1 Legal Developments

1.1 New Saudization Rules Proposed

Saudization is the colloquial term used to refer to Saudi Arabia’s official government policy of encouraging the employment of Saudi Arabian nationals in the private sector. The policy of Saudization is enforced and implemented through several programs and regulations in Saudi Arabia, including the Nitaqat Program.

New rules proposed by the Ministry of Labor seek to measure the Saudization level of companies in Saudi Arabia based on the wages and years of service of its expatriate workforce.

If approved, the rules would treat an expatriate worker with 3-5 years of working in Saudi Arabia as two expatriate workers, an expatriate worker with 5-7 years of working in Saudi Arabia as three expatriate workers, and an expatriate worker with over 7 years of working in Saudi Arabia as four expatriate workers for Saudization purposes.

Wages would also be a factor, with different wage levels counting for or against a company's Saudization levels. The proposed rules would count an expatriate worker earning between SAR 7,000 and SAR 10,000 per month as one expatriate worker, an expatriate worker earning between SAR 10,000 and SAR 15,000 as three-fourths of an expatriate worker, and an expatriate worker earning over SAR 15,000 per month as half of an expatriate worker. It is not clear yet how the rules on earnings would interact with the rules on years of service.

Arab News, 26 March 2015

1.2 New Draft Bankruptcy Law

The Ministry of Commerce and Industry (MoCI) issued a policy paper, the General Policies of Bankruptcy (the GBP), for public commenting in preparation for an envisaged Insolvency Law to be adopted in Saudi Arabia.

Currently, Saudi Arabia’s bankruptcy law regime is governed by: 1) the bankruptcy related portions of the Commercial Court Law (CCL);  and 2) the Bankruptcy Preventive Settlement Law (BPSL) (including the Implementing Regulations),  which together provide a very general and vague bankruptcy and insolvency process in Saudi Arabia.

The GBP provides for a four-phase process by which the envisaged Insolvency Law would be adopted and further discusses in a general manner the basic foundational principles which the Insolvency Law should contain. Envisaged provisions include the requirement of creditors’ meetings, specialized bankruptcy courts, automatic and non-automatic stays on enforcement, and nullification of ipso facto contractual provisions.

Arab News, 27 April 2015

1.3 Labor Law Amendments Published

As we reported in our April 2015 KSA update, the Ministry of Labor announced an overhaul of the Labor and Workmen’s Law (the Labor Law) with 38 amendments.

The amendments embody several new requirements including, inter alia, higher Saudization and training obligations for employers, in addition to longer breaks and leaves of absence in favor of employees.

The amendments were published in the Official Gazette, Umm al Qura, on 24 April, 2015 and will take effect after six months of its publication, which will be around the end of October 2015.

2 Finance and Capital Market Developments

2.1 CMA Issues Final Rules Governing Foreign Investment in Listed Shares

As we have reported in previous updates, the Capital Market Authority (the CMA) has previously issued draft rules and announcements related to the liberalization of foreign investment in listed shares on Saudi Arabia’s sole stock exchange, the Tadawul, for certain foreign investors.

On 6 May 2015, the CMA issued the final rules for Qualified Foreign Investors (QFIs) to invest in listed shares on the Tadawul. The final rules will come into effect on 15 June 2015.

For commentary and analysis of the final rules, please access this link.

2.2 ICD and Cote d’Ivoire Ink Sukuk Deal

The Islamic Corporation for the Development of the Private Sector (ICD) and the Republic of Cote d’Ivoire executed a sukuk deal in the amount of CFA 300 billion (USD 503.7 billion).

The sukuk deal will go towards the financing of several developmental projects in Cote d’Ivoire, with the aim of assisting the country to achieve an emerging economy status by 2020.

Arab News, 24 April 2015

2.3 IPOs and the Final Rules Governing Foreign Investment in Listed Shares

With the much awaited issuance of the final rules governing foreign investment in listed shares, the question of foreign investment in initial public offerings (IPOs) in Saudi Arabia remains unclear. CMA Chairman, Mohammed Aljadaan, stated this month that there are no strict rules for allowing or prohibiting foreign investors from participating in IPOs and, thus, such a situation would be subject to the discretion and agreement of the CMA and the particular issuer undergoing the IPO.

Arab News, 6 May 2015