Consultancy Agreement Between Two Companies Template for Saudi Arabia

A Consultancy Agreement Between Two Companies is a comprehensive legal contract that governs professional advisory relationships between corporate entities in Saudi Arabia. This document establishes the framework for consultancy services while ensuring compliance with Saudi Commercial Law, the Companies Law of 2015, and relevant Sharia principles that govern business transactions in the Kingdom.

When do you need this document?

You need this agreement whenever your company engages another business entity for professional consulting services in Saudi Arabia. This includes scenarios such as hiring management consultants for organizational restructuring, engaging technical advisors for industrial projects, securing financial consultants for investment planning, or retaining legal advisors for regulatory compliance. The document is particularly crucial for Vision 2030 initiatives where local and international companies collaborate on strategic projects. You'll also require this agreement when establishing long-term advisory relationships, conducting feasibility studies, or seeking specialized expertise that your company lacks internally. Given Saudi Arabia's regulatory environment, having a formal consultancy agreement protects both parties and ensures transparency in commercial relationships.

Key legal considerations

Several critical legal elements must be addressed in your consultancy agreement to ensure enforceability under Saudi law. The scope of services section must clearly define deliverables, timelines, and performance standards to prevent disputes and ensure accountability. Intellectual property clauses are essential, particularly regarding ownership of work products, confidentiality of proprietary information, and protection of trade secrets developed during the consultancy period. Payment terms must specify fees, invoicing procedures, and VAT obligations under Saudi Arabia's 15% standard rate for consultancy services. The agreement should include termination clauses that outline conditions for early termination, notice periods, and post-termination obligations. Limitation of liability provisions protect both parties from excessive damages while maintaining reasonable accountability standards. Additionally, ensure the agreement includes appropriate indemnification clauses and insurance requirements to manage risk exposure.

Legal requirements in Saudi Arabia

Your consultancy agreement must comply with specific Saudi Arabian legal requirements to be enforceable. Under the Saudi Commercial Law (Royal Decree No. M/32), the agreement must clearly identify both parties with their commercial registration numbers, registered addresses, and authorized signatories. The Companies Law of 2015 requires that corporate entities have proper authority to enter into such agreements, which may need board resolutions or shareholder approvals depending on the agreement value and company structure. The Commercial Agencies Law governs service provision agreements and may apply to certain consultancy arrangements. Your agreement must also address VAT obligations under Saudi tax law, including proper invoicing procedures and tax registration requirements. Anti-Commercial Fraud Law compliance requires transparency in all commercial dealings and accurate representation of services and capabilities. The agreement should specify that disputes will be resolved through Saudi courts or approved arbitration centers, and include Arabic translation requirements if needed for official proceedings or regulatory submissions.