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Structuring Cross-Border M&A: Saudi Legal Considerations for International Investors

Posted on September 8, 2025 - 7:10 am by

Saudi Arabia has emerged as one of the most dynamic markets in the Middle East, propelled by sweeping economic reforms under Vision 2030. Foreign direct investment (FDI) is a cornerstone of this transformation, with mergers and acquisitions (M&A) playing an increasingly important role in advancing corporate consolidation, capital deployment, and access to the Kingdom’s rapidly expanding sectors. For international investors, structuring a cross-border M&A transaction in Saudi Arabia requires careful navigation of the country’s regulatory, commercial, and cultural landscape.

 

Regulatory Framework and Approval Requirements

A combination of statutory laws and sector-specific regulations regulates cross-border M&A activity in Saudi Arabia. The Ministry of Investment of Saudi Arabia (MISA) is the primary authority for foreign investment licensing, while the Saudi Arabian General Authority for Competition (GAC) oversees competition clearances. Depending on the target company’s industry, approvals may also be required from sector regulators, such as the Saudi Central Bank (SAMA) or the Communications, Space & Technology Commission (CST).

Foreign investors must obtain a foreign investment licence from MISA before acquiring shares in a Saudi entity. This process involves assessing eligibility under the foreign investment rules, which restrict ownership in specific sectors while providing incentives in others. In parallel, transactions that result in an economic concentration require notification to the GAC, particularly if financial thresholds based on turnover are met. Early engagement with regulators can prevent delays and ensure smooth completion.

Due Diligence and Compliance

Comprehensive due diligence is fundamental to any cross-border M&A, but in Saudi Arabia, it takes on heightened importance given the evolving regulatory environment. Investors should assess corporate governance structures, compliance with licensing and regulatory requirements, employee obligations, tax exposures, and contractual commitments.

Particular attention should be paid to foreign ownership restrictions and the validity of existing licences. In some cases, local sponsors or partners may have contractual rights that impact the deal structure. Moreover, compliance with anti-bribery and anti-money laundering laws is strictly enforced, with Saudi Arabia aligning itself more closely with international standards in recent years.

Structuring Considerations

The choice of structure depends on the nature of the transaction, whether it is an asset purchase, share purchase, or merger. Share acquisitions are the most common route, offering continuity of contracts and licences, though they require regulatory consents. Asset acquisitions, while providing greater flexibility in isolating liabilities, can be more complex due to transfer formalities and additional approvals.

In some cases, international investors prefer to establish a Saudi holding or special purpose vehicle to facilitate the acquisition. This approach can simplify regulatory filings, allow for greater flexibility in financing arrangements, and provide tax efficiencies depending on the transaction’s cross-border elements.

Tax and Financial Implications

Tax structuring is another critical consideration. Saudi Arabia imposes a corporate income tax of 20% on foreign-owned entities, while Saudi and GCC shareholders are subject to zakat. Withholding tax applies to cross-border payments such as dividends, interest, and royalties, with rates varying depending on applicable double tax treaties.

The introduction of transfer pricing rules and increased scrutiny by the Zakat, Tax and Customs Authority (ZATCA) mean that related-party transactions must be carefully managed. Investors should also account for value-added tax (VAT) implications on asset transfers and service agreements linked to the acquisition.

Employment and Workforce Matters

Saudi labour law is protective of employees and mandates certain obligations on employers, including end-of-service benefits and Saudisation requirements. Any cross-border M&A transaction must evaluate the impact of workforce restructuring, continuity of employment, and compliance with mandatory localisation quotas. Employee-related liabilities should be factored into valuations and addressed in transaction documents to mitigate post-closing risks.

Dispute Resolution and Governing Law

While Saudi law will generally govern local entities and transactions, parties often seek to negotiate arbitration clauses for cross-border M&A. Saudi Arabia is a signatory to the New York Convention, and arbitration awards are enforceable through local courts, subject to compliance with Sharia principles. The Saudi Centre for Commercial Arbitration (SCCA) provides a modern institutional framework for dispute resolution, offering international investors greater predictability.

Cultural and Commercial Dynamics

Beyond legal considerations, cultural alignment is central to successful deal execution in Saudi Arabia. Relationship-building, negotiation styles, and local business practices can significantly influence transaction timelines and outcomes. International investors benefit from engaging with experienced local advisers who understand both regulatory nuances and the importance of cultural context.

Cross-border M&A in Saudi Arabia presents significant opportunities, driven by government reforms, growing capital markets, and a youthful consumer base. However, international investors must navigate a multi-layered legal framework, regulatory approvals, and commercial sensitivities to achieve successful outcomes. With careful structuring, rigorous due diligence, and proactive engagement with regulators, cross-border transactions can unlock long-term strategic value in one of the region’s most attractive markets.

Real Estate SPVs and REITs: Legal Considerations in Saudi Property Transactions

Posted on September 8, 2025 - 7:05 am by

Saudi Arabia’s property market is undergoing a profound transformation, fuelled by Vision 2030 initiatives, giga-projects, and increasing foreign and institutional participation. Real estate has become one of the most dynamic asset classes in the Kingdom, offering opportunities for domestic and international investors alike. Against this backdrop, structuring vehicles such as special purpose vehicles (SPVs) and real estate investment trusts (REITs) has emerged as a key tool in facilitating real estate investment and transactions. However, these structures bring their own legal and regulatory considerations that investors must navigate to ensure compliance and protect value.

 

SPVs in Real Estate Transactions

SPVs are commonly used in real estate to isolate risks, ring-fence assets, and streamline ownership structures. In Saudi Arabia, they are often incorporated to acquire, develop, or holding a specific real estate asset. This allows investors to separate liabilities associated with the project from their wider business, enhancing both risk management and financing flexibility.

An SPV can also facilitate joint ventures, particularly where foreign investors seek to partner with Saudi entities. By confining rights, obligations, and cash flows within a dedicated vehicle, the SPV simplifies governance and exit options. However, investors must ensure that the SPV is adequately licensed and complies with foreign investment restrictions. Approvals from the Ministry of Investment of Saudi Arabia (MISA) may be required where non-Saudi investors hold equity.

