In reference to the Royal Decree No. (M/51) dated 13/8/1433 H, which includes the promulgation of the Finance Companies Control Law. We inform you of the issuance of the Royal Decree No. (M/272) dated 4/12/1445 H approving the amendment of a number of articles of the Finance Companies Control Law, as follows:
 

1- Amending the definition of “Finance Company” in Article (1) of the Law, to read as follows: “Finance company: A company licensed to engage in finance activities.”
 

2- Adding a clause numbered (5) to Item (first) of Article (5) of the Law, stating the following: “The company shall take the form of a joint stock company. The Bank may authorize other than the form of joint stock companies if it deems that the proposed business model or the nature of the activity requires it, provided that this does not prejudice the safety of the financial system and the fairness of the transactions.” The current clause (5) should be renumbered as clause (6).
 

3- Amendment to clauses (1) and (2) of Article (11) of the Law to read as follows:
    “1- Engage in any activity other than finance activities, unless approval is obtained from the bank.
    2- Acquire, directly or indirectly, other entities engaging in activities other than finance activities, unless approval is obtained from the bank.”
 

4- Amendment to subparagraph (d) of clause (1) of Article 12 of the Law to read as follows “finance or offer facilities to persons or entities if one of the members of the board of directors of the finance company, one of its managers, members of its board of managers, or the like, as the case may be, or its external auditor is a guarantor for receiving such finance or facilities.”
 

5- Amendment to clause (2) of Article Twelve of the Law to read as follows “Without prejudice to public and private rights prescribed by law, any board member of a finance company, any director of the finance company, any member of the board of managers of the finance company, or the like - as the case may be - and any external auditor of the finance company, who receives finance in breach of sub-clause 1(b), 1(c) or 1(d) of this Article shall be deemed dismissed as specified under the provisions of the Regulations.”

6- Amendment to Article (16) of the Law and its Clauses (1) and (2) to read as follows: "A finance company board member, or its managers or the member of its board of managers, or the like,- as the case may be- requires the following:
 

1. be a board member in another finance company engaged in the same activity, nor one of its managers, member of its board of managers, or the like, as the case may be.
2. combine the duty of monitoring finance companies or auditing their accounts with membership in board of directors in the same finance company, nor as one of its managers, members of its board of managers, or the like, as the case may be."
    

7- Amendment to Article (17) of the Law to read as follows: "Members of the board of directors of the company, its managers ,and the members of its board of managers, or the like,- as the case may be- as well as its general manager, senior executive directors and branch managers, each within their powers, shall be liable for the company’s breach of the provisions of this Law and its Regulations."
 

8- Amendment to Article (18) of the Law to read as follows: "Without prejudice to Article 12(1) (a) of this Law, members of the board of directors of a finance company, its managers ,and the members of its board of managers, or the like,- as the case may be- shall be jointly and severally liable for guaranteeing the company’s rights against losses resulting from granting finance without collateral."
 

9- Amendment to Article (19) of the Law to read as follows: "An audit committee shall be formed in each joint-stock finance company from non-executive board members. Committee duties, selection of its members, term of membership and work procedures shall be determined pursuant to a resolution by the general assembly of the finance company upon a proposal by the board of directors."
 

10- Amendment to Article (20) of the Law to read as follows: "Upon concluding any finance contract falling within their powers, the chairman, board members, its managers ,and the members of its board of managers or the like— as the case may be— and employees of the finance company shall disclose in writing the following:
 

1. Any relation with respect to the contract.
    
2. Any relation to the contract of any relative up to the second degree.
    
3. Any financial interest they have with any contract party.
    

In case of non-disclosure, an aggrieved party may file a lawsuit before the competent court to invalidate the contract."
 

11- Amendment to the Title of Chapter (5) of the Law from "Supervising Finance Companies" to "Supervision".
 

12- Amendment of Article (21) of the Law to read as follows: "Subject to paragraph (2) of Article (Ten) of the Law, the bank supervises the activities of finance companies, entities engaged in activities supporting finance activity, and companies licensed to register contracts under the provisions of the Finance Lease Law, and exercise its powers pursuant to the provisions of this Law and its Regulation."
 

13- Amendment to Article (29) of the Law to read as follows: "If a finance company, entities engaged in activities supporting finance activity, or a contract registration company commits violations relating to any professional irregularities or transactions exposing its shareholders or creditors to risk, or if its debts exceed its assets, SAMA shall, by written decision and in proportion to the violation, take one or more of the following measures:
 

1. Serve a warning.
    
2. Require the finance company to submit an appropriate corrective action plan.
    
3. Order the suspension of some of its operations or prevent distribution of dividends.
    
4.     Impose the fine set out in Article (34) of the Law, as the case may be.
    
5. Order the temporary suspension or dismissal of the violator -if not a board member, managers, or a members of its board of managers or the like as the case may be- according to the gravity of the violation.
    
6. Temporarily suspend the chairman, any board member, managers, or a members of its board of managers or the like as the case may be.
    
7. Appoint one or more consultants at the expense of the finance company to provide advice on its conduct of business.
    
8. Suspend the board of directors, its managers ,and the members of its board of managers or the like— as the case may be and appoint a manager at the expense of the finance company to run the company until the causes for suspension, as determined by SAMA, cease to exist. And if SAMA deems that the violation calls for cancellation of the license or liquidation of the finance company, SAMA may initiate a suit before the competent court. SAMA, at its own discretion, may suspend the license until the suit is decided.
    

14- Addition of a New Article (36- Bis) to the Law, to read as follows: "The bank may exempt one or more finance companies from the scope of application of certain provisions of Chapters (3), (4), and (5) of the Law, taking into account equity of transactions and the integrity of the financial system."
 

For your information.