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  • Part Two: Finance Companies Licensing

    • Article 4

      No one is allowed to carry out any finance activity without obtaining a license from SAMA in accordance with the Law and the Regulation or other applicable laws.

      This Article has been amended in accordance with His Excellency the Governor's Decision No. 66/M SH T, dated 09/07/1439H.

    • Article 5

      The finance of a natural or a legal person regarding the goods of their institution or services to their consumers will be subject to the controls and instructions issued by SAMA.

      This Article has been amended in accordance with His Excellency the Governor's Decision No. 78/M SH T, dated 05/12/1440H.

    • Article 6

      The Finance Company shall not practice any activities, which it has not been licensed for under the Finance Laws and their regulations.

    • Article 7

      Founding shareholders of the Finance Company, or their representatives, shall apply to SAMA for a License. The application shall specify the activities for which a License is requested, and includes the following:

       1.Completed application form required by SAMA; 
       2.Draft articles of association and by-laws of the Finance Company; 
       3.Description of the organizational structure of the Finance Company showing all necessary departments and functions and their main tasks; 
       4.List of all founding shareholders setting out the number and percentage of shares that each founding shareholder will own; 
       5.Fit and proper requirements form for founding shareholders signed by each founding shareholder; 
       6.Fit and proper requirements form for Board members signed by each candidate for Board membership; 
       7.Feasibility study identifying target market, services to be provided, business model, and strategy of the Finance Company in addition to a five- year business plan sets out at least the following: 
        a.Finance Activities, for which a license is requested, products and a marketing plan;
        b.Credit granting policies and procedures;
        c.Estimated financial statements, projected annual revenue, expenses and financial margins and targeted growth rates, taking into account the requirements of capital adequacy and liquidity assessments of the SAMA;
        d.Projected start-up costs and funding thereof;
        e.Projected ongoing financing of operations;
        f.Branch offices to be established;
        g.Plan and programs of monitoring and managing risks and compliance;
        h.Recruitment and training plan, including the projected number of employees and percentage of Saudi nationals at each department and each organizational level, and the training and qualification programs for employees.
       8.An irrevocable bank guarantee issued in favour of SAMA by one of the local banks for an amount equivalent to the required minimum capital for the Finance Activity or Activities, requested to be licensed, in accordance with the model set by the SAMA. Such bank guarantee is renewable automatically until the required capital is paid up in full. This guarantee shall be released upon the request of the founding shareholders in the following cases: 
        a.Paying up the capital in cash.
        b.Withdrawing the license application.
        c.Refusing the license application by SAMA.
       9.Drafts of proposed agreements and contracts with third parties, including agreements and contracts with related parties and external service providers; and 
       10.Any other documents or information that SAMA may request. 

    • Article 8

      Subject to the provisions of the Companies Law, the minimum paid up capital of the Finance Company is as follows:

       1.For Finance Company carrying out real estate Finance Activity: (200,000,000) two hundred million Saudi riyals.
       2.For Finance Company carrying out one Finance Activity or more other than real estate Finance: (100,000,000) one hundred million Saudi riyals.
       3.For Finance Company carrying out only microfinance activity: (10,000,000) ten million Saudi riyals.
       4.For Finance Company carrying out only small and medium enterprise finance activity: (50,000,000) fifty million Saudi riyals.
       

      SAMA may stipulate higher or lower minimum capital based on the prevailing market conditions, or if, as deemed by SAMA, the proposed business model of the Finance Company, scope and nature of proposed activities, or their geographic reach so requires, taking into consideration the magnitude and the nature of risks associated with such activities. The capital must be paid up in full at the establishment of the Finance Company.

      This article has been amended in accordance with His Excellency the Governor's Decision No. (126/M SH T) dated 8/6/1444H.

    • Article 9

       1.Microfinance activity is limited to Financing the production activates of small business owners, crafts people and the like, provided that the finance amount shall not exceed the limit set by SAMA.*
       2.The licensed Finance Company practicing microfinance shall comply with SAMA requirements, permissions and rules regarding this Finance Activity.

      * This paragraph has been amended in accordance with His Excellency the Governor's Decision No. 85/M SH T dated 26/5/1441H.