Legal and Regulatory Framework for SPVs
  • The incorporation of SPVs is governed by the Saudi Companies Law, which sets out requirements for shareholding, governance, and reporting. Investors must also consider:
  • Licensing: Foreign investors require MISA approval for direct or indirect ownership of real estate assets, except where exemptions apply.
  • Sector-Specific Restrictions: Certain property types, such as land in Makkah and Madinah, are subject to foreign ownership limitations.
  • Financing and Security: Mortgages and security interests must be registered with the Unified Real Estate Registry and the Ministry of Justice to be enforceable.
  • Tax and Zakat: SPVs are subject to corporate tax where foreign-owned and to zakat where Saudi- or GCC-owned, with implications for structuring joint investments.

SPVs therefore offer flexibility, but their establishment and operation require careful attention to licensing, ownership, and regulatory compliance.

REITs as a Structuring Tool

REITs, introduced into Saudi Arabia in 2016, provide a regulated framework for collective investment in income-generating real estate. They allow investors to access real estate markets without directly owning or managing assets, offering liquidity through public listing on the Saudi Stock Exchange (Tadawul).

  • REITs are governed by the Capital Market Authority (CMA) and must meet detailed requirements, including:
  • Diversification: Limits on concentration of assets and obligations to invest primarily in developed, income-producing properties.
  • Distribution: Mandatory annual distribution of a significant portion of net income to unitholders.
  • Transparency: Strict disclosure requirements, including valuation standards, periodic reporting, and governance obligations.
  • Leverage: Restrictions on borrowing to mitigate systemic risks.

These requirements make REITs attractive to institutional investors seeking regulated exposure to Saudi real estate. However, compliance with CMA rules and ongoing reporting obligations can present operational challenges, particularly for sponsors unfamiliar with capital markets regulation.

Key Legal Risks in Structuring

When deploying SPVs or REITs in property transactions, investors must navigate several legal risks:

  • Foreign Ownership Restrictions: Limitations on property ownership in certain regions may restrict structuring options.
  • Regulatory Approvals: Both MISA and CMA approvals may be required, depending on the structure and asset class.
  • Taxation: Cross-border transactions can give rise to withholding tax on dividends, royalties, or management fees; double taxation treaty protections should be considered.
  • Governance Risks: Poorly drafted shareholders’ agreements in SPVs or inadequate compliance frameworks in REITs can create disputes or regulatory penalties.
  • Exit Strategy: For SPVs, clarity around share transfers and valuation mechanisms is critical, while for REITs, liquidity is tied to market conditions and regulatory requirements.
Dispute Resolution and Enforcement

Dispute resolution in real estate SPVs and REITs often centres on shareholder disagreements, financing arrangements, or regulatory compliance. Arbitration is commonly used, and Saudi Arabia’s adoption of the New York Convention ensures the enforceability of arbitral awards, subject to Sharia principles. For REITs, disputes may also involve regulatory enforcement actions by the CMA, requiring sponsors and managers to adhere strictly to compliance obligations.

Strategic Opportunities

The growing use of SPVs and REITs reflects Saudi Arabia’s maturing investment ecosystem. SPVs offer bespoke, flexible ownership and financing structures, while REITs provide transparency, liquidity, and regulated access to the property market. Both are instrumental in unlocking capital, attracting foreign participation, and facilitating investment in landmark developments and income-producing portfolios.

As Saudi Arabia continues to reshape its real estate sector, SPVs and REITs are becoming indispensable structuring tools for both local and international investors. However, they present distinct legal and regulatory challenges that must be managed carefully to ensure compliance, protect investment value, and achieve strategic objectives. By anticipating these challenges at the outset of a transaction, investors can successfully harness these vehicles to participate in one of the region’s most dynamic property markets.

Understanding the SSAC’s Financial Control Arbitration Rules

Posted on September 8, 2025 - 7:00 am by

The Saudi Stock Exchange Arbitration Centre (SSAC) plays a critical role in maintaining the integrity and efficiency of financial markets in Saudi Arabia. One of the key tools in its regulatory framework is the Financial Control Arbitration Rules, which provide a structured mechanism for resolving disputes related to financial oversight, governance, and compliance. Understanding these rules is essential for financial institutions, listed companies, and investors operating within the Kingdom’s increasingly sophisticated capital markets.

 

The Financial Control Arbitration Rules are designed to ensure that disputes arising from financial control matters are addressed promptly, fairly, and in a manner consistent with Saudi regulatory standards. These rules apply to a wide range of scenarios, including disagreements over financial reporting, audit findings, compliance with internal control obligations, and adherence to corporate governance requirements. By establishing a specialised arbitration process, the SSAC offers an alternative to traditional court proceedings, enabling parties to resolve conflicts in a confidential, efficient, and legally binding manner.

One of the distinguishing features of the SSAC’s rules is their emphasis on expertise and impartiality. Arbitrators appointed under the Financial Control Arbitration Rules are typically professionals with specialised knowledge in finance, auditing, and corporate governance. This ensures that decisions are not only legally sound but also technically informed, reflecting best practices in financial oversight. The rules also provide clear guidelines on the selection, appointment, and responsibilities of arbitrators, thereby promoting transparency and trust in the arbitration process.

The procedural framework under these rules is carefully structured to balance efficiency with due process. It includes provisions for initiating arbitration, submitting evidence, conducting hearings, and issuing binding awards. Parties to a dispute are allowed to present their case entirely, including the submission of expert reports, financial analyses, and other relevant documentation. Notably, the rules allow for interim measures to be requested, such as temporary freezes on disputed financial actions or access to essential financial records, thereby protecting the rights and interests of all parties pending the final resolution of the dispute.

Enforcement of arbitral awards under the SSAC’s Financial Control Arbitration Rules is robust and aligned with Saudi law. Awards issued by the SSAC are recognised as final and binding, with limited grounds for challenge, ensuring that parties can rely on the enforceability of the decision. This predictability is particularly valuable in financial disputes, where timely resolution can have significant implications for market stability, investor confidence, and corporate reputation.

