Chapter Three Supervision on Consumer Microfinance Companies
Article 14
Consumer Microfinance Company shall provide SAMA with precautionary data at the specified times as per the forms, controls and instructions set by SAMA.
Article 15
1. A Consumer Microfinance Company must provide SAMA with its audited annual financial statements, auditor’s report and the Board report within (45) forty five working days from the end of the Gregorian year.
2. A Consumer Microfinance Company must provide SAMA with its quarterly financial statements and auditor’s report within (20) twenty working days from the end of each Gregorian quarter.
3. A Consumer Microfinance Company shall immediately report to SAMA any losses exceeding (15%) of the paid-up capital.
4. SAMA may amend the periods mentioned in this Article when it deems necessary.
Article 16
A Consumer Microfinance Company shall obtain a non-objection letter from SAMA prior to approving any dividend distribution, and such distribution shall not lead to a decrease in the level of capital adequacy and liquidity in accordance with the rules, requirements and criteria set by SAMA.
Article 17
1. No acquisition of assets other than those necessary to manage its business shall be executed by the Consumer Microfinance Company unless it has obtained a non-objection letter from SAMA.
2. A Consumer Microfinance Company may not execute any partial or total liquidation of its business or of the Company itself without obtaining a non-objecting letter from SAMA.
Article 18
A Consumer Microfinance Company must not obtain non-banking credit facilities or the like unless it has obtained a non-objection letter from SAMA.
Article 19
1. The Consumer Microfinance Company must apply international accounting standards in the preparation of their accounts and financial statements
2. The Consumer Microfinance Company must make provisions for contingent losses and risks in accordance with International Financial Reporting Standards. SAMA may require that the Company to make an additional provision or more for contingent losses and risks.
3. Subject to the international accounting standards, a Consumer Microfinance Company must define criteria for assets value reduction, provisioning standards and regularly verify their implementation.
Article 20
1. Prior to appointing an external auditor, a Consumer Microfinance Company shall obtain a non-objection letter from SAMA. SAMA may require the company to appoint another auditor whenever the size and nature of its business require so.
2. SAMA may require the Consumer Microfinance Company to replace its external auditor or may appoint another external auditor at the expense of the company in any of the following cases:
a. when necessary due to the size and nature of its business;
b. the external auditor has committed a breach of professional obligations; if there is a reason to believe that the external auditor has a conflict of interest; or
c. when necessary for the protection of the finance sector or governance considerations and the protection of shareholder’s interest.
3. The external auditor must report to SAMA immediately all facts of which he/she obtains knowledge in the course of an audit and which:
a. justify the reservation in the audit report or the abstention from giving an opinion;
b. jeopardize the existence of the consumer microfinance company;
c. seriously impair the company’s development;
d. indicate an evidence that the executives violate any of the applicable laws, regulations or instructions in Saudi Arabia or the by-laws of the company; or
e. terminate the agreement before it ends with the reasons thereupon.
4. SAMA may require the external auditor to explain his/her report or to reveal other facts that may have come to his/her attention during the audit, which indicates any violation of the laws, the regulations, the instructions or the by-laws of a Consumer Microfinance Company.
Article 21
1. The Consumer Microfinance Company, its Board members, and employees must provide all information and documentation concerning the Company, its business, its shareholders, and its personnel, that SAMA may request at any time.
2. SAMA has the right to inspect the records and accounts of the Consumer Microfinance Company, through SAMA’s personnel or by auditors appointed by SAMA, provided that the inspection shall be at the Company’s premises.
3. The Consumer Microfinance Company and its employees shall facilitate the task of whom SAMA appoints for inspection and cooperate with them particularly as follows:
a. providing the inspector with the company’s records, accounts and documents he/she deems necessary to perform his/her task;
b. providing information and explanations as required by the inspector; and
c. disclosing any violations or irregularities in the Company’s operations to the inspector at the beginning of his/her mission
4. The Consumer Microfinance Company shall adhere to the recommendations and instructions given by SAMA to address the observations of inspection visits.
5. The Consumer Microfinance Company and any of its employees may not hide or attempt to hide any information or irregularities or fail to provide any clarifications requested by the appointed inspector or neglect to provide any requested information and documents on time.
6. SAMA’s employees in charge of the supervision, control, and inspection shall not be vulnerable to any claims as a result of performing their duties.
Article 22
1. Every violation of the provisions of the Law and the Regulation or the noncompliance to any of the rules or circulars issued by SAMA is a violation related to the professional irregularity referred to in Article (29) of the Law.
2. Every violation that endanger the shareholders of the Consumer Microfinance Company or their creditors as referred to in Article (29) of the Law, is as follows:
a. There is a material adverse change in the business, or in the financial or legal or administrative situation of the Consumer Microfinance Company that might endangers its existence or its ability to pay its debts as they fall due.
b. The Consumer Microfinance Company incurs a loss amounting to one- half of its paid up capital.
c. The Consumer Microfinance Company incurs a loss amounting to more than (10%) of its paid-up capital in each of at least four consecutive fiscal years.
Article 23
The Consumer Microfinance Company must reimburse all costs of a third party appointed by SAMA as a consequence of procedures taken under this Chapter.