Saudi Arabia: Saudi Arabia Update - June 2016

Legal Developments

Vision 2030 introduces new Nitaqat

Earlier this year, the Deputy Crown Prince Mohammed bin Salman announced the new reform plan, Vision 2030, which expresses Saudi Arabia's long-term goals and expectations, and reflects the country's strengths and capabilities. As part of Vision 2030, Saudi Arabia is aiming to cut the unemployment rate to 7 per cent by 2030 and raising women's employment from 22 per cent to 30 per cent of the local workforce.

The government of Saudi Arabia planned a new form of Nitaqat that would not solely focus on the numbers of Saudi nationals, but also on factors such as women's employment, the average pay of Saudi nationals, the ratio of the wages of Saudis against expatriates and the sustainability of jobs occupied by local citizens.

Arab News – 5 May 2016

SAGIA's new services

As part of the Saudi Arabian General Investment Authority's (SAGIA) continuous efforts to facilitate and develop its electronic services, it has announced the launch of the following online services:

  1. Updating the financial statements service: it is an online service to collect specific financial information from licensed entities, which replaces the submission of financial statements in the future. This update should be done annually. If an entity already submitted its annual financial statements via Qawaem before the end of May, it will no longer be required to re-submit it through SAGIA's electronic services. Qawaem is a program established by the Ministry of Commerce and Investment (MOCI) in cooperation with the Saudi Organization for Certified Public Accountants to provide services related to financial statements, which enables entities and audit firms to upload and send financial statements to be used by relevant parties, such as government sectors.
  2. Updating government document data service: it is an online service to update the entities' government documents data to establish a reliable government database. This update should be done once only.

Both services are currently optional for all entities licensed by SAGIA until 14 July 2016. However, the services will be mandatory for all entities afterwards.

SAGIA – 9 June 2016

Further Saudization restrictions and labor reforms

Companies that fire Saudi employees are being warned by the Ministry of Labor and Social Development (MOL) that they will not be allowed to hire foreign employees. The private sector currently employs 1.8 million Saudis and 8.9 million expatriates, mostly in Riyadh, the Eastern Province and Makkah. Closing the gap between the private and public sectors can be achieved by reducing the working week to 40 hours with two days off on the weekends, as well as specifying the minimum wage and providing a decent work environment, said Mufrej Al-Haqbani, Labor Minister.

Further, the MOL is introducing several measures to ensure Saudi women are employed, aiming to increase women's representation in the workforce from 22 per cent to 30 per cent. Currently, the participation of Saudi women in the workforce is low and is mainly concentrated in health and education sectors.

Arab News – 5 May 2016

Saudi Arabia's military purchases to be local

As part of Vision 2030, Saudi Arabia is committing to localize defense industries. Although Saudi Arabia is the world's biggest military spender, only 2 per cent of the spending is within Saudi Arabia. Localizing the defense industry will stimulate other industrial sectors such as industrial equipment, communications and information technology, which will lead to creating more job opportunities, according to some. The localization will be achieved through direct investments and strategic partnerships with leading companies in this sector.

Arab News – 26 April 2016

Saudisation in the telecom industry

The MOL recently decided to Saudize the telecom industry. The decision was taken by some relevant authorities and ministries, along with the participation of young men and women working in this sector. However, the Saudization of the telecom industry led to an 83 per cent decline in the rents of some mobile shops, due to the withdrawal of Saudi investors from the telecom sector to avoid implementation of the Saudization plan. A representative from the MOL said all relevant ministries are attentive to ensure commitment to the decision by all mobile shops.

Arab News – 29 May 2016

Capital Market Developments

Shareholders of companies with losses must abide by the new law

Boards of directors and shareholders of listed companies that record substantial losses of 50 per cent or more of their paid up capital must comply with Article 150 of the new Companies Law (CL). The Capital Market Authority (CMA) granted those companies a one-year period starting from 2 May 2016 to comply with the provisions of Article 150 of the CL. Companies that lost 50% or more of their paid up capital before or during the one-year period should make a monthly announcement explaining their plans and actions in order to comply with Article 150.

Saudi Gazette – 5 May 2016

CMA sets Quorum for holding general assemblies

The CMA announced that listed companies wishing to hold general assemblies must set a quorum for correctly holding such assemblies by using the registry of shareholders at the end of the trading period on the day of the assembly meeting. Further, the CMA warned that violating this will impact the validity of the resolutions adopted at the assembly meeting.

Saudi Gazette – 29 May 2016

Rules for Special Purpose Entities

The CMA drafted rules for Special Purpose Entities (SPEs) and is inviting interested parties to comment on the draft. The draft rules are made available on the CMA's website and will continue for 60 days until it becomes final. The purpose of the rules is to regulate the establishment, licensing, registration, offering and management of SPEs and associated activities in Saudi Arabia. The draft rules consist of 83 articles and four annexes aiming to regulate the SPEs.

Arab News – 30 May 2016

CMA amends the IFR

Earlier this year, the CMA published the draft amended Investment Funds Regulations (IFR) on its website for 60 days for public consultation. Now, the board of the CMA has approved the final draft of the IFR, which includes 104 articles covering fund management, custody, offering and selling units, merging funds and offering units of foreign funds in Saudi Arabia.

Further, the CMA announced that the amended IFR will enter into force on 6 November 2016.

Arab News – 9 June 2016

Sipchem to complete Sukuk soon

The Saudi International Petrochemical Co. (Sipchem), a mid-sized petrochemicals firm whose largest shareholder is the Zamil Group, is aiming to complete a SAR1.8 billion sukuk issue by June. The sukuk will be used to fund current business requirements, as well as new opportunities. Sipchem is also proceeding along downstream opportunities in Saudi Arabia and plans to grow abroad into areas which would give it a competitive advantage.

Arab News – 16 May 2016

Positive impact of stock market liberalization

Opening the stock market as part of Vision 2030 has positively impacted Saudi brands, according to some commentators. All Saudi bank brands experienced double digit percentage growth in brand value. The most notable impact has been the Initial Public Offering (IPO) of Saudi Aramco, in which valuations have varied significantly. However, this could create the world's most valuable public company and reveal one of the most valuable brands worldwide.

Arab News – 18 May 2016

CMA announces draft amended rules

As part of the CMA's efforts to develop the capital market, it has prepared an amended draft of the Rules for Qualified Foreign Financial Institutions Investment in Listed Securities. With reference to the announcement issued by the CMA dated 5 March 2016 regarding the approval of amendments to the Registration Requirements for Qualified Foreign Financial Institutions, the CMA board issued on 20 June 2016 its resolution to publish the amended draft on the CMA's website for interested parties to provide their comments for a period of 30 calendar days.

CMA – 20 June 2016

CMA issues an updated FAQ for the QFI rules

The CMA recently issued an updated Frequently Asked Questions (FAQs) on the Rules for Qualified Foreign Financial Institutions Investment in listed shares (Rules). The FAQs are for the purpose of answering questions that may be raised by foreign investors, authorised persons and other relevant parties in relation to the Rules. The updates cover the submission of applications, the required information to satisfy the identity of any controller, the appointment of foreign portfolio managers, granting waivers, changing the first Qualified Foreign Investors (QFI) and management of QFI clients' funds. The CMA further announced that it will set, announce and impose fees for QFI registration or QFI client approval in 2017.

CMA – 20 June 2016

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