Beyond dispute resolution, the rules contribute to the broader objectives of financial governance in Saudi Arabia. By codifying a transparent and professional process for handling financial control disputes, the SSAC reinforces regulatory compliance, encourages responsible corporate behaviour, and supports the overall integrity of the capital markets. For businesses and investors, familiarity with these rules is not only a matter of legal compliance but also a strategic consideration, enabling them to manage risks proactively and engage with the market with confidence.

The SSAC’s Financial Control Arbitration Rules represent a sophisticated and essential framework within Saudi Arabia’s financial regulatory landscape. By combining technical expertise, procedural clarity, and enforceable outcomes, these rules provide a reliable mechanism for resolving disputes related to financial control, thereby safeguarding market integrity and promoting confidence among market participants. For any entity involved in the Kingdom’s capital markets, understanding and effectively navigating these rules is a critical aspect of financial governance and risk management.

Saudisation and Workforce Restructuring: Legal Do’s and Don’ts for Employers

Posted on September 8, 2025 - 6:56 am by

Saudisation, also known as the Saudi nationalisation programme, is a central component of the Kingdom’s economic and social policy. It requires private sector organisations to increase the representation of Saudi nationals within their workforces. At the same time, many employers must also manage workforce restructuring as business models evolve. The interaction between Saudisation requirements and restructuring exercises presents both opportunities and risks. Employers must understand their legal duties, avoid common pitfalls, and implement strategies that are compliant with Saudi labour law.

 

Saudisation and the Nitaqat System

The Saudisation programme is administered under the Nitaqat system, which categorises companies into tiers ranging from Platinum and High Green to Yellow and Red. The categorisation depends on the number of Saudi nationals employed in relation to the overall workforce size. Companies in higher categories enjoy significant benefits such as faster access to work visas and eligibility for government contracts. By contrast, companies in lower categories may face severe restrictions that hinder their ability to operate effectively.

Recent policy adjustments have increased Saudisation requirements in specific industries, with some sectors now requiring up to 80 per cent Saudi employment. Employers must therefore ensure that their hiring strategies are aligned with these enhanced quotas and must also take advantage of support initiatives such as the Human Resources Development Fund, which provides subsidies for the recruitment and training of Saudi employees. Attempts at superficial compliance, such as appointing Saudi nationals to nominal positions without genuine responsibilities, are prohibited and can attract penalties.

Workforce Restructuring and Termination Procedures

Workforce restructuring often requires difficult decisions, including contract terminations or non-renewals. Saudi labour law provides clear rules under Articles 74 to 76 that govern notice requirements. For fixed-term contracts, Article 74 requires prior written notice of at least 30 to 60 days if either party does not intend to renew the contract. Article 75 requires that indefinite contracts be terminated with at least 60 days’ notice where employees are paid monthly, or 30 days in other cases. Article 76 makes it clear that failure to comply with notice obligations requires compensation equivalent to the wages for the notice period.

Employers must ensure that contracts clearly outline notice obligations and that any termination or non-renewal is adequately documented. Notices should always be in writing and acknowledged by both parties. Ambiguous or verbal notices expose employers to legal and financial risk.

Compensation under Article 77

Article 77 of the Labour Law governs compensation for termination without valid cause. Under this provision, indefinite contracts are subject to compensation of 15 days’ wages for each year of service, while fixed-term contracts require compensation equal to the salary for the remaining contract period. In both cases, compensation cannot be less than two months’ wages. Liquidated damages clauses may be included in employment contracts, but must comply with Shari’ah principles, which prohibit excessive penalties and require that compensation reflect actual loss. Importantly, reinstatement of employment is no longer a remedy available to employees following termination, as this option was removed in recent legislative reforms. Employers must therefore be able to demonstrate valid reasons for any termination, and they should consider offering fair severance packages beyond statutory requirements to minimise disputes and preserve goodwill.

Payroll and Wage Protection

Restructuring also requires close attention to payroll compliance. The Wage Protection System, managed by the Ministry of Human Resources and Social Development through the Mudad platform, ensures that wages are paid in full and on time. Delays or unlawful deductions trigger automatic alerts and may lead to investigations or suspension of company services. Employers are legally obliged to pay final entitlements promptly, with a deadline of one week for terminations initiated by the employer and two weeks where the employee has resigned. Employers are also prohibited from deducting costs such as residence permit fees or health insurance contributions from employees, as these remain the responsibility of the employer.

Labour Reforms under Vision 2030

The Kingdom’s Vision 2030 reforms have introduced several significant changes that employers must incorporate into their workforce strategies. Labour mobility rules now allow expatriates greater flexibility in moving between employers and in obtaining exit permits through platforms such as Qiwa and Absher. Probationary periods have been extended to a maximum of 180 days, allowing employers more time to evaluate employees before confirming permanent roles. Resignation procedures for fixed-term contracts have been formalised, with timeframes for employer responses and procedures for withdrawal of resignations managed through the Qiwa platform.

Additional reforms have also expanded employee rights, including extended bereavement, maternity and paternity leave, and enhanced anti-discrimination protections. Overtime provisions now allow employees to opt for compensatory time off in lieu of payment. Employers must update their policies to reflect these reforms to remain compliant and to foster a fair and transparent workplace culture.

The interaction between Saudisation policies and workforce restructuring presents both compliance challenges and strategic opportunities for employers in Saudi Arabia. By aligning recruitment strategies with Nitaqat requirements, respecting notice and termination obligations, compensating relatively under Article 77, ensuring payroll compliance, and adapting to ongoing labour reforms, employers can minimise legal risks and support the Kingdom’s broader economic and social objectives. Careful planning and strict adherence to the law will not only reduce the risk of disputes but also strengthen an organisation’s reputation in an increasingly competitive market.

From Term Sheet to Exit: Legal Risks in Saudi Private Equity Deals

Posted on September 8, 2025 - 6:52 am by

Private equity (PE) has become a vital driver of investment activity in Saudi Arabia, fuelled by the Kingdom’s ambitious Vision 2030 agenda, diversification initiatives, and growing appetite for alternative asset classes. With sectors such as healthcare, technology, education, logistics, and energy transition attracting increasing investor attention, private equity transactions are gaining both scale and sophistication. Yet, while opportunities are abundant, private equity deals in Saudi Arabia carry unique legal risks at every stage of the investment cycle from negotiating the initial term sheet through to structuring the exit.