    • Article 10

       1.Each founding shareholder must comply with the Sharia and legal competence requirements, and the fit and proper requirements stipulated by SAMA. In particular the following: 
        a.He must not have been convicted of a violation of any of the provisions of a criminal law, the Banking Control Law, the Capital Market Law, the Co-operative Insurance Companies Control Law or its regulations, the Finance Laws or its regulations, or any other laws or regulations inside or outside the Kingdom of Saudi Arabia;
        b.He must not have been declared bankruptcy or entered into a general settlement with any creditor;
        c.He must not have been sentenced of a breach of trust offence, unless rehabilitated and at least 10 years have passed since the last sanction for this crime has been completed and on the condition of obtaining a non-objecting letter from SAMA;
        d.Have not requested to withdraw license application to carry out Finance Activity in the last two years;
        e.He must not have a previous application to carry out Finance Activity refused by SAMA during the last five years; and
        f.He must have the sufficient financial solvency and shall not have breached any financial obligations towards his creditors nor there is an indication that he cannot continuously comply with his financial obligations towards his creditors.
       2.In case of a founding shareholder or an owner of the Qualifying Interest committing a prejudice to the Sharia or legal competence, or solvency stipulated by SAMA; SAMA may at any time band them from the right to vote on the decisions of the Finance Company or require receiving a written non-objection before practicing this right in order to preserve the integrity of the performance of the Finance Company, apply the principles of governance and protect the interests of stakeholders of the Finance Company. 
       3.A written non-objecting letter from SAMA is required prior to the acquisition of any shares in a Finance Company that is not publically traded in the Saudi Stock Exchange “Tadawul”, or the acquisition of a Qualifying Interest in a Finance Company that is publically traded in the Saudi Stock Exchange “Tadawul”, and the acquirer of such shares shall be subject to the provisions of this Article in both cases. 
       4.If the founding shareholder or that who intends to acquire shares in the Finance Company is an entity, the provisions of this Article shall apply on any who owns (5%) or more of the capital or of the right to vote in that entity. 

    • Article 11

      All Board members shall comply with the requirements of professional eligibility and fit and proper requirements stipulated by SAMA. In particular the following:

       1.He must not be a Board member in another Finance Company;
       2.He must not combine work in supervising Finance Companies or auditing their financials and membership in a Board of the Finance Company;
       3.He must not have been dismissed from an executive leadership function in financial facility as disciplinary measure;
       4.He must not have been convicted of a violation of any of the provisions of a criminal law, the Banking Control Law, the Capital Market Law, the Co-operative Insurance Companies Control Law or its regulations, the Finance Laws or its regulations, or any other laws or regulations inside or outside the Kingdom of Saudi Arabia;
       5.He must not have been previously declared bankruptcy, or entered into a general settlement with any creditor;
       6.He must not have been sentenced of a breach of trust offence, unless rehabilitated and at least 10 years have passed since the sanction for this crime has been completed and on condition that he receives a non-objecting letter from SAMA; and
       7.He must have the sufficient financial solvency and shall not have breached any financial obligations towards his creditors nor there is an indication that he cannot continuously comply with his financial obligations towards his creditors.

    • Article 12

      Any candidate for a Senior Management position in the Finance Company must comply with the requirements of professional eligibility and fit and proper requirements stipulated by SAMA. In particular the following:

       1.He must be permanently resident in the Kingdom of Saudi Arabia;
       2.He must be professionally qualified and must have at least five years of relevant experience. SAMA has the right to assess the candidate's completion of such period of experience.*
       3.He must not have been dismissed from a previous job as disciplinary measure;
       4.Not have been convicted of a violation of any of the provisions of a criminal law, the Banking Control Law, the Capital Market Law, the Cooperative Insurance Companies Control Law or its regulations, the Finance Laws or its regulations, or any other laws or regulations inside or outside the Kingdom of Saudi Arabia;
       5.He must not have been declared bankruptcy or entered into a general settlement with any creditor;
       6.He must not have been sentenced of a breach of any trust offence, unless rehabilitated and at least 10 years have passed since the sanction for this offence has been completed and on condition that he receives a non-objecting letter from SAMA; and
       7.He must have the sufficient financial solvency, and shall not have breached any financial obligations towards his creditors nor there is an indication that he cannot continuously comply with his financial obligations towards his creditors.

      * This paragraph has been amended in accordance with His Excellency the Governor's Decision No. 72/M SH T, dated 20/06/1440H.

    • Article 13

       1.The license application must comply with the requirements set out in the Law and this Regulation. The founding shareholders of the Finance Company must provide SAMA with any additional information or documents that SAMA may require within 30 days from the date of request;
       2.In case of failing to meet the 30 days period requirement specified in Paragraph 1 of this Article, SAMA may refuse the license application;
       3.SAMA will issue a written notice to the applicant after the completing all the requirements stipulated in the Law and the Regulation and
       4.Within (60) days from the day on which SAMA has accepted the license application as being complete, SAMA will either grant a preliminary approval or refuse to grant a License, giving its reasons in case of a refusal. The preliminary approval does not constitute a License or approval to practice the Finance Activity.

