Chapter IV: Activity Provisions
Article 23: Participant Due Diligence
1- The Debt-Based Crowdfunding Company shall prepare a Participant due diligence program. This program must include policies and procedures for the following, as a minimum:
a. Know Your Customer (KYC).
b. Information security.
c. Data privacy and confidentiality.
d. Combating financial crimes, such as money laundering and terrorist financing.
2- The Debt-Based Crowdfunding Company shall comply with the Electronic Transactions Law and its Implementing Regulations and relevant laws and shall establish the necessary procedures and measures to ensure the validity of information, including:
a. verifying the Participant’s email address and phone number by sending a verification link to the registered email and number (Authentication)
b. Developing procedures necessary to ensure the provision of up-to-date information, such as the national address.
Article 24: Assessment of the Creditworthiness and Due Diligence of the Institutional Beneficiary
1- The Debt-Based Crowdfunding Company shall check and document the credit record of the Institutional Beneficiary after its approval.
2- Upon the Institutional Beneficiary’s approval, the Debt-Based Crowdfunding Company shall register the credit information of the Institutional Beneficiary with one or more of the licensed credit bureaus in accordance with the relevant laws, regulations, and instructions. Such information shall be updated throughout the period of dealing with the Institutional Beneficiary.
3- The Debt-Based Crowdfunding Company must decline the finance request in case of the absence of approval from the Institutional Beneficiary mentioned in paragraphs (1) and (2) of this Article.
4- The Debt-Based Crowdfunding Company shall adopt clear, transparent and documented scientific methods, criteria and procedures to evaluate the creditworthiness of the Institutional Beneficiary and its ability to repay the debt. Such methods, criteria, and procedures shall be applied in accordance with the best practices in this field. The board of directors of the Debt-Based Crowdfunding Company shall approve these criteria and procedures, review them at least on an annual basis, update them when necessary, and document such updates.
5- The Debt-Based Crowdfunding Company shall set clear policies regarding the Institutional Beneficiary due diligence in accordance with the Anti-Money Laundering Law and the Law of Combating Crimes of Terrorism and its Financing, their Implementing Regulations and relevant instructions. The Company shall also set identification criteria and initial due diligence for the Institutional Beneficiary. The due diligence framework shall cover at least the following:
a. Verifying the legal status of the Institutional Beneficiary.
b. Verifying the identity of the Institutional Beneficiary, including its establishment.
c. Verifying the address of the Institutional Beneficiary.
d. Ensuring that there is no conflict of interest between the Debt-Based Crowdfunding Company and the Institutional Beneficiary.
e. Verifying the sufficiency of the Institutional Beneficiary’s resources to carry out the activity, including its solvency, credit history, and past performance.
f. Assessing the Institutional Beneficiary’s business or financing levels (if any) and the existing financing and its source.
g. Assessing the business plan of the Institutional Beneficiary.
6- Without prejudice to the provisions of the relevant laws, the Debt-Based Crowdfunding Company shall inform Participants of the results of the due diligence procedure in the risk assessment process.
Article 25: Service Agreements Between Parties
1- The Debt-Based Crowdfunding Company shall draw up a paper or electronic contract with Participants in accordance with the relevant legal requirements. Each party shall receive a copy of the contract that must clarify at least the following:
a. Contract parties.
b. Contract scope.
c. Contract term.
d. Institutional Beneficiary’s name - and commercial register number or the unified number.
e. Finance type.
f. Finance Amount.
g. Fees.
h. Rights and obligations of the contract parties.
i. Dispute settlement and compensation mechanism.
j. Expected net Profit that Participants will receive.
k. Obligations of the Debt-Based Crowdfunding Company to manage financing, including the method of transferring payments made by the Institutional Beneficiary, to the Participant.
l. Procedures to be followed in case of default.
m. Contingency arrangements to deal with business disruption or cessation of the Debt-Based Crowdfunding Company.
n. Contract termination and expiration.
o. Participants’ right to withdraw their finance amounts before the completion of the Finance Amount.
2- The Debt-Based Crowdfunding Company shall draw up a paper or electronic finance contract with the Institutional Beneficiary when providing finance. Each party shall receive a copy of the finance contract that must clarify at least the following:
a. Names of the contract parties, commercial register number of the Institutional Beneficiary or its unified number, official addresses, and contact information including mobile phone number and email address.
b. Finance type.
c. Contract term.
d. Finance Amount.
e. Conditions for withdrawing the Finance Amount, if any.
f. Term cost and its application conditions.
g. Annual percentage rate (APR).
h. Term of payment of fees or funds required without paying the Finance Amount and the conditions for such payment.
i. Consequences of delayed payment of installments.
j. Guarantee and security required.
k. The number of the account used for depositing finance installments and the name of the bank.
l. Early repayment procedures, if any.
m. Procedures for dealing with guarantees in case of value reduction.
n. Procedures for exercising the right to terminate the finance contract.
o. Permission of the Institutional Beneficiary to include its information in the credit record.
p. Requiring the Institutional Beneficiary to notify the Debt-Based Crowdfunding Company, within a reasonable period, of any material changes that would affect Participants, the Institutional Beneficiary’s business, or the implementation of their projects.
q. Requiring the Institutional Beneficiary to submit its financial statements, including bank account statements, on an annual basis at least.
