Foreign Investment The Saudi Arabian General Investment Authority (“SAGIA”) announced in 2015 that international companies were being encouraged to establish 100% foreign owned trading companies.Shortly after the announcement of the Saudi Vision 2030, the Saudi Council of Ministers approved rules to implement this change in June 2016.New quorum requirements for OGM of 25% of capital, or higher percentage provided by Ao A (capped at 50% of capital) Quorum for EGM remains at 50% unless Ao A prescribe a higher percentage but capped at two thirds of a JSC’s losses are 50% or more of capital and prescribed requirements (as specified) not followed deemed dissolution occurs by operation of law if EGM is not held within 45 days or EGM fails to pass resolution or re-capitalisation not implemented within 90 days of resolution.
The chairman must provide the company shareholders with financial statements, Board report, and auditors’ report unless they are published in a daily newspaper and a copy must be sent to MOCI and other authorities at least 15 days before the general assembly Within thirty days from the date of the general assembly filing with MOCI, and CMA in case of listed companies, of the financial statements, board report, auditor’s report and the audit committee report.
The shareholders resolution must be published on the Mo CI website.
Whilst it is not mandatory for a company to have constitutional documents in this format, it is likely to be easier, certainly for any companies formed after the publication of these templates, to obtain Mo CI approval using constitutional documents based on this format and they should also be considered when existing companies are considering changes to their constitutional documents.
The new template Ao A for LLCs reflect , for example, the following changes under the new law: JSCs-Mo CI and Capital Markets Authority Statements In April and May 2016 Mo CI and the CMA issued two joint statements dealing with the implementation of the new law in relation to JSCs (and holding companies) and specifying certain provisions of the new law that must be implemented immediately and others which fall within the 12 month grace period.
Examples of provisions to be complied with are: However the Mo CI/CMA statements make clear that any new action intended by a JSC must comply with the new law eg on appointing a new director Article 68.1 must be complied with.
Accordingly as well as bringing their procedures and affairs into line with the new law, all existing Saudi companies will need to review their existing constitutional documents and consider the changes required to be consistent with the New Law.Table Minimum notice period for OGMs reduced to 10 days.New meeting can be held 1 hour after inquorate meeting.Interim Period Article 224 of the new law gives existing companies 12 months from the Effective Date to bring their affairs into compliance with the new law.However, this does not mean that existing entities do not have to comply with the new law until the end of the 12 months because penalties can be applied from the Effective Date.This article highlights some key issues relating to the implementation of the new law, signposts some new and impending regulations that Saudi, GCC and foreign investors need to be aware of and some of the steps that existing companies and managers now need to be considering.