Legal developments

Fines and penalties for employers

This month witnessed increased pressure on employers in Saudi Arabia in the form of fines and penalties, including:

The General Organization for Social Insurance (GOSI) will fine employers for failing to provide required data or for providing incorrect data. This fine will be either SAR 10,000 or double the amount of the subscription made by the employer, whichever is higher, and it will be doubled with the number of workers or for repeated violations. Employers will also be fined if any employee registered with GOSI is not working for the employer.

Saudi Gazette – 2 February 2017

The Ministry of Labor and Social Development (MOL) has stated that it will halt recruitment and sponsorship abilities of companies that have terminated the employment of either a group of 10 or more Saudi employees or a number of Saudis representing more than 1 per cent of their entire workforce (whichever is higher). Any penalty on a companyʼs decision to terminate the employment of a large number of Saudi employees will not be enforced until two months after said decision, in order to provide companies with the opportunity to rectify the situation. The MOL will halt recruitment visas for one month for firms that fail to inform it about mass terminations. Longer penalties will apply to companies that terminate the employment of a greater number of Saudi employees.

However, the firings will be permitted by the MOL if the company submits documents containing financial studies regarding the terminations that justify the firing of each individual Saudi employee.

Saudi Gazette – 31 January 2017

The General Directorate of Passports (Jawazaat) has announced that employers will now be fined for failing to renew residence permits (iqamas), for expatriate workers under their sponsorship. Employers will be fined SAR 500 for failing to renew visas three days before expiry and SAR 1,000 for a second violation. Further, the workers will be deported if the violation occurs a third time.

In the case of employing illegal workers, Jawazaat will also impose a fine of SAR 25,000 and a one-year ban on expatriate recruitment, and will deport the manager responsible if he is an expatriate. Repeated violations will result in higher fines, longer recruitment bans, publication of the name of the offending company, and jail terms in addition to deportation.

Saudi Gazette – 1 February 2017

The MOL has announced that employers will be fined SAR 20,000 for holding workerʼs passports without their written consent. The fine will be multiplied by the number of workers whose passports are being held. The employer will have one month to comply after the first fine, at which point the fine will be doubled.

Saudi Gazette – 26 January 2017

Improving the court system

Saudi Arabia’s courts, judiciary and dispute resolution systems are notoriously inefficient. This month witnessed the following changes:

The Saudi Ministry of Justice (MOJ) has ordered that all paper-based transactions and referrals to courts and enforcement units be completely replaced by a fully electronic filing system. Electronic systems have already been launched in Riyadh and Buraidah.

Arab News – 19 January 2017

The MOJ signed a memorandum of cooperation with the Saudi Post Cooperation (SPC) to improve court services and procedures. The deal aims to exchange information and provide services electronically. Additionally, it offers comprehensive postal services related to court notifications and accompanied documents as well as linking government services through the national address. Furthermore, the MOJ will provide all lawsuit documents of each plaintiff via his/her national address and the SPC will deliver all judicial notifications via the national address.

Arab News – 11 January 2017

A representative from Saudi Arabia’s Ministry of Foreign Affairs confirmed a new mechanism to issue visas electronically for foreign investors within 24 hours. The application system for new visas for businesspeople and business delegations became effective on 1 January 2017, and a similar system for companies established in Saudi Arabia will also become effective soon. Meanwhile, the Saudi Arabian General Investment Authority (SAGIA) aims to decrease the process request time of foreign business delegations to two days instead of the previous 30 days.

Shoura considering fees on expatriate remittances

The Shoura Council (the advisory body to the King) is currently discussing a proposal to impose a 6 per cent fee on foreign remittances by expatriates. This fee would be in effect for the first year, but would gradually be reduced. The fee is designed to encourage expatriates to spend money inside the Kingdom and would be held by the Saudi Arabian Monetary Authority (SAMA). The council will also consider a cap on the amount of cash an expatriate can take with him on final exit of the Kingdom.

Saudi Gazette – 19 January 2017

Capital market developments

As we have mentioned in previous Updates, the Capital Market Authority (CMA) has approved the Parallel Market Listing Rules (Rules) for listing on the Nomu-Parallel Market. The Rules have been published in the Saudi Official Gazette, Um Al-Qura, and have now entered into force. The Nomu-Parallel Market was launched on 26 February 2017.

To be listed on the Nomu-Parallel Market, a company must have a market value of at least SAR 10 million (about US$2.7 million) and have a financial consultant, and its founders will be banned from selling their shares for one year. If the valuation of its shares is above SAR 40 million (about US$10.7 million), there must be at least 50 stakeholders and, if below that amount, there must be at least 35 stakeholders. The company must be operating on the market for at least one year with 20 per cent of its shares being publicly owned, and each stakeholder may only own 5 per cent of the shares.

In order to move to the main market, companies will have to remain on the parallel market for two years, in addition to meeting the main marketʼs basic requirements.

Um Al-Qura – 20 January 2017

The CMA approved four companies for listing on the Nomu-Parallel Market and applications for 77 other companies are currently under review.

Saudi Gazette – 17 January 2017