Company directors and executives should be aware
As we have described in previous updates, Saudi Arabia has adopted a new companies law that will take effect as of 2 May 2016 (the New Companies Law) to wholly replace the existing companies law regime. The New Companies Law provides for, inter alia, significant increases to the potential liabilities and sanctions on officers and directors of Saudi Arabian companies.
In line with these provisions of the New Companies Law, the Ministry of Commerce and Industry (MOCI) this month announced that directors and officers can face jail terms of up to five years and fines of up to SAR 5 million for certain violations committed by their companies. These violations include, but are not limited to, registering false financial statements, misusing company funds for personal gain, acting maliciously against other members of the firm or for the benefit of another company, and preventing shareholders and other members of the company from exercising their rights.
The Bureau of Investigation and Public Prosecution is the authorised body to take action for such violations. Anyone who is aware of a violation but does not report it may also be penalized; further, if the same violation is repeated within three years, the penalty may be doubled.
Arab News – 23 February 2016
Saudi Arabia aims to set up free zones
As part of a long-term plan to diversify Saudi Arabia's economy away from oil, the General Authority of Civil Aviation (GACA) is negotiating with government agencies to set up free zones at the airports of Jeddah and Riyadh, as a starting point. Advocates believe that setting up free zones in Saudi Arabia for different industries and services would attract foreign businesses through relaxed licensing, visa, and taxation rules. It will be interesting to see how this develops.
Further, GACA announced that it is planning to privatize Saudi Arabia's international and domestic airports by 2020 as an additional means of harnessing foreign investment to support state finances.
Arab News – 4 March 2016
Big 5 Saudi Construction Exhibition
The Big 5 Saudi International Building & Construction Show took place in Jeddah from 7–10 March 2016. Dentons partner and head of Construction and Infrastructure, Andrew Jones, attended to provide insight into some of the major issues related to construction and infrastructure projects in Saudi Arabia and the wider Gulf region.
Arab News – 6 March 2016
Mandatory standard employment contracts
As per the amendments to the Saudi Arabian Labor Law that came into effect as of October 2015, the Ministry of Labor (MOL) shall develop a standard form employment contract (Article 12.1). The MOL announced this month that its standard form employment contract is under consideration and will be released soon. We will keep you updated as soon as we have more information on this.
As per the amendment to Article 13 of the Labor Law, the parties may agree to terms and conditions that are additional to the standard form employment contract. However, terms or conditions that are contradictory must be approved by the MOL.
Saudi Gazette – 9 March 2016
Banking and Finance developments
Market Conduct Regulations amended
As part of the initiatives described in the 2015-2019 strategy of the Capital Market Authority (CMA), and further to its continuous efforts to develop and cultivate the capital market and protect investors, the Board of Commissioners of the CMA issued a resolution to amend the Market Conduct Regulations (MCRs). The MCRs govern the ethics and integrity of the market and prohibit engaging in conduct such as insider trading and manipulative practices.
The amendments to the MCRs added front-running by Authorized Persons to the list of prohibited practices. Front-running refers to the practice of licensed market-makers dealing in securities based on advance information before his or her client has been made aware of such information, or executing a transaction in relation to the security first executing the client’s transaction in relation to that same security.
Arab News – 9 March 2016
Jeddah Economic City financing
As part of the development of the Jeddah Economic City Project and construction of the Jeddah Tower, the Alinma Jeddah Economic City Fund has obtained Shari’a-compliant financing from Alinma Bank in the amount of up to SAR 3.6 billion. The financial planning stage for the project lasted around two years, and the first phase of the project – which includes construction of an integrated city and the world’s highest skyscraper – is scheduled for five years.
Arab News – 16 March 2016