Saudi Arabia's new Sports Law; establishes dedicated sports arbitration centre

Saudi Arabia’s new Sports Law; establishes dedicated sports arbitration centre

Saudi Arabia’s new Sports Law: What investors and stakeholders in the sports sector need to know

Introduction to the sports law

Having been identified as a key sector in the Vision 2030 project, the sports sector has been a key area of focus in the Kingdom of Saudi Arabia (the " Kingdom “). The Kingdom has hosted global sporting events, made statement acquisitions in the global sports sector via PIF and its sports investment arm, SURJ Sports Investments, and has opened up Saudi sports assets, notably Saudi Pro League football clubs, for inbound foreign investment. Following this major evolution of the sports sector, there is now a similarly robust and sophisticated legislative framework in place to drive the continuing evolution of sports in the Kingdom.

The Sports Law was approved by Cabinet Decision No. 414

1447 and promulgated by Royal Decree No. M

1447H (the " Sports Law “). The Kingdom’s first standalone Sports Law supersedes the Statute of Sports Federations and the Saudi Arabian Olympic Committee issued by Royal Decree No. (M

19 AH and cancels all conflicting provisions.

The implementing regulations to the Sports Law (the " Implementing Regulations “) will also be issued imminently by the Minister of Sports (the " Minister “), although as of the date of publication of this alert these have not yet been issued. A significant number of the Sports Law’s provisions expressly defer to the Implementing Regulations for further detail. Clients should treat this alert as a guide to the framework established by the Sports Law itself and must monitor the Implementing Regulations closely as they will fill critical commercial and operational gaps.

For a sector that has previously been fragmented, a comprehensive and codified legislation is a welcome change. However, not only does the Sports Law consolidate existing practice, it creates a new commercial investment architecture for the sports sector, introduces personal liability standards for sports entity governance, establishes a comprehensive licensing regime across the entire sports value chain, and formalises a dedicated sports arbitration centre within the Kingdom. For parties with exposure or ambitions in the Saudi sports market, the Sports Law simultaneously opens significant new investment pathways and imposes a compliance burden that requires immediate attention.

The new sports entity framework

One of the primary functions of the Sports Law is to categorise the different entities involved in sport within the Kingdom. The Sports Law defines a " Sports Entity " as either a Committee, a Federation, a Club or an Association. Understanding the legal characteristics of the type of Sports Entity you are dealing with is the starting point for any commercial engagement in the sector. The choice of form will have direct consequences for investment access, governance requirements, profit distribution, and commercial flexibility.

The Saudi Olympic and Paralympic Committee (the " Committee “) is a non-governmental sports body with legal personality that does not primarily seek to make a profit and is the entity recognised domestically and internationally as the Kingdom’s National Olympic and Paralympic Committee. The Committee may establish companies and contribute or participate in them in accordance with the Companies Law, after obtaining the Minister’s approval. It may also own real estate and movable property and invest funds in accordance with the Implementing Regulations. The Committee is required to adopt its own bylaws through vote of the eligible Federations, and the Committee must act in accordance with these bylaws.

" Federations " are non-governmental sports bodies with legal personality that do not primarily seek profit; each is the recognised entity in the Kingdom for the sport within its jurisdiction. Only one federation may be established per sport. Federations hold wide powers in relation to their respective sports, including licensing clubs, coaches, sports agents, and other individuals, and registering professional and amateur players and referees. They may organise sports competitions, set participation conditions, operate and own the rights related to them, and market them.

" Clubs " are the category most directly relevant to private investment. A Club is a non-governmental Sports Entity with legal personality that takes the form of either a non-profit sports institution or a company governed by the Companies Law. The choice to constitute a Club as either a non-profit or a commercial organisation is the foundational premise of the commercial investment model contemplated by the Sports Law.

" Associations " are entities established by Clubs to manage and commercially market competitions. An Association similarly takes the form of either a non-profit sports body or a company under the Companies Law and exercises its functions in managing and marketing sports competitions in accordance with its bylaws and the regulations of the concerned Federation.

The Ministry will establish a National Sports Registry (the " Registry “) in which all Sports Entities, the Saudi Sports Arbitration Centre (” SSAC “), the Saudi Anti-Doping Committee (” SADC “), sports groups, facilities, centres, institutes, academies, and schools must be registered. Failure to register may render contracts with the entity void or unenforceable. The Implementing Regulations will specify which contents of the Registry are publicly accessible. Legal personality for a Sports Entity (in non-company form) is acquired only from the date of registration. Any amendment to a Sports Entity’s bylaws must also be recorded in the Registry. Registry status is a prerequisite for legal personality and therefore for the enforceability of commercial arrangements with Sports Entities.