Any other information specified by SAMA.
Article 26: Credit Limits
1- The total amount of existing finance provided through the Platform shall not exceed 40 times the Debt-Based Crowdfunding Company’s capital and reserves, unless a written non-objection letter from SAMA is obtained.
2- Finance shall be limited to commercial enterprises registered in Saudi Arabia, and the Debt-Based Crowdfunding Company shall not grant financing for consumer purposes.
3- The total amount of existing finance provided to each Institutional Beneficiary that is a micro, small, or medium-sized enterprise shall not exceed SAR 7,500,000 (seven million five hundred thousand Saudi riyals), except for large enterprises, enterprises licensed to practice real estate development activity, or in case a written non-objection letter from SAMA is obtained.
4- The Participant’s contribution shall not exceed 25% of the Finance Amount requested for each Institutional Beneficiary. The existing financing for each Participant shall not exceed SAR 250,000 (two hundred fifty thousand Saudi riyals) for all finance options offered through the Debt-Based Crowdfunding Platform. Eligible Participants shall be excluded. The Debt-Based Crowdfunding Company may increase the maximum limit of existing financing for Participants after obtaining a written non-objection letter from SAMA.
5- Taking into account paragraph (1) of this Article, the Debt-Based Crowdfunding Company may participate in financing Institutional Beneficiaries through the Platform and in this case, it shall consider the following:
a) Obtaining a non-objection letter from SAMA for the Debt-Based Crowdfunding Company to participate in financing Institutional Beneficiaries through the Platform.
b) The Debt-Based Crowdfunding Company shall have an approved policy by the board to organize the participation process in financing Institutional Beneficiaries.
c) The total existing finance provided by a Debt-Based Crowdfunding Company through its participation shall not exceed 8 times the capital and reserves, unless a non-objection letter from SAMA is obtained and provided that the existing finance does not exceed the financing limits referred to in paragraph (1) of this Article.
d) The participation percentage shall not be less than (5%) and shall not exceed (25%) of the total Finance Amount required by the Institutional Beneficiary. SAMA may increase or decrease these percentages as it deems appropriate.
e) SAMA may require the participation of the Debt-Based Crowdfunding Company, which obtains SAMA’s non-objection to finance Institutional Beneficiaries through the Platform, in all available opportunities if deemed necessary.
Article 27: Fund-Raising and Payment Provisions
1- The fund-raising period for each Institutional Beneficiary shall not exceed (60) days, provided that the funds are transferred to the Institutional Beneficiary within a period not exceeding five working days after the total Finance Amount is raised. In the event that the requested Finance Amount is not covered during the fund-raising period, the finance campaign shall be void, and Participants shall be refunded within (15) days after the end of the fund-raising period.
2- The Debt-Based Crowdfunding Company shall publish the Institutional Beneficiary’s information on the Platform, granting a period of no less than (24) hours for Participants to view this information before the beginning of the fund-raising period. Participants shall be allowed to withdraw their finance amounts at any time prior to the completion of the Finance Amount.
3- The Finance Amount repayment period shall not exceed (60) months. The Debt-Based Crowdfunding Company may extend this period upon the Participants’ approval.
4- Repayment shall only be made through electronic channels, and it is prohibited to repay in cash.
5- The Debt-Based Crowdfunding Company, which enables automatic participation in the financing option, shall clarify this for the Participants and obtain their pre-approval to activate this option and allow them to cancel it at any time.
6- The funds available in the Collection Account shall be separate and independent from the funds of the Debt-Based Crowdfunding Company, and shall not be used for purposes other than collecting and managing the Finance Amount.
7- The account used for Participants’ funds in the Debt-Based Crowdfunding Company shall be named (Finance Amount Management Account - name of the Debt-Based Crowdfunding Company).
Article 28: Disclosure
1- By using the Platform, the Debt-Based Crowdfunding Company shall clarify the nature of the business offered and publish awareness-raising information, in addition to the risks resulting from participation in Debt-Based Crowdfunding. The Company shall also ensure that the nature of the relationship between finance process parties is clarified on the
Platform.
2- The Debt-Based Crowdfunding Company shall prepare the appropriate declarations and pledges and enable the Participants and the Institutional Beneficiary to read and agree to them before using the Debt-Based Crowdfunding Platform. Before using the Platform, the Company shall obtain an electronic acknowledgment from the Participants through a (Pop-Up Window), which includes their acknowledgment of the risks associated with Debt-Based Crowdfunding.
