their implications for businesses in Saudi Arabia. Here are the common pitfalls to avoid and solutions to follow:

• Complete the entire banking process before making significant legal changes, such as altering the parent company name.
• Sign account opening agreements promptly upon bank approval to avoid business disruptions.
• Keep documents updated and submit them at least 90 days before license expiration to ensure compliance.

Understanding Reasons for Delays in Bank Account Setup From a Company Side and the Impact: Case Studies

Below are the common examples that cause delays in opening a bank account and best practices to avoid them.

When a company changes its legally registered name

Situation: After completing the issuance of the Iqama (residency permit), a company opted to change the parent company's name; this necessitated the amendment of the MISA license, commercial registration (CR), and Articles of Association in alignment with Saudi business laws.

This process required the re-attestation of the parent company's documents after amendment, resulting in a significant delay in opening a bank account for this company.

Impact: The company had several contracts within Saudi Arabia with its clients, which required a Saudi bank account to facilitate payments.

As a result, contracts were put on hold, leading to operational difficulties for the company and incurring late fees due to non-compliance.

Takeaway: It is advisable to complete the banking procedures first and then make the necessary changes afterward.

When the POC of the company delays signing documents

Situation: The company's bank account opening request was accepted, but the client did not sign the documents within the specific period in the system, rendering the request invalid.

Impact: This company was unable to make any government payments, which required a Saudi bank account. Several other substantial contracts were put on hold.

Takeaway: Signing account opening agreements promptly upon bank approval is key to avoiding disruptions in business operations and ensuring uninterrupted financial performance.

When the company is unable to submit its ownership structure documentation

Situation: Due to the company being owned by a consortium, the client was unable to provide all the commercial registers of the owning companies and passports of the individual owners.

As a result, the company's commercial registration and MISA license expired before the required documents were provided.

Impact: The companies faced challenges due to costs associated with renewing the MISA license and commercial registration. Consequently, it was unable to carry out any operations within Saudi Arabia due to the expiration of its licenses.

Takeaway: Maintaining updated documents and providing them at least 90 days before the company's license expires is crucial for ensuring compliance.

Understanding Reasons for Delays in Bank Account Setup From a Bank Side and the Impact

Below are the common reasons behind delays in establishing a bank account from the perspective of the banks.

High Risk Entities

In some cases, large companies are identified as high-risk entities, leading to extended processing times for account management. The bank's legal team may then take up to a month to share online login information and grant the company authority to manage its account.

This process can require some other steps, such as site visits to verify the company's address and requests for additional documentation.

The implications of these delays can be significant, particularly for companies with ongoing contracts or pending license applications. For instance, a company may have several contracts requiring a Saudi bank account to receive payments and provide bank guarantees.

Technical Issues

Technical issues within banking systems can be the culprit of delays, causing widespread delays in account management and payments.

Case in point: When one of AstroLabs’ banking partners faced technical issues with their systems, leading to delays in the account opening process, the expansion team immediately contacted them, and a dedicated team from the bank was assigned to follow up on resolving the issue and provide daily updates.

Using its all-encompassing expertise and understanding of the Saudi business environment and banking landscape, AstroLabs offers a full range of corporate setup services in Saudi Arabia including a streamlined business account setup process.

Companies that faced challenges opening bank accounts had their accounts successfully established within three days after seeking assistance from AstroLabs. This support played a crucial role in their expansion in the Saudi market.