 

The Term Sheet

The term sheet is often the first formal step in a private equity deal, outlining key commercial and legal principles before binding agreements are executed. Although commonly perceived as non-binding, specific provisions such as exclusivity, confidentiality, and governing law typically carry legal force.

In Saudi Arabia, the drafting of term sheets requires careful attention to regulatory limitations on foreign ownership, mandatory licensing requirements, and competition considerations. Ambiguity or over-reliance on boilerplate language may result in misaligned expectations or unenforceable provisions. Investors should also be cautious about inadvertently creating binding obligations on financing commitments or valuations before due diligence is completed.

Due Diligence: Identifying Hidden Liabilities

Comprehensive due diligence is critical in the Saudi market, where regulatory compliance and governance structures vary significantly across industries. Key risk areas include:

  • Licensing and Regulatory Compliance: Foreign investment restrictions, validity of MISA licences, and sector-specific approvals (e.g. in banking, insurance, or telecoms).
  • Corporate Governance: Accuracy of shareholder registers, board structures, and compliance with the Companies Law.
  • Employment Matters: Saudisation obligations, end-of-service benefits, and ongoing labour disputes.
  • Tax Exposures: Outstanding zakat, tax liabilities, and transfer pricing compliance.
  • Contractual Risks: Change-of-control clauses, termination triggers, and enforceability of key agreements.

Failure to identify such risks early can lead to inflated valuations, disputes, or regulatory penalties that undermine deal viability.

Investment Structuring: Balancing Control and Compliance

Once risks are identified, structuring the investment is central to mitigating exposure and aligning investor interests with those of the founders or existing shareholders. Common approaches include minority equity stakes, joint ventures, or complete acquisitions.

Private equity investors in Saudi Arabia often seek protective rights such as reserved matters, board representation, and veto powers. However, these must be carefully balanced to avoid contravening restrictions on foreign ownership control or inadvertently triggering regulatory reclassification of the entity.

Moreover, financing structures involving shareholder loans, convertible instruments, or profit participation arrangements must be assessed for compliance with the Saudi Companies Law and tax framework. Improperly structured financing could give rise to recharacterisation risks or adverse withholding tax implications.

Shareholders’ Agreements: Allocating Rights and Responsibilities

The shareholders’ agreement (SHA) is a cornerstone of private equity deals, defining governance, management, and exit mechanics. Key areas of legal risk include:

  • Transfer Restrictions: Right of first refusal, tag-along, and drag-along rights must be enforceable under Saudi law and aligned with regulatory approvals.
  • Dividend Policies: Profit distribution arrangements must comply with the Companies Law and should account for zakat and tax considerations.
  • Deadlock Mechanisms: Buy-sell provisions, arbitration, or put/call options must be drafted to avoid prolonged disputes.
  • Protective Rights: Reserved matters should be precise and enforceable, avoiding overly broad veto rights that could stifle operations.

A poorly drafted SHA can create prolonged disputes or undermine investor protections, particularly in scenarios involving minority ownership.

Regulatory Approvals and Competition Clearance

Saudi Arabia’s competition regime has become increasingly sophisticated, requiring notification to the General Authority for Competition (GAC) for economic concentrations that meet specific thresholds. Transactions undertaken without clearance risk administrative fines, invalidation, or unwinding.

In addition, cross-border PE transactions may require scrutiny by sector regulators such as the Saudi Central Bank (SAMA) or the Communications, Space & Technology Commission (CST). Timely engagement with regulators is critical to avoiding closing delays.

Exit Strategies: Planning Ahead

An exit strategy should be considered from the outset of the investment. In Saudi Arabia, private equity exits typically occur through:

  • Trade Sales: Transfers to strategic buyers, often requiring fresh regulatory approvals.
  • Secondary Buyouts: Sales to another private equity fund, involving negotiation over warranties, indemnities, and valuation mechanisms.
  • Initial Public Offerings (IPOs): Increasingly viable with the growth of the Saudi capital markets, particularly Tadawul’s Main Market and Nomu (parallel market).

Each exit route carries distinct legal risks. For instance, IPOs are subject to rigorous disclosure obligations and approval from the Capital Market Authority (CMA). Trade sales may encounter competition scrutiny or change-of-control restrictions, while secondary buyouts often involve complex indemnity negotiations over legacy liabilities.

Dispute Resolution and Enforcement

Disputes in private equity deals often arise over valuation adjustments, earn-outs, or breaches of warranties. Arbitration is commonly chosen as the dispute resolution mechanism, with Saudi Arabia being a signatory to the New York Convention and having modernised its arbitration framework. The Saudi Centre for Commercial Arbitration (SCCA) offers a credible local platform, although enforcement remains subject to Sharia principles and oversight by local courts.

Private equity transactions in Saudi Arabia present investors with attractive opportunities, but they also carry legal risks across every stage of the deal lifecycle. From negotiating binding provisions in a term sheet to navigating regulatory approvals, drafting enforceable shareholders’ agreements, and structuring a viable exit, success depends on anticipating risks and embedding safeguards at the earliest stage. With the Kingdom’s regulatory framework becoming increasingly sophisticated, proactive risk management and careful structuring are essential for international and domestic private equity investors alike.

Protecting Athlete Image Rights Under Saudi Law: Challenges and Opportunities

Posted on September 8, 2025 - 6:47 am by

Saudi Arabia’s rapid transformation has placed sports at the heart of its global positioning. With significant investments in football, motorsport, boxing, and e-sports, athletes are increasingly in the spotlight as both competitors and brand ambassadors. This surge in visibility has amplified the importance of protecting and monetising athlete image rights.

 

While Saudi Arabia does not yet recognise a standalone “right of publicity,” athletes benefit from protection through a patchwork of legal frameworks. These range from copyright and data protection laws to advertising regulations and contract principles. Understanding this framework is critical for athletes, clubs, and sponsors seeking to safeguard value and navigate compliance in one of the world’s fastest-growing sports markets.

Legal and Regulatory Framework for Athlete Image Rights
Copyright Law and Consent

Saudi Copyright Law prohibits the publication or commercial use of a person’s photograph or likeness without their consent, subject to limited exceptions. This provides athletes with a foundational legal tool to control unauthorised use of their image in campaigns, merchandise, or media.

