Finance Archives - Page 4 of 5 - Hammad & Al-Mehdar Law Firm

Post Covid in a Nutshell

Posted on July 9, 2023 - 12:34 pm by perpetual-admin

The COVID-19 pandemic had a significant impact on the funds market, with 2021 seeing record levels of funding and deal numbers. Funds were achieving their target size and even further reaching their hard caps (also known as the maximum fund size), indicating a strong appetite for investments in the market. However, this trend did not continue in 2022, with hard caps being rarely met. This shift in the market led General Partners (GPs) to explore new strategies to grow their assets under management (AUM) and meet their targets.

One of the strategies that GPs are increasingly using is offering co-investment opportunities at a record scale. This allows GPs to raise additional capital while also providing investors with an opportunity to co-invest in promising deals. Co-investing also allows GPs to share the risk with their investors, which can be an attractive proposition for LPs.

Another strategy that GPs are using is borrowing. Borrowing has traditionally been limited by a cap and a time constraint, but funds are increasingly allowing borrowing without a time limitation. The borrowing caps vary between funds, with some funds allowing as much as a 100% cap on borrowing. This flexibility in borrowing allows GPs to access additional capital quickly and can help them meet their investment or portfolio goals.

Recycling is another strategy that GPs are using to generate capital. Recycling allows GPs to reinvest capital returned from previous investments into new deals. There is a shift towards accepting the return of capital during the life of the fund, with a cap on the amounts to be recycled. This is different from the traditional approach of allowing recycling only 12 to 18 months from the return of capital.

In addition to these strategies, GPs are also focusing on differentiating themselves. This includes exploring different sectors such as healthcare, technology, and renewable energy, among others. GPs are also targeting different geographical regions, such as emerging markets, to generate capital. They are adopting different investment strategies, such as early-stage investing or value investing, and increasingly focusing on Environmental, Social, and Governance (ESG) factors in their investment decisions.

Overall, the funds market has undergone significant changes since the onset of the pandemic, and GPs are adapting by adopting new strategies such as co-investment, borrowing, and recycling to generate capital. However, the uncertainty of the market in 2023 suggests that GPs may need to continue exploring new strategies to ensure the success of their funds. The evolving nature of the funds market requires GPs to stay agile and adaptable to meet the needs of their investors and the market.

Unlocking the Potential of Project Financing in Saudi Arabia’s Energy Sector

Posted on May 2, 2023 - 9:59 am by perpetual-admin

Project financing has played a significant role in the development of the energy sector in Saudi Arabia. The Kingdom is a critical player in the global energy industry, and its vast oil and natural gas reserves have helped fuel economic growth for decades. In recent years, however, the Saudi government has recognized the need to diversify the country’s energy mix and reduce its reliance on fossil fuels. As a result, there has been a surge in investment in renewable energy projects, which has required innovative financing solutions.

Project financing is a method in which the lender provides financing for a specific project based on its expected cash flows rather than the borrower’s assets. This method of financing is often used in large infrastructure projects, such as those in the energy sector, where the risks and costs are high. In Saudi Arabia, project financing has become an increasingly popular method of financing energy projects, particularly those involving renewable energy sources.

The Saudi government has set ambitious targets for renewable energy development, with plans to generate 9.5 gigawatts of renewable energy by 2023 and 58.7 gigawatts by 2030. The government has launched several initiatives to achieve these targets, including the National Renewable Energy Program (NREP) and the Green Middle East Initiative, which aim to attract private sector investment in renewable energy projects.

One of the advantages of project financing is that it allows investors to spread their risks across multiple stakeholders. In the energy sector, this means that lenders can share the risks associated with the project developers, contractors, and other stakeholders. This approach can help reduce the project’, making it more attractive to investors.

Another advantage of project financing is that it provides a structured framework for managing the project’s cash flows. This is particularly important in the energy sector, where projects can have long lifetimes and complex cash flow structures. Project financing allows investors to manage these cash flows in a predictable and structured manner, which can help to mitigate the risks associated with the project.