3- The Debt-Based Crowdfunding Company shall clearly share basic information about how the service works on the Platform. Such information shall include, at a minimum, the following:
a. Details on how the Platform works.
b. The extent to which the Debt-Based Crowdfunding Company is participating in financing Institutional Beneficiaries, in addition to the Company’s policy for participation.
c. Details of the service fees
d. Any financial interest of the Debt-Based Crowdfunding Company or a relevant person that may lead to a conflict of interest.
e. Approved standards for assessing the Institutional Beneficiary’s credit rating, including but not limited to: The Institutional Beneficiary’s financial position standard, the solvency of the Institutional Beneficiary and its owners, the Institutional Beneficiary’s credit record, and the collaterals provided by the Institutional Beneficiary.
f. Eligibility criteria of Participants.
g. The mechanism of dealing with the Participants’ funds when the Finance Amount requested is not covered.
h. The steps taken by the Debt-Based Crowdfunding Company and the rights of relevant parties if a material change occurs in the conditions of the Institutional Beneficiary.
i. The mechanism followed by the Debt-Based Crowdfunding Company in case of default.
j. The measures put in place by the Debt-Based Crowdfunding Company for information security and data protection.
k. Contingency arrangements in the event the Debt-Based Crowdfunding Platform ceases to operate.
4- The Debt-Based Crowdfunding Company shall clearly share on its Platform all relevant information about each Institutional Beneficiary, including at least the following:
a. A detailed description of the Institutional Beneficiary’s project for which it aims to obtain the Finance Amount, including the total Finance Amount requested and how the funds will be used.
b. Audited financial statements of the Institutional Beneficiary for the last two years, if any.
c. Current and future key financial indicators of the Institutional Beneficiary.
d. The results of the Institutional Beneficiary due diligence process conducted by the Debt-Based Crowdfunding Company.
e. A statement clarifying that displaying the project on the Platform shall not be considered as advice to provide financing to the Institutional Beneficiary.
f. Details of the term cost and Participants’ expected profits aside from the charges and fees received by the Debt-Based Crowdfunding Company and any other rights related to the financing.
g. Guarantees and any restrictions on their use.
h. The charges and fees received by Debt-Based Crowdfunding Company.
i. The Debt-Based Crowdfunding Company’s participation percentage in financing Institutional Beneficiaries, if any.
j. Payment terms and the preventive controls and measures taken.
5- The Debt-Based Crowdfunding Company shall clearly share information on its Platform about the significant risks that Participants may face from using the Debt-Based Crowdfunding Platform. Such information shall include, but not be limited to, the following:
a. The potential for Participants to be exposed to material risks, including the loss of some or all of their money in case of default.
b. A clear and detailed list of the potential risks that the Institutional Beneficiary may face.
6- The Debt-Based Crowdfunding Company shall clearly share on the homepage of its electronic Platform the main information on the status of its existing finance opportunities and update this information quarterly or upon the occurrence of developments, whichever comes first. Such information shall include, at a minimum, the following:
a. The default percentage of the opportunities financed, classified according to the level of risks.
b. Total amounts collected by the Debt-Based Crowdfunding Company compared to the Finance Amounts to be collected.
c. Clarifying that the data contained in paragraphs (a) and (b) are not considered sufficient indicators to anticipate the future performance of the Debt-Based Crowdfunding Company or that of Institutional Beneficiaries.
7- The Debt-Based Crowdfunding Company shall follow up with the Institutional Beneficiary’s commitment to the financing contract and notify Participants using electronic communication means (SMS messages or email) within (72) hours from the date of occurrence of any of the below-mentioned cases, in addition to clarifying the measures to be taken
by the Debt-Based Crowdfunding Company on a case-by-case basis:
a. Approval of the Institutional Beneficiary’s request for early repayment.
b. Default.
c. Existence of a legal dispute with the Institutional Beneficiary over the financing contract.
Article 29: Conflict of Interests
1- The Debt-Based Crowdfunding Company shall take reasonable measures to avoid and address any conflict of interest to ensure fair treatment of all participants.
2- The Debt-Based Crowdfunding Company shall not provide advice to Participants in relation to the Institutional Beneficiary’s projects displayed on the Debt-Based Crowdfunding Platform.
3- The Debt-Based Crowdfunding Company shall not offer finance or grant facilities to an Institutional Beneficiary in which one of the members of the board of the Debt-Based Crowdfunding Company, its directors, or its employees, as well as their spouses and first- or second-degree relatives has an interest.
4- The staff of the Debt-Based Crowdfunding Company, including members of the board and its committees, in addition to its major shareholders, shall not participate in any finance granted through the Platform. SAMA may issue regulatory controls to allow staff and major shareholders of the Debt-Based Crowdfunding Company to participate in finance granted through the Platform.