Personal Data Protection Law (PDPL)

The PDPL, implemented in 2021 and updated in 2023, classifies an individual’s image and biometric features as personal data. Organisations must obtain explicit consent to collect, process, or share this data, and are subject to restrictions on cross-border transfers and data retention. For athletes, this ensures additional control over the commercial use of their likeness in digital and broadcast media.

Anti-Cyber Crime Law

The Anti-Cyber Crime Law criminalises acts that invade privacy, including unauthorised use or distribution of personal images via electronic means. This provides athletes with recourse against online misuse of their images, such as “deepfakes” or unlicensed digital endorsements.

Trademark Protection

Names, signatures, and even player numbers may be registered as trademarks with the Saudi Authority for Intellectual Property (SAIP). This enables athletes to secure exclusive rights to their commercial identity, strengthen enforcement against counterfeiting, and create structured licensing programmes.

Advertising and Media Regulations

Saudi advertising regulations prohibit misleading promotions and require transparency in sponsored content. Influencers and athletes endorsing products on social media must obtain a media licence and disclose paid partnerships. Breaches may result in fines or licence suspension, underscoring the importance of compliance in brand collaborations.

Civil Transactions Law (2023)

The recently enacted Civil Transactions Law codifies principles of contract and tort liability. It provides a framework for damages claims where unauthorised use of an athlete’s image causes material or moral harm. This enhances legal certainty in disputes relating to image rights breaches.

Monetisation of Athlete Image Rights
Endorsements and Sponsorships

Athletes in Saudi Arabia are increasingly signing endorsement deals spanning apparel, technology, financial services, and lifestyle products. Agreements typically cover the scope of use, territorial rights, exclusivity, approval processes, and morality clauses.

Licensing and Merchandising

Image rights can be licensed for merchandise such as jerseys, collectables, and digital content. Trademark registration strengthens protection and enforcement, while well-drafted licensing contracts ensure revenue sharing and quality control.

Collective Rights in Team Sports

Clubs and federations often control collective image rights for team campaigns and league promotions, while athletes retain personal rights. Careful contract drafting is required to prevent conflicts between personal endorsements and league sponsors.

Digital and Social Media Content

With the rise of influencer marketing, athletes increasingly monetise personal platforms. Compliance with PDPL, advertising disclosure rules, and influencer licensing is essential to avoid regulatory breaches.

Tax Considerations
  • Withholding Tax (WHT): Payments for licensing or endorsement fees to non-resident athletes are often treated as royalties and may be subject to 15% WHT, subject to treaty relief.
  • Value-Added Tax (VAT): Image rights services supplied in Saudi Arabia are generally subject to 15% VAT. For non-resident athletes, Saudi entities may need to account for VAT under the reverse charge mechanism.
  • Zakat/Income Tax: Saudi or GCC nationals may fall under zakat rules, while foreign athletes and entities remain subject to corporate income tax.

Tax structuring is therefore critical in cross-border endorsement and licensing arrangements.

Key Legal Risks
  • Unauthorised Exploitation: Online misuse or counterfeit merchandise can dilute brand value.
  • Ambush Marketing: Unauthorised association with major sporting events may infringe advertising rules and trademark rights.
  • Reputation Management: Breach of morality clauses or reputational disputes can trigger contract termination.
  • Compliance Failures: Lack of influencer licensing or PDPL consent may result in regulatory penalties.
  • Cross-Border Complexities: Multinational campaigns must reconcile Saudi rules with foreign IP, tax, and data regimes.
Dispute Resolution and Enforcement

Disputes may arise over endorsement contracts, misuse of images, or trademark infringement. Saudi courts and the Saudi Center for Commercial Arbitration (SCCA) provide avenues for enforcement. As a signatory to the New York Convention, Saudi Arabia also enforces foreign arbitral awards, subject to Sharia principles. Regulatory authorities such as SAIP, SDAIA, and the Ministry of Commerce play active roles in policing infringements.

Strategic Opportunities

The legal framework—though fragmented—offers clear pathways for athletes and brands to protect and commercialise image rights. Key opportunities include:

  • Brand Building: Registering trademarks and reserving digital domains to strengthen brand portfolios.
  • Digital Innovation: Leveraging compliant social media and e-commerce channels for monetisation.
  • Structured Contracts: Aligning endorsement and licensing agreements with PDPL, advertising, and tax rules.
  • Event Leverage: Harnessing the Kingdom’s investment in mega-sporting events to expand regional and global brand reach.

Saudi Arabia’s evolving sports ecosystem offers unprecedented opportunities for athletes to monetise their image rights. While the Kingdom lacks a unified “publicity right,” a combination of copyright, data protection, advertising, and contract laws provides robust protection when used strategically. By anticipating compliance requirements and structuring deals carefully, athletes, clubs, and brands can unlock long-term value while safeguarding reputation and legal integrity.

Exit Strategies in Family-Owned Companies: Legal Pathways for Separation

Posted on August 11, 2025 - 6:39 am by

Family-owned companies remain a cornerstone of economic development in Saudi Arabia and across the broader Middle East. Rooted in deep personal ties and shared long-term goals, these enterprises often evolve from informal arrangements into sophisticated multi-generational structures. As businesses mature and family dynamics shift, some members may inevitably wish to reduce or end their involvement. In such cases, a legally sound and well-governed exit strategy is essential. It not only safeguards business continuity but also helps preserve family harmony.

 

Understanding Exit Scenarios in Family Businesses

An exit in a family-owned business involves the departure of a family member from ownership, management, or both. These exits can be planned, such as through retirement or generational transition, or they may arise from disputes, divergent business priorities, or personal financial goals. Unlike exits in public or widely held companies, family business separations carry emotional, cultural, and reputational dimensions that must be addressed delicately and strategically.

