Legal developments

Labor law developments

This month, a number of changes to Saudi Arabia’s labor and employment law regime have occurred.

Implementing Regulations of the amended Labor Law

As we have mentioned in previous updates, the Ministry of Labor (MOL) issued 38 amendments to the Labor Law which came into force as of October 2015. Now, the MOL has issued the Implementing Regulations (Regulations) of the amended Labor Law by Ministerial Resolution no. 1982 dated 28/06/1437H. corresponding to 6 April 2016. The Regulations came into force as of 22 April 2016.

The Regulations include, for example, standard forms of employment contract and internal work guidelines, as well as clarifications on issues such as leaves, probationary periods, and the like, in addition to further requirements, such as maximum age limits for expatriate workers. We will be sending additional information on the changes. Please stay tuned.

Um Al-Qura Newspaper – 22 April 2016

Human resources jobs restricted to Saudis

The MOL is planning to restrict all human resources jobs, as well as positions in the departments dealing with hiring employees in the private sector, to Saudi nationals only. This intent is reflected in the Regulations, which forbid non-Saudi Arabian individuals from holding the title of Senior Human Resources Director.

The MOL will take the final decision regarding this plan, whilst taking into consideration the suggestions and opinions provided by businessmen and employers in the private sector.

Saudi Gazette – 5 April 2016

Expats cannot replace available Saudis

According to a senior official of the Human Resources Development Fund (Hadaf), foreign manpower can be employed in the private sector only if there are no qualified Saudis to take the jobs the employers are recruiting for. If the employer is unable to find qualified Saudis within a stipulated time, his/her recruitment application for foreign manpower will be processed.

Currently, a project to provide opportunities for the nationalization of jobs before opening the door for foreign recruitment is being worked out and will soon be implemented. Under this project, the recruitment process will be transferred to the MOL's electronic National Gate for Jobs to create opportunities for the Saudi workforce.

Saudi Gazette – 12 April 2016

Not providing facilities for disabled people leads to no license

The Jeddah municipality is warning establishments that their municipality licenses are in danger if they fail to provide facilities for disabled people. The facilities provided should ease the entrance into the establishment and moving around the building. The municipalities have already issued regulations regarding the same and establishments should follow them by providing suitable facilities for disabled people.

Saudi Gazette – 14 April 2016

CMA-regulated companies shall implement the new Companies Law

Earlier this year, the Ministry of Commerce and Investment (MOCI) (formerly the Ministry of Commerce and Industry) and the Capital Market Authority (CMA) signed a memorandum of cooperation between them over the application and implementation of the new Companies Law (CL), which comes in pursuit of the MOCI and CMA's efforts to coordinate their policies and procedures in the application of the CL in order to achieve harmony and integration. The CL became effective on 2 May 2016 and, pursuant to Art. 224, existing companies have one year thereof to come into compliance therewith.

CMA website – 17 April 2016

Factories obliged to employ 10 women

As part of the MOL's contribution to solve the problem of unemployment amongst Saudi Arabian females, the MOL is obliging factory owners to employ a minimum of 10 Saudi women in all phases of the production line.

Innovation licenses introduced by SAGIA

The Saudi Arabian General Investment Authority (SAGIA) has announced a new “innovation-based” license applicable to joint venture investors that are subject to SAGIA licensing. At this point, few details are available. However, applicants must submit a form along with detailed documents that describe the idea, benefits, contribution to the local economy, job creation for Saudis, endorsement letters including concept validation from the educational or institute incubator, followed by progress reports for major project stages.

Regulatory developments

CMA approves Investment Accounts Instructions

On 10 January 2016, the CMA published the draft Investment Accounts Instructions (the Instructions) on its official website for 30 days for the interested parties to observe and comment. Further, the CMA Board issued its Resolution Number 4-39-2016 dated 25/6/1437H. corresponding to 3 April 2016 to adopt the Instructions, which consist of 17 articles. The Instructions cover several aspects of investment accounts such as the mechanism on how to accept clients, availability of specific data to open an investment account, transfers from and to the investment account, power of attorney on the investment account, appointment of a receiver to open and operate the investment account, closing the investment account and updating the investment account's data. The Instructions shall be effective and in full force as of 3/1/1438H. corresponding to 4 October 2016.

The Instructions can be viewed on the CMA’s website on the following link:

Saudi Gazette – 5 April 2016

CMA amends procedures for companies with 50% losses

In light of the CL, which took effect on 2 May 2016, the CMA is working to amend the instructions and procedures related to Companies Listed on the Saudi Stock Exchange with accumulated losses of 50% or more of its capital. The CMA is working alongside MOCI and will announce the amended instructions and procedures once the CMA Board approves them.

Saudi Gazette – 14 April 2016

CMA approves amendments to the registration requirements for Qualified Foreign Financial Institutions

Last year, the CMA approved foreign investment on the Saudi Arabian stock exchange, Tadawul, by allowing foreign investors to directly buy and sell shares under the Rules for Qualified Foreign Financial Institutions Investment in Listed Shares (the Rules). For our comprehensive overview of the Rules, click here.

As part of the efforts to improve the capital market environment, the CMA has approved a number of amendments to the Rules for registration of Qualified Foreign Financial Institutions (QFIs).

Some of the amendments include:

  • lowering the minimum assets under management requirement for QFIs from SAR 18.75 billion to SAR 3.75 billion;
  • increasing the maximum foreign ownership threshold in a listed company by a single QFI from 5% to 10%; and
  • increasing the maximum foreign ownership threshold in a listed company by QFIs in the aggregate from 20% to 49% (unless the company's bylaws or any other regulation provides otherwise).

The amended Rules will be published and effective before the end of the first half of 2017.