    • Article 14

      Founding shareholders must establish the Finance Company as a joint stock company within six months of the granting of the preliminary approval and provide SAMA with copies of the Finance Company’s commercial registration and by-laws, reflecting the licensed activities in accordance with the preliminary approval. The preliminary approval will expire after six months of the preliminary approval. Unless a non-objection letter has been obtained from SAMA to extend its duration for a maximum of six months.

    • Article 15

       1.Once the company has completed the establishment requirements and the applicants have provided proof indicating full payment of the capital, and any additional initial funding as set out in the business plan has been provided to the Finance Company and that the company has taken all necessary measures to start carrying out the planned Finance Activities, including the establishment of all necessary personnel, systems, equipment and functions, SAMA will grant the License.
       2.SAMA may take all necessary actions, such as on-site supervision, inspection, meeting their officials and viewing their systems, procedures and records, to verify that the requirements set out in Paragraph 1 of this Article have been met.

    • Article 16

      SAMA will determine in the License the Finance Activity or Activities for which it is granted. SAMA may restrict the License to certain geographic area or specific types of Borrowers or impose other conditions.

      This article has been respectively amended in accordance with His Excellency the Governor's Decision No. 72/M SH T, dated 20/06/1440H, and  His Excellency the Governor's Decision No. 113/M SH T dated 10/08/1443H.

    • Article 17

      The License shall be granted for a term of five years and may be renewed by SAMA based on a request by the Finance Company in accordance with the requirements of this Regulation. The renewal application must be submitted to SAMA at least six months prior to the expiry of the License in accordance with the model stipulated by SAMA, including the following:

       1.an updated strategy and five-year business plan that sets out at least the following: 
        A.A marketing plan taking into account existing and planned products;
        B.Credit policies and procedures;
        C.Projected financial statements, annual revenue and expenses, financial margins and targeted growth rates, against the performance of the Finance Company over the past five years, taking into account any modifications to the company’s strategy and business plan;
        D.Projected liquidity and capital adequacy ratios against the levels of liquidity and capital solvency ratios of the past five years, taking into account any modifications to the Company’s strategy and business plan;
        E.Projected ongoing Finance operations;
        F.Branch offices to be established;
        G.Report on risks suffered by the Finance Company through the past five years, and how to manage and deal with it, including the risks of non-compliance and cases of violation of laws, regulations, or, instructions and future plan and programs of the company to manage risks and compliance.
        H.Current number of employees and the percentage of Saudi nationals thereof at each department and each organizational level.
        I.Recruitment and training plan, including training and qualification programs for employees.
       2.The financial charges required for renewing the License; 
       3.Any other documents and information that SAMA may request. 

    • Article 18

      The Finance Company must not cease any of its activities for more than three consecutive months unless SAMA has granted its prior written approval, and without prejudice to the Company’s obligations towards its creditors, shareholders or the integrity of the financial system.

    • Article 19

      The Finance Company may apply for an amendment of the License for addition or deletion of some Finance Activities or amendment of any term or limitation thereof. Amendment application must be based on reasonable justifications and accompanied by any documents, information or studies required by SAMA.

    • Article 20

       1.SAMA may revoke the License upon the request of the Finance Company, taking into account the rights of the creditors and Borrowers and the integrity of the financial system.
       2.SAMA may revoke the License if the Finance Company has submitted false information or failed to disclose material information that should have been provided for licensing purposes.
       3.If the License is revoked, the Finance Company must be liquidated. SAMA may appoint a liquidator.

    • Article 21

      The Finance Company must cease its Finance Activities with immediate effect if the License is suspended according to Article 29 of the Law, and may not practice any of these activities unless a non-objection letter has been obtained from SAMA thereupon.

    • Article 22

       1.SAMA may charge the following: 
        a.(200,000) two hundred thousand Saudi riyals for issuing the License;
        b.(100,000) one hundred thousand Saudi riyals for renewing the License; and
        c.(50,000) fifty thousand Saudi riyals for amending the License.
       2.Notwithstanding the provision of Paragraph 1 of this Article, the financial fees for issuing the license to practice microfinance activity, renew it or amended it is (10.000) Ten Thousand Saudi Riyals. 

    • Article 23

      The Finance Company shall obtain from SAMA a non-objection letter prior to the launch of any financial products or amendment of any existing products directed to individuals or beneficiaries of microfinance.

      This article has been amended in accordance with His Excellency the Governor's Decision No. 72/M SH T, dated 20/06/1440H.