Legal Foundations for Exit Planning

1. Shareholder Agreements

A detailed shareholder agreement is the legal backbone of a sustainable exit plan. It sets out the rights and obligations of each shareholder and provides mechanisms for resolving disputes and managing exits. In family-owned structures, these agreements should also address unique concerns such as:

  • Exit scenarios and triggering events
  • Valuation methods and appointment of independent experts
  • Transfer restrictions and approval protocols for non-family buyers
  • Protections to keep ownership within the family circle
  • Roles of non-operational family shareholders

By documenting these matters clearly, the agreement reduces ambiguity and the potential for intra-family disputes.

2. Memorandum and Articles of Association (MOA and AOA)

The constitutional documents of the company must align with the shareholder agreement. They serve as the legally binding reference for governance, share transfers, voting rights, and dispute resolution. In Saudi Arabia, any amendments to these documents must comply with the 2022 Companies Law and be registered with the Ministry of Commerce via the Qiwa or Meras platforms, as applicable.

3. Valuation Mechanisms

Disagreements over valuation are a common source of tension during exits. To avoid this, family businesses should pre-define valuation methodologies in their legal documents. Options include:

  • Net asset or book value
  • Earnings-based or EBITDA multiples
  • Discounted cash flow (DCF)
  • Independent third-party valuation

Consistency, transparency, and fairness are key to maintaining trust and enabling smooth transactions.

Legal Pathways for Exiting a Family-Owned Business

1. Buy-Sell Agreements

These agreements create binding arrangements that dictate how shares are to be handled under specific circumstances, such as death, disability, retirement, or voluntary exit. They provide financial predictability and help keep ownership within the designated circle of shareholders.

2. Family Settlement Agreements

When disputes emerge or when there is a mutual decision to separate, family settlement agreements can be used to redistribute shares or reassign responsibilities. These agreements are enforceable under Saudi law and typically include:

  • Confidentiality clauses
  • Non-compete obligations
  • Waivers of future claims
  • Clear transfer terms

They offer a private, practical resolution while preserving family relationships.

3. Company Share Buybacks

Under the Companies Law, a limited liability company (LLC) or a joint stock company (JSC) may repurchase its shares, subject to regulatory compliance and capital requirements. This may be preferable when other shareholders are not in a position to acquire the exiting member’s interest. The company must ensure adequate liquidity and must follow the Ministry of Commerce notification procedures.

4. Corporate Restructuring and Spin-Offs

For family groups operating across multiple sectors, corporate restructuring offers an alternative to direct exits. A spin-off or demerger can allocate separate business units to different branches of the family. This allows for operational independence while preserving shared legacy and group identity. Such strategies require careful tax and regulatory planning and may involve approvals from the Zakat, Tax and Customs Authority (ZATCA) and the Ministry of Commerce.

5. Third-Party Sale

Though typically a last resort in family businesses, external sales may become necessary when internal options are exhausted. Protective mechanisms in the shareholder agreement, such as:

  • Rights of first refusal
  • Tag-along rights
  • Drag-along rights

Regulatory disclosures and anti-competition laws must also be considered when selling to third parties.

Aligning Exit with Succession Planning

Exit planning and succession planning should be viewed as two sides of the same coin. The exit of a senior family member often coincides with the need to elevate the next generation. Establishing a formal family council or advisory board helps manage expectations and provide a structured forum for communication and dispute resolution. Legal alignment between succession and exit frameworks ensures continuity and prepares the business for long-term sustainability.

Legal Due Diligence and Risk Management

Before any exit is finalised, thorough legal due diligence is critical. This process should include:

  • Verification of share ownership and compliance history
  • Review of all corporate documents, shareholder agreements, and minutes
  • Tax liabilities and potential exposure
  • Intellectual property and asset entitlements tied to the exiting member
  • Review of any personal guarantees or outstanding obligations

In recent years, the Saudi legal landscape has evolved significantly, particularly with the new Companies Law and increasing regulatory scrutiny. Legal due diligence ensures that all exits are legally valid, commercially reasonable, and compliant with current regulations.

Looking Ahead

In Saudi Arabia, family businesses continue to grow in sophistication, size, and complexity. As such, the need for structured and legally robust exit pathways has become more important than ever. A proactive approach to planning including clear documentation, legal enforceability, and alignment with business strategy helps avoid costly disputes and protects both commercial and personal interests.

Legal advisors play a key role in guiding families through this process, offering solutions that reflect not just legal compliance, but also cultural understanding and emotional sensitivity. With the right frameworks in place, family businesses can navigate separations gracefully and remain resilient across generations.

Employment Litigation in KSA: What General Counsel Should Expect in 2025

Posted on August 11, 2025 - 6:24 am by

As the Kingdom of Saudi Arabia continues its ambitious Vision 2030 programme, the employment law landscape is transforming rapidly. For a General Counsel responsible for corporate compliance and risk management, staying ahead of legal developments is not a choice but a necessity. The year 2025 is expected to bring further shifts in employment litigation, driven by regulatory changes, a maturing legal framework, increased employee awareness, and intensified focus on Saudisation and labour market reform.

 

A Shifting Legal Landscape

Traditionally, employment litigation in Saudi Arabia has been governed by a mix of Sharia law, statutory labour codes, and regulatory guidance from the Ministry of Human Resources and Social Development (MHRSD). Recent years have seen these foundations modernised to support economic diversification, increase foreign investment, and promote greater Saudi workforce participation.

This regulatory evolution has introduced more transparent and structured employment practices but also placed heavier compliance responsibilities on employers. Legal departments must now operate within a more robust enforcement environment, where non-compliance is likely to result in swift legal and reputational consequences.

Rising Employee Awareness and Claims

Employees in the Kingdom are becoming increasingly aware of their rights, with improved access to legal resources, user-friendly complaint portals, and more efficient dispute resolution mechanisms. This has contributed to a steady rise in claims, especially around wrongful termination, delayed or unpaid entitlements, and contract breaches.

As this trend continues in 2025, General Counsel should expect a more proactive and legally empowered workforce. Employers must therefore maintain accurate records, follow clear and fair procedures, and promote transparent practices throughout the employment cycle.

Contractual Clarity and Legal Precision

Employment contracts are under greater scrutiny than ever. Evolving regulations demand that key contractual terms are precisely defined, including probation periods, termination conditions, remuneration structures, and end-of-service entitlements. Vague or outdated contracts may be challenged in court, especially in cases involving dismissal or financial claims.

