Setting up corporates (1): Legal Risk Analysis!

Entrepreneurs and those who are about to establish emerging commercial companies are interested in studying the economic feasibility of their projects so that they can analyze the economic risks that may befall their company during its activity and their company’s ability to make more possible profit as quickly as possible.

However, most of these Entrepreneurs ignore the legal feasibility study for their startup business, which represents the green light to start it up. This study gives specific and clear answers about the project’s validity for incorporation from a legal point of view, and whether the state provides specific incentives to establish this project, and finally the appropriate legal form for establishing the company.

What is the legal feasibility study for the project!

The legal feasibility study of the project can be defined as the process of collecting data and information on decisions and regulations related to the activity that the project owner wishes to establish, whether those decisions are issued by ministries, supervisory authorities, or other entities related to the project, With the aim of determining the legal validity of the project and determining the incorporation procedures, incorporation fees, the legal form that the company must take, the rules related to grants, tax or customs exemptions, or grace periods, and also aims to determine whether there are limits to the capital with which the project must be established. And also the limits of the legal responsibility of each partner – if there are partners – or the limits of the responsibility of the project owner if there are no partners.

The legal feasibility study for the emerging project affects the establishment and continuity of this project, and its compatibility with the decisions, regulations, and regulations in force in the country.

Hence, the importance of studying the legal feasibility of the project by identifying the regulatory bodies to which the project is subject, whether it is for profit or not for profit. This is automatically reflected in the nature of the penalties for violations that the project may commit. It also determines whether there are special conditions for the type of project he intends to establish, or whether his project will be subject to the general rules for establishing companies.

The legal feasibility study of the project also plays an important role in determining the entities supporting the project, the incentives offered by these entities or the state for similar projects, as well as the most appropriate types of contracts that should be drawn up with customers, suppliers, and workers, in addition to determining the periodic legal work of the project.

Analyze the legal risks of the project!

This type of risk arises from not following legal and regulatory obligations, including contract and litigation risks against the project. Whereas, the counterparty in the relationship will not be liable to fulfill its obligations under the law. These difficulties may arise from a number of reasons, one of the most common beings that the agreement was not well documented enough to be legally enforceable.

After the process of collecting data and information related to the project, the risks that may occur to it due to the lack of legal vision of the requirements or possible modifications in one or all of the following aspects are analyzed:

  • • Regulatory risks, such as safety, environment, and urban planning requirements.
  • • Risks of non-compliance with procedures and laws.
  • • Non-contractual obligations.
  • • Risks of lawsuits.
  • • Reputational and intellectual property risks.
  • The most important elements of the legal risk analysis of the project are represented in five main elements, namely:
  • • Protection, control, restrictions.
  • • Tax treatment.
  • • Rules and forms of competition.
  • • Obstacles, consequences and supporters.
  • • The available opportunities and expected threats.

Analyzing legal risks in the era of digital transformation!

With the tremendous development provided by the technology of doing business, modern methods of providing services and delivering products, and the subsequent innovation of ideas and inventions related to the production, design, and distribution of digital products that help in providing these services, and with the enormous costs incurred by the entrepreneur who has e-commerce company.

The Kingdom has accompanied this development by paying attention to the issuance of the necessary regulations and laws to regulate the practice of this type of business, especially with the challenges faced by data protection and privacy operations. The system in 2020, and also developed a guide for electronic stores to be compatible with the e-commerce system.

This system has established strict penalties for which a fine of up to one million riyals, in addition to the possibility of partially or completely blocking the online store, temporarily or permanently, which shows the importance of studying the feasibility of projects that depend on digital transformation from a legal point of view so that the project owner will not be surprised by the loss of his capital that he invested in the project.


ALF Law Firm is interested in providing legal feasibility studies and project risk analysis from a legal point of view, through distinguished and experienced legal researchers.