In Saudi Arabia, project financing has been used to fund a range of energy projects, including solar and wind power plants and transmission and distribution infrastructure. For example, in 2018, the Saudi Arabian government signed an agreement with a consortium of international lenders to finance the 300 MW Sakaka solar project, which is expected to generate electricity for 75,000 households. The project is being developed by ACWA Power, a Saudi-based energy developer, and is one of the first utility-scale solar projects in the country.

Another notable project in Saudi Arabia is the Dumat Al Jandal wind farm, which is being developed by a consortium led by French energy company EDF Renewables. The project, which is expected to have a capacity of 400 MW, will be the country’s first utility-scale wind farm and is expected to generate electricity for up to 70,000 homes. The project is financed through a mix of equity and debt, with international lenders providing project financing.

Project financing is a complex process that requires careful consideration of various legal aspects. This is particularly true in Saudi Arabia, where the legal system is based on Islamic law, and local regulations can differ from those in other countries. This article will explore some critical legal aspects investors and developers should consider when seeking project financing in Saudi Arabia.

Contractual Frameworks

One of the most important legal aspects of project financing in Saudi Arabia is the contractual framework that governs the project. The contractual framework should clearly define the rights and obligations of all parties involved in the project, including the lender, borrower, and other stakeholders. It should also establish dispute resolution mechanisms in case of disagreements.

In Saudi Arabia, project agreements are typically governed by Saudi Arabian law, and ensuring that the contracts comply with local regulations is essential. Investors should also consider incorporating Shariah-compliant financing structures based on Islamic finance principles.

Security and Collateral

Another critical legal aspect of project financing in Saudi Arabia is the security and collateral required to secure the loan. Lenders typically require a range of security and collateral to protect their investment, including mortgages, pledges, and guarantees.

In Saudi Arabia, the legal system recognizes various forms of collateral, including real estate, movable assets, and shares in a company. Ensuring that the collateral is appropriate and enforceable under Saudi Arabian law is important. It is also essential to ensure that the collateral is sufficient to cover the loan in case of default.

Regulatory Compliance

Saudi Arabia has a highly regulated business environment, and project financing transactions are subject to various regulatory requirements. Investors and developers must comply with various laws and regulations related to foreign investment, taxes, and environmental protection.

Working with experienced legal advisors familiar with the local legal and regulatory environment is essential to ensure regulatory compliance. Before starting the project, investors and developers should also obtain all necessary licenses and permits.

Dispute Resolution

Disputes are an inevitable part of any project financing transaction, and it is essential to establish clear and effective dispute resolution mechanisms. In Saudi Arabia, disputes can be resolved through various methods, including arbitration, litigation, and mediation.

Arbitration is often preferred as it is more efficient and confidential than litigation. Investors should ensure that the dispute resolution mechanism is clearly defined in the contractual framework and complies with local regulations.

As the Kingdom progresses toward a more sustainable future, project financing in the energy sector will undoubtedly play a crucial role. By prioritizing the legal aspects of project financing, investors and developers can ensure that their renewable energy projects in Saudi Arabia are set up for success. With the right approach and partnerships, project financing in Saudi Arabia can unlock opportunities for growth, innovation, and long-term success in the energy sector.

However, investors and developers must know the various legal aspects of project financing in Saudi Arabia. This includes ensuring the contractual framework is transparent and complies with local regulations, providing sufficient collateral, and meeting all necessary regulatory requirements. Effective dispute resolution mechanisms must also be established to mitigate potential conflicts. Working with experienced legal advisors can help ensure a successful project financing transaction in Saudi Arabia.

Vision 2030 and the regulatory reforms on the horizon

Posted on March 23, 2022 - 6:38 am by perpetual-admin

Since its inception in 2016, Saudi Arabia’s Vision 2030 has been positioned as a transformative blueprint for the country’s future. And while there is no doubt that the plan — which aims to wean the economy off its dependence on oil and gas revenues and make the Kingdom a global investment powerhouse — will have a profound impact on virtually every sector of Saudi society, its legal implications are most far-reaching.