General Counsel should oversee periodic reviews of employment contracts to ensure legal compliance and alignment with business operations. Contracts should also reflect sector-specific obligations and internal company policies to withstand potential legal scrutiny.

Saudisation and Workforce Management

Saudisation remains a key government priority in 2025, with increasingly stringent compliance mechanisms. Employers must strike a balance between achieving workforce localisation targets and maintaining operational efficiency. Failure to comply with Saudisation rules can result in penalties and expose employers to legal claims, especially those concerning discrimination or inequitable dismissal practices involving Saudi nationals.

Legal teams should work closely with HR to monitor Saudisation ratios, implement compliance systems, and ensure ongoing education and training to minimise litigation risks.

Workplace Environment and Employee Well-being

The Kingdom is placing greater emphasis on workplace safety, equality, and mental health. Regulatory focus is shifting towards ensuring inclusive and respectful work environments. As a result, litigation related to harassment, unsafe working conditions, and discriminatory behaviour is becoming more prevalent.

Employers must adopt comprehensive policies on health and safety, implement confidential reporting channels, and conduct regular training to reinforce expected standards of workplace conduct.

Growing Role of Alternative Dispute Resolution

Although labour courts remain the default venue for employment disputes, alternative dispute resolution (ADR) methods such as mediation and arbitration are gaining traction in the Kingdom. These mechanisms offer the potential for faster, more cost-effective outcomes, particularly in complex or sensitive disputes.

General Counsel should consider incorporating ADR clauses into employment contracts and internal grievance policies. Familiarity with ADR processes can significantly reduce legal costs and promote amicable dispute resolution.

Cross-border Employment Issues

For multinational corporations operating in Saudi Arabia, cross-border employment challenges add another layer of complexity. Issues such as expatriate employment rights, international secondments, and data protection obligations are subject to both local and global scrutiny.

In 2025, legal teams must ensure that group-wide employment policies are tailored to comply with Saudi labour law. This requires regular coordination between head offices and local legal teams, as well as real-time monitoring of both domestic regulations and international developments.

A Proactive Approach for General Counsel

As employment litigation in Saudi Arabia becomes more structured and employee-driven, General Counsel must move from a reactive to a proactive legal strategy. Key priorities for 2025 should include:

  • Regularly updating employment contracts and HR policies to reflect current regulations
  • Establishing transparent internal mechanisms for grievance handling and dispute resolution
  • Collaborating closely with HR and compliance departments on Saudisation, diversity, and inclusion
  • Leveraging mediation and arbitration to reduce formal litigation exposure
  • Addressing cross-border employment risks through integrated legal frameworks

By taking these steps, legal leaders can support their organisations in maintaining compliance while contributing to the broader national goals of a modern, fair, and dynamic labour market.

Digital Contracts and E-signatures: Are They Legally Binding in Saudi Arabia?

Posted on August 11, 2025 - 6:14 am by

As Saudi Arabia accelerates its Vision 2030 agenda, digital transformation continues to reshape both public services and private sector operations. A critical pillar of this shift is the growing reliance on digital contracts and electronic signatures. These tools offer speed, convenience, and traceability, but many organisations remain uncertain about their legal enforceability.

 

This article provides an up-to-date overview of the legal framework, compliance requirements, and practical use cases for digital contracts and e-signatures in Saudi Arabia as of August 2025.

Legal Status of Electronic Signatures in Saudi Arabia

Electronic signatures are legally recognised in the Kingdom under the Electronic Transactions Law. The law treats electronic signatures and digital records as equivalent to their paper-based counterparts, provided they meet specific legal conditions.

To be valid, an electronic signature must:

  • Be linked to the identity of the signer
  • Demonstrate the intent to approve the content
  • Be securely protected from tampering after signing

The law was further reinforced by executive regulations and updates issued by the Digital Government Authority (DGA), which oversees the National Root Certification Authority. This authority licenses and regulates certified digital signature providers, ensuring that digital certificates meet stringent security and authenticity standards.

Are Digital Contracts Enforceable?

Yes. Digital contracts are enforceable under Saudi law so long as they meet the general conditions for contract formation:

  • Mutual consent between the parties
  • A lawful subject matter
  • Legal capacity of the signatories
  • A valid offer and acceptance

The format of the contract, verbal, paper, or electronic, does not affect its validity unless specific legislation or regulations require a particular form (e.g. notarisation for certain real estate transactions or formal registration for franchise or agency agreements).

A digital contract that includes a legally valid electronic signature is fully binding and carries the same legal force as a traditional contract.

Oversight and Infrastructure

Saudi Arabia’s robust digital ecosystem is built on cooperation between key regulatory bodies:

  • Digital Government Authority (DGA) – sets digital governance policies and standards
  • National Cybersecurity Authority (NCA) – ensures the security of digital infrastructure
  • Communications, Space and Technology Commission (CST) – oversees telecom and IT regulations
  • Root Certification Authority – issues and manages digital certificates and ensures Public Key Infrastructure (PKI) compliance

Together, these bodies provide a secure environment for electronic transactions and promote trust in digital services.

Government-accredited providers offer qualified electronic signature solutions, which use encryption and digital certificates to verify the identity of signatories and protect the integrity of signed documents.

Common Use Cases

Electronic signatures are already being widely used across Saudi Arabia’s economy:

  • Commercial Contracts: Agreements for supply, services, partnerships, and joint ventures
  • Employment Agreements: Facilitating hiring, onboarding, and remote work arrangements
  • Banking and Finance: Account openings, loan documentation, and internal approvals
  • Government Platforms: Services such as GOV.SA, Qiwa, Muqeem, and Tawtheeq rely on digital signatures for submissions, verifications, and compliance tasks.

However, some documents, such as real estate title transfers, court submissions, and inheritance proceedings, may still require traditional notarisation or judicial approval in accordance with Sharia and administrative procedures.

Compliance and Risk Management

While the law supports digital signatures, businesses must proactively ensure compliance to reduce legal and operational risks. Best practices include:

  • Using only certified providers authorised by the Root Certification Authority
  • Establishing internal policies on when and how electronic signatures should be used
  • Providing staff training on legal requirements, risks, and proper procedures
  • Storing signed contracts in tamper-proof, auditable formats
  • Conducting regular audits to ensure compliance with applicable laws and standards

Failure to implement these safeguards could expose businesses to disputes around authenticity, consent, or enforceability, especially in high-value or sensitive transactions.