In addition to codifying the Sports Entities, the Sports Law also includes definitions for athletes, coaches and agents. Athletes are now split between professional and amateur, and athletes come under the purview of their respective Federations, which will include setting licensing conditions and penalties for breaches of the Sports Law. The changes made should help to professionalise the sports sector and those that work in it. Athletes will receive greater protection, and all individuals will be subject to regulatory oversight designed to ensure compliance and limit misconduct.

Investing in Saudi sport: The company pathway

This is the most commercially significant innovation in the Sports Law for institutional investors and there are now various options for ownership of a sports company within the Kingdom.

Before submitting an application to establish a sports company or before an existing company engages in sports activities, the Minister’s approval must first be obtained. The Minister shall issue his decision within a period not exceeding 60 days from the date of submission of a complete application; if this period expires without a decision, the application is deemed rejected. The capital of a sports company shall not be less than the amount specified in the Implementing Regulations, and in any event shall not fall below the capital specified in the Companies Law. The exact minimum has not yet been prescribed.

Once Ministerial approval is obtained, the company must apply to register its constitutional documents with the Registry within 60 days of establishment or of the Minister’s approval decision, as applicable. It must also notify the Ministry of Sports (the " Ministry “) of any subsequent amendments to those documents within the same period.

For existing Clubs and Associations currently constituted as non-profit institutions, the Sports Law creates a formal conversion mechanism that did not previously exist. The General Assembly of either a Club constituted as a sports institution or an Association constituted as a sports body may issue a resolution to transform such Sports Entity into a company, and that resolution must be approved by the Minister to take effect.

Upon conversion, all trademarks, logos, fixed and movable assets, contracts, rights, and obligations of the Club will transfer to the newly formed company and the company assumes full responsibility for the obligations arising from the Club or Association prior to their transformation. Upon establishment of the company and completion of the transfer the legal personality of the original institution is extinguished. Investors should note that the Minister retains discretion over how conversion proceeds are applied, which may affect post-conversion capital structure and distributions, and the Implementing Regulations will specify the controls on this.

For new investors, Club conversions represent an entirely new M&A opportunity in the Kingdom. Previously constituted as non-profit entities without transferable equity, Saudi Clubs can now become investable corporate vehicles. Investors considering acquiring stakes in Clubs should conduct full historical liability due diligence given that pre-conversion obligations transfer wholesale to the company, and should await the Implementing Regulations, which will specify the conversion procedure in detail.

A Club’s conversion into a company may constitute a change of control event under existing documentation and could affect counterparty rights and obligations. Investors with existing commercial relationships with Clubs, whether through sponsorship, naming rights, venue, or broadcast agreements, should review those arrangements now.

Foreign ownership and cross-border investment

As a protective measure over assets with important community value, the Sports Law states that the share of a foreign partner or shareholder in a sports company shall not exceed the percentage determined by the Minister. That percentage has not yet been set and will be established when the Implementing Regulations are published. This is a critical unknown for any international investor structuring an acquisition or a co-investment with non-Saudi capital. Until the Ministerial determination is made, international investors cannot finalise ownership structures for sports companies. Any investor that is in advanced discussions on a sports investment during this interim period should build contingency provisions into any heads of terms or conditional agreements to accommodate the foreign ownership threshold once published, such as conditions precedent tied to confirmation of the foreign ownership cap, or price adjustment mechanisms if the cap is lower than anticipated.

The Ministry is required to coordinate with the Ministry of Commerce, the Ministry of Investment (specifically in respect of foreign investment), and other concerned authorities to establish the conditions for obtaining approvals for mergers, acquisitions, and disposals of ownership rights in sports companies, in line with the Ministry’s strategic orientations for the sports sector. The inclusion of this provision clearly signals that M&A activity in the sports sector will require sector-specific regulatory approvals in addition to those under the Companies Law and the Investment Law. Investors must factor additional Ministry clearance timelines into transaction planning and should engage early and proactively with the Ministry as a key stakeholder. The mechanics of this approval process will be prescribed in the Implementing Regulations.

As well as categorizing the types of Sports Entities and individuals participating in sport in the Kingdom, the Sports Law also provides requirements on the governance of such Sports Entities. All Sports Entities must comprise three statutory organs: a General Assembly, a Board of Directors (” Board “), and either a General Secretariat or Executive Management. The Board must comprise a minimum of three experienced and competent members, unless the Imp