From the introduction of 5G and the accompanying increase in regulation to the need for businesses to embed new systems and ways of working, Vision 2030 is certain to have a major impact on Saudi law. Perhaps nowhere is this more evident than in the area of competition law, where the plan’s ambitious diversification and privatisation goals are likely to bring increased competition — and with it, the need for stricter enforcement.

With this in mind, here’s a closer look at some of the legal implications of Saudi Arabia’s Vision 2030.

5G & Regulation

The rollout of 5G networks is set to transform the way we live and work, and the Saudi government is keen to ensure that the country is ready for this next-generation technology. Abdullah Al-Sawahah, Minister of Communications and Information Technology, stated that “Saudi Arabia is determined to be a world leader in 5G to take early advantage of its benefits.”

To that end, the government announced in 2021, that they would designate the entire 6GHz radio band for unlicensed use. This is in line with global trends, as more countries are making large swaths of radio spectrum available for 5G deployment.

However, in order to ensure that the rollout of 5G in Saudi Arabia is done in a way that is safe and compliant with international standards, the government has also laid out a framework for telecoms companies. Under these new regulations, they must adhere to a number of strict security and privacy requirements and are advised of the need to develop disaster recovery plans and ensure that customer data is properly protected.

Information Security & Data Protection

With the rise of cloud computing and the increasing digitisation of society, the issue of information security and data protection is becoming increasingly important. The Saudi government has taken note of this trend and has introduced several regulations aimed at safeguarding consumer data.

Saudi Arabia’s Personal Data Protection Law was implemented by royal decree in 2021. This regulation sets out a number of strict requirements for businesses that process or store personal data.

Among other things, businesses must, in most cases, obtain prior consent from individuals before collecting, using, or sharing their data. They must also ensure that personal data is properly protected and take steps to ensure that any data breaches are promptly reported and resolved. The CITC has also published a set of guidelines on information security, which businesses are encouraged to adopt in order to protect themselves from cyber-attacks.

Competition Law

As Saudi Arabia moves away from its dependence on oil and gas revenues, the need for strong competition laws becomes increasingly important. This is especially true in the context of Vision 2030’s ambitious diversification plans, which are sure to bring new players into many sectors of the Saudi economy.

In late 2019, a new Competition Law was announced by Royal Decree. This new set of regulations is in line with international best practices and designed to ensure that businesses compete fairly, without resorting to anti-competitive practices such as price-fixing, bid-rigging, and illegal market manipulation.

The General Authority for Competition (GAC) has begun to increase its enforcement of competition law in recent years, and this is likely to continue as the Saudi economy becomes more competitive. In 2021, the GAC blocked its first transaction during a merger, signalling a new era of tougher enforcement.

“Competition filing has been a standard part of acquisition and investment transactions relating to Saudi Arabian companies, including technology companies, which have seen an investment boom over the last 2 years. Private equity and, to a certain extent, venture capital, investors and targets must now consider the impact of competition on their intended transactions” stated Abdulrahman Hammad, partner and head of the finance practice at Hammad & Al-Mehdar.

The Changing Future Of Saudi Arabia

The Saudi government’s Vision 2030 is a bold and ambitious plan that is sure to have a major impact on the Kingdom’s economy. While the full extent of these impacts is not yet known, it is clear that businesses will need to be prepared for a number of legal and regulatory changes. From new regulations on 5G and data protection to increased competition law enforcement, businesses will need to adapt in order to stay ahead of the curve.

Mergers & Acquisitions: Trends & Visions In Saudi Arabia

Posted on April 18, 2022 - 7:58 am by perpetual-admin

Mergers and Acquisitions (M&A) have been increasing in Saudi Arabia as the country undergoes economic diversification and privatisation initiatives. The nation is currently one of the most active markets for M&A in the region. For international companies seeking new opportunities, Saudi Arabia presents a unique opportunity to invest in a country with a young and growing population as well as a rapidly expanding economy.

However, the legal and regulatory environment for M&A in Saudi Arabia is still maturing and businesses should ensure they have a clear understanding of the relevant laws before proceeding with any transaction. Early and careful preparation is essential to ensure a successful merger or acquisition in Saudi Arabia.

