The Council of Ministers,
after perusal, in its session held under the chairmanship of the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz Al-Saud, of Royal Court File 69422 dated 24 Ramadan 1445 [3 April 2024], which includes the Saudi Central Bank Letter 44045330 dated 5 Jumada Al-Thani 1444 [29 December 2022] regarding the amendment of the Law on the Oversight of Financing Companies issued by Royal Decree D/51 dated 13 Sha’ban 1433 [3 July 2012],
after perusal of the Law on the Oversight of Financing Companies issued by Royal Decree D/51 dated 13 Sha’ban 1433 [3 July 2012],
after perusal of the Bureau of Experts at the Council of Ministers Memorandum 2170 dated 15 Rajab 1444 [6 February 2023], Memorandum 1243 dated 14 Rabi Al-Thani 1445 [29 October 2023], Memorandum 2595 dated 18 Rajab 1445 [29 January 2024], Memorandum 3629 dated 19 Shawwal 1445 [28 April 2024], and Minutes 338 dated 22 Dhu Al-Qa’dah 1444 [11 June 2023],
after perusal of the Council of Economic and Development Affairs Recommendation 2-7/45/R dated 29 Jumada Al-Awwal 1445 [12 December 2023],
after consideration of Shura Council Decision 255/24 dated 16 Ramadan 1445 [26 March 2024],
and after perusal of the General Committee of the Council of Ministers Recommendation 11405 dated 4 Dhu Al-Qa’dah 1445 [12 May 2024],
hereby decides
The amendment to the Law on the Oversight of Financing Companies issued by Royal Decree D/51 dated 13 Sha’ban 1433 [3 July 2012] is hereby approved as follows:
1․ The definition of “Financing company” provided in article 1 of the law is hereby amended to have the following text:
Financing company: A company holding a license to practice the activity of financing.
2․ A paragraph numbered 5 is hereby added to article 5(First) of the law with the following text:
That the company takes the form of a joint-stock company, and the bank may license a form other than a joint-stock company if it determines that the proposed business model or the nature of the activity requires this, provided that this does not prejudice the integrity of the financial system and the fairness of transactions.
The sequence of the current paragraph 5 is hereby amended to be paragraph 6.
3․ Article 11(1) and (2) of the law are hereby amended to have the following text:
1․ Practicing an activity other than financing except after obtaining the approval of the bank.
2․ Acquiring an establishment that practices an activity other than financing, whether directly or indirectly, except after obtaining the approval of the bank.
4․ Article 12(1)(d) of the law is hereby amended to have the following text:
That it finances or grants facilities to persons or establishments, if one of the members of the board of directors of the financing company, one of its managers, members of the executive board or their equivalent—as the case may be—or one of its external account auditors, is a guarantor to obtain the financing or facilities.
5․ Article 12(2) of the law is hereby amended to have the following text:
Without prejudice to a public and private right prescribed by the laws, every member of the board of directors of the financing company, every manager of the financing company, every member of its executive board or their equivalent—as the case may be—and every external accounts auditor of a financing company, who obtained financing in violation of any of the provisions provided in paragraphs 1(b), 1(c), or 1(d) of this article, must be deemed as dismissed as specified by the regulation.
6․ The opening of article 16 of the law and paragraphs 1 and 2 of it are hereby amended to have the following text:
The following must be met to be a member of the board of directors of a financing company, to be a manager, or to be a member of its executive board or their equivalent, as the case may be:
1․ That he is not a member of the board of directors of another financing company practicing the same activity, one of its managers, or a member of its executive board or their equivalent, as the case may be.
2․ That he does not simultaneously hold employment in overseeing financing companies or auditing their accounts and membership in the board of directors of the financing company, or that he is one of its managers, or a member of its executive board or their equivalent, as the case may be.
7․ Article 17 of the law is hereby amended to have the following text:
Each of the board of directors of the financing company, its managers, members of its executive board or their equivalent—as the case may be—its general manager, senior executives, and branch managers are responsible—each within the limits of their mandate—for violations by the company of the provisions of the law or its regulation.
8․ Article 18 of the law is hereby amended to have the following text:
Without prejudice to article 12(1)(a) of the law, members of the board of directors of the financing company, its managers, and members of its executive board or their equivalent—as the case may be—are jointly liable for guaranteeing the rights of the company against losses resulting from the provision of financing without guarantee.
9․ Article 19 of the law is hereby amended to have the following text:
Each joint-stock financing company must have an audit committee composed of members who are not executive members of the board of directors. A decision regarding its tasks, the rules for selecting its members, the term of their membership, and its work procedures must be issued by the general meeting of the company based on a proposal from the board of directors.
10․ Article 20 of the law is hereby amended to have the following text:
The chairman and members of the board of directors of a financing company, its managers, members of the executive board or their equivalent—as the case may be—and the employees of the company shall, when making any finance financing contract in regard to which they have the authority to take a decision, disclose in writing the following:
1․ Any relationship any of them has to the contract.
2․ Any relationship of their relatives to the second degree has to the contract.
3․ Any financial interest they have with anyone related to the contract.
The harmed party may, in the event of non-disclosure, file a lawsuit before the competent court requesting the annulment of the contract.
11․ The title of chapter 5 of the law “Supervising Financing Companies” is hereby amended to “Supervision”.
12․ Article 21 of the law is hereby amended to have the following text:
Subject to article 10(2) of the law, the bank shall supervise the work of financing companies, establishments that carry out support activities to the activity of financing, and contract registration companies licensed under the provisions of the Finance Lease Law, and it shall exercise its powers in accordance with the provisions of the law and its regulation.
13․ Article 29 of the law is hereby amended to have the following text:
If a financing company, an establishment that practices support activities to the activity of financing, or a contract registration company commits violations relating to professional misconduct or transactions that expose its shareholders, partners, or creditors to danger, or if the debts of a company or an establishment exceed its assets, the bank shall, by a written decision—in proportion to the scale of the violation—take one or more of the following measures towards the company or establishment:
1․ Warning it.
2․ Requiring it to submit an appropriate program that clarifies the measures it will take to remove the violation and rectify the situation.
3․ Compelling it to suspend some of its operations, or preventing it from distributing profits.
4․ Imposing the fine stipulated in article 34 of the law, as the case may be.
5․ Compelling it to temporarily suspend the violating person—who is not a member of its board of directors, managers, or members of its executive board or their equivalent, as the case may be—from work, or compelling it to dismiss him according to the gravity of the violation.
6․ Temporarily suspending the chairman of its board of directors, any of its members, managers, or members of the executive board or their equivalent, as the case may be.
7․ Appointing one or more advisors to advise it in the management of its business at its expense.
8․ Suspending the authority of its board of directors, managers, or members of its management board or their equivalent—as the case may be—and appointing a manager at the expense of the company to manage its business until the reasons for this cease to exist, at the discretion of the bank.
If the bank considers that the violation requires the cancellation of the licence or the liquidation of the company or establishment, it may file a lawsuit before the competent court. The bank may, in the cases it deems appropriate, suspend the licence until the lawsuit is decided.
14․ Article 36bis is hereby added with the following text:
The bank may exempt one or more financing companies from the scope of application of some of the provisions of chapters 3, 4, and 5 of the law, taking into account the fairness of transactions and the integrity of the financial system.
A draft royal decree has been prepared in the form attached.
Salman bin Abdulaziz Al-Saud
Issued on: 27 Dhu Al-Qa’dah 1445
Corresponding to: 4 June 2024
Published in Umm Al-Qura 5036 issued on 28 June 2024.