Final Thoughts

Saudi Arabia has firmly established the legal validity and enforceability of digital contracts and electronic signatures. Supported by a comprehensive regulatory ecosystem and a rapidly maturing digital infrastructure, electronic transactions are not only recognised, but they are also increasingly encouraged.

For businesses, embracing these tools represents more than just a compliance exercise. It is a strategic advantage that enables faster decision-making, reduced costs, and seamless collaboration across borders.

To fully realise these benefits, organisations must align their internal processes with national standards, invest in secure technologies, and stay informed of legal developments. In doing so, they can participate confidently in the Kingdom’s digital future, without compromising on legal certainty or contractual integrity.

Data Privacy vs Business Growth: Navigating KSA’s Evolving PDPL Landscape

Posted on August 11, 2025 - 6:06 am by

As Saudi Arabia continues to accelerate its digital transformation under Vision 2030, the balance between data privacy and commercial innovation has become a defining business challenge. The Personal Data Protection Law (PDPL) now plays a central role in shaping how organisations operate in the Kingdom, bringing both regulatory rigour and commercial opportunity.

 

Since its introduction, the PDPL has evolved into a sophisticated framework that aligns with global standards, while being tailored to the Kingdom’s socio-economic context. For companies operating in or interacting with the Saudi market, understanding the PDPL is no longer optional. Compliance is now a strategic imperative.

A Brief Overview of the PDPL Framework

The PDPL was first issued under Royal Decree No. M/19 on 16 September 2021 and is overseen by the Saudi Data and Artificial Intelligence Authority (SDAIA), in collaboration with the National Data Management Office (NDMO). The law aims to establish a transparent, accountable and secure system for the collection and processing of personal data.

Since its inception, the PDPL has undergone significant amendments, with the latest set of executive regulations issued in 2024. These updates introduced a more flexible and risk-based approach, particularly in areas such as international data transfers, consent mechanisms, and the role of data protection officers.

Core Compliance Requirements

Organisations subject to the PDPL must meet several key obligations:

  • Lawful Processing: All personal data must be processed on a lawful basis. Consent remains the default, but exceptions include legal obligations, the protection of vital interests, or legitimate interests that do not conflict with the rights of individuals.
  • Purpose, Limitation, and Data Minimisation: Data must only be collected for clear, lawful purposes and limited to what is necessary to achieve those purposes.
  • Transparency and Rights of Data Subjects: Individuals have the right to be informed about how their data is processed. They can also request access to their data, corrections, deletion in some cases, and object to specific uses.
  • Security and Risk Mitigation: Organisations are required to implement appropriate technical and organisational measures to protect data against unauthorised access, misuse, or loss.
  • Data Breach Notification: Entities must notify SDAIA without undue delay in the event of a data breach. If the breach poses a high risk to individuals, those affected must also be informed.
  • Registration and Governance Roles: Certain entities may need to register with SDAIA and appoint a data protection officer, particularly where large-scale or sensitive data processing is involved.
Cross-Border Data Transfers: A Pragmatic Shift

One of the most notable developments in the updated PDPL is the shift in approach to international data transfers. Initially, the law imposed strict limitations on sending personal data outside Saudi Arabia. However, the revised regime allows transfers subject to specific conditions, including:

  • Adequacy of protection in the receiving jurisdiction
  • Contractual safeguards such as standard clauses
  • Regulatory approval, where applicable
  • Justified business needs or legal obligations

This change is particularly welcome for multinationals and digital service providers, as it brings Saudi Arabia’s framework closer to established models like the EU’s GDPR, without losing sight of national interests.

Key Challenges for Businesses

While the PDPL aims to support innovation, it introduces several operational and legal complexities:

  • Rising Compliance Costs: Achieving and maintaining compliance requires investment in legal advisory, IT systems, internal training, and policy development. This is especially challenging for SMEs with limited resources.
  • Slower Product and Service Rollouts: New products must be designed with privacy in mind from the start. This “privacy by design” principle can add time and cost to development pipelines, particularly for data-reliant services like AI, analytics, or targeted advertising.
  • Complex Third-Party Ecosystems: Businesses are responsible for the data practices of their service providers and partners. Due diligence, contractual oversight, and regular audits are now essential.
  • Evolving Legal Landscape: Executive regulations and technical guidance continue to develop. Staying compliant means staying up to date with SDAIA’s latest requirements and being ready to adapt internal practices quickly.
A Strategic Approach to Compliance and Growth

Rather than viewing compliance as a regulatory hurdle, forward-looking organisations are embedding privacy into their long-term business strategy. Recommended actions include:

  • Build Privacy into Design: Whether developing digital products or structuring internal processes, integrating privacy from the outset reduces future risks and builds trust with users and partners.
  • Appoint Internal Leadership: Even where not required, designating a data protection lead or team ensures internal accountability and strengthens governance.
  • Embrace Privacy-Enhancing Technologies: Automation tools that support consent management, audit logging, and data access requests can streamline compliance while supporting scalability.
  • Conduct Routine Data Audits: Regular reviews of data processing activities help identify gaps, assess risk exposure, and ensure data is only held for valid purposes.
  • Maintain a Dialogue with Regulators: Engaging with SDAIA and the NDMO through consultations or industry roundtables can help clarify expectations, especially in novel use cases or high-risk sectors.
Privacy as a Competitive Advantage

Saudi Arabia’s PDPL is more than a regulatory milestone; it is a cornerstone of the Kingdom’s broader ambition to become a global digital leader. Organisations that treat data privacy not just as a legal requirement, but as a business enabler, will be best placed to thrive.

Compliance can unlock greater customer confidence, smoother cross-border operations, and increased investment readiness. In today’s digital economy, trust is currency, and privacy is its foundation.

By adopting a forward-thinking, principles-based approach to data governance, businesses can not only meet PDPL obligations but also drive innovation, protect their brand, and contribute to a resilient and future-ready Saudi economy.

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