The Custodian of the Two Holy Mosques, King Abdullah, announced on Sunday June 23, 2013 that the official working days in Saudi Arabia will change to Sunday to Thursday and the weekend to Friday to Saturday, with effect from June 29, 2013 (the “Royal Decree”). The change aligns Saudi Arabia with the other members of the Gulf Co-operation Council, Oman having changed its weekend earlier this year, and provides a four working day overlap with other business centres globally. The prospect of the weekend day change was first raised by the Shura Council in April of this year.
The Royal Decree is a welcome change for many, but the switch to the timing of the weekends does raise questions as to the operation of “Business Day” definitions in existing financing documentation for Saudi Arabian borrowers, issuers, investors and financial institutions.
The announcement by the Shura Council back in April focused attention on the definition of “Business Day” and many financing agreements signed after this date moved to the LMA (Loan Market Association) standard form style formulation of “Business Day” referring to “days when banks are open for business in Riyadh for interbank transactions”, following the same convention as for other financial centres like New York or London.
“Business Day” Definition to Impact Documentation
However documentation entered into prior to the Shura Council announcement often followed the convention where “Business Day” was defined as “a day, other than a Thursday or Friday, on which banks are generally open for business in, Riyadh, the Kingdom of Saudi Arabia”.
- Financing documentation that includes this “Business Day” formulation will see the Riyadh business days narrow to four (4) days per week.
- Payments due on a Thursday may now fall due for payment on a Wednesday (where a fall back to the next prior business day convention applies) or on a Sunday (where the fall forward to the next succeeding business day convention applies).
Key Considerations for the Royal Decree
- The consequences of the Royal Decree will vary from transaction to transaction, however it is likely that financing agreements signed pre June 23, 2013 may now contain an obsolete definition of Business Day.
- Parties to financing agreements may wish to examine their documentation to better understand the impact of the Royal Decree.
- The Royal Decree did not provide for any automated amendment of “Business Day” conventions and parties to financing agreements will need to consider whether an amendment to their existing documentation should be executed to regularise references to “Business Days” for relevant periods – including commission and profit rate, cure and notice periods and repayment dates.