Current M&A Trends In Saudi Arabia

2020 saw a 73.4% increase in deal value in comparison to 2019, representing a growing trend of high-value M&A activity across the region. In 2021, this pattern continued, with $44 billion worth of announced deals in 2021. Compared to the M&A activity of the entire Middle East and North Africa region in that same time period – $75 billion. Saudi Arabia stands out as being a key market for M&A.

This trend is set to continue in the coming years as the Saudi economy grows and the government continues to encourage privatisation and foreign investment. The highest value deals are being seen in the energy and materials sector, but when it comes to deal count, most mergers and acquisitions have been spread across the consumer, healthcare, education, and ICT sectors.

Legal Considerations During A Merger Or Acquisition

When conducting a merger or acquisition in Saudi Arabia, businesses must consider the relevant legal and regulatory framework. As the regulatory body for M&A activity in the Kingdom, all mergers and acquisitions must be carried out through the Ministry of Commerce, including the final issue of amended commercial registration.

In Saudi Arabia, most private M&A transactions are structured as share purchase deals in which the share capital of the target is acquired by the buyer from the seller. Break fees are customary in Saudi Arabia, but do not usually exceed 1% of the deal value.

Public M&As are regulated by the Capital Market Authority (CMA). Before a public transaction may proceed, the bidder and the target must appoint a CMA approved financial adviser and an independent legal adviser.

If a non-Saudi/non-GCC national is to be involved in any M&A activity, the person must first apply for the relevant foreign investment license. The Saudi Ministry of investment (MISA) – formerly known as SAGIA – is the main governmental body responsible for regulating foreign investments in the Kingdom. MISA provides licenses and approvals for foreign investors and oversees the implementation.

The Saudi Central Bank (SAMA) — previously referred to as the Saudi Arabian Monetary Authority — is responsible for regulating the banking and financial services sector in the Kingdom. SAMA must approve any merger or acquisition involving a Saudi bank or financial institution.

If a merger or acquisition may result in some form of “economic concentration”, then the General Authority for Competition (GAC) must be notified 90 days before the closing of the M&A transaction. The GAC interprets “economic concentration” widely, and we strong recommend transacting parties to thoroughly consider whether their transactions may be subject to competition notification prior to transacting.

Why Businesses Should Prepare Early On

Businesses should prepare early when considering a merger or acquisition in Saudi Arabia. The legal and regulatory framework is still maturing and there is a lack of precedent in many areas. This can make it difficult to predict the outcome of a particular transaction. Early preparation will allow businesses to identify any potential risks and take steps to mitigate them. It’s also important to seek professional advice from a qualified lawyer or advisor who is familiar with the Saudi M&A market. They’ll be able to guide you through the process and ensure that all the necessary legal and regulatory approvals are obtained.

Mergers and acquisitions can be a complex and time-consuming process. However, with the right preparation and guidance, they can be a valuable tool for businesses looking to grow in Saudi Arabia. M&A will play a key role in the development of the Kingdom’s economy as it continues to diversify, with increased private sector participation and foreign investment.

Legal Due Diligence: Why Is it Important in M&A Transactions?

Posted on May 29, 2022 - 7:41 am by perpetual-admin

A 2021 report by the Saudi Venture Capital, showed that the VC ecosystem had 88 deals, which were all valued at $152 million. Another report by the financial market data firm, Refinitiv, highlighted the growth of mergers and acquisitions (M&A) across the Middle East and North Africa. The report showed that Saudi Arabia dominates M&A, with deals reaching a record high compared to the previous years.

The increase in M&A activity is attributed to an influx of foreign investment, however such transactions are sensitive and require rigorous legal, due diligence. They also have the tendency to attract the scrutiny of the General Authority for Competition, trying to avoid monopolistic and oligopolistic practices.

What Is Legal Due Diligence?

Legal due diligence involves reviewing a company’s documentation to identify any potential legal exposure and non-compliance issues. Legal due diligence is conducted when a business is interested in acquiring or merging with a target company.

Legal due diligence has different subcategories, which include:

Business
Accounting
Intellectual property

The due diligence seeks to know more about the company:

Lawsuits (pending or potential)
Debts
Leases
Warranties
Compensation
Distribution agