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, board members, 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 membership 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, board members, 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, board members, or the like, as the case may be."
    

7- Amendment to Article (17) of the Law to read as follows: "Each of the board of directors of the finance company, its managers, board members, or the like - as the case may be- the general manager, senior executives, and branch managers are responsible—each within their jurisdiction—for any violation by the company of the provisions of the law or its Regulations."
 

8- Amendment to Article (18) of the Law to read as follows: "Without prejudice to the provisions in Paragraph (1/a) of Article (12) of the Law, the members of the board of directors of the finance company, its managers, board members, or the like, as the case may be, shall bear joint liability for guaranteeing the company’s rights against losses resulting from providing financing without security."
 

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, directors, members of the board of directors 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: "With regard to clause (2) of Article (Ten) of the Law, the bank supervises the activities of finance companies, entities engaged in support activities for financing, and companies licensed to register contracts under the provisions of the Finance Lease Law, exercising its powers in accordance with the provisions of the law and its Regulations."
 

13- Amendment to Article (29) of the Law to read as follows: "If a finance company, an entity engaged in support activities for financing, or a contract registration company commits violations related to professional misconduct or engages in transactions that put its shareholders, partners, or creditors at risk, or if the company’s or entity’s debts exceed its assets, the bank must, by written decision and proportional to the severity of the violation, take one or more of the following actions against the company or entity:
 

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. Require it to suspend the offending individual—who is not a board member, manager, or the like as the case may be—temporarily, or compel the company to dismiss them, depending on the severity of the violation.
    
6. Temporarily suspend the chairman, any board member, manager, or equivalent.
    
7. Appoint one or more consultants to provide advisory services for managing its operations, at its own expense.
    
8. Suspend the authority of its board of directors, managers, or the like as the case may be, and appoint a manager at the company’s expense to manage its operations until the reasons necessitating this are resolved, at the bank’s discretion.
    

If the bank deems that the violation warrants revocation of the license or liquidation of the company or entity, it must file a lawsuit before the competent court. The bank may, in cases it deems necessary, suspend the license until the case is resolved."
 

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 application of certain provisions of Chapters (3), (4), and (5) of the Law, taking into account fairness in transactions and the stability of the financial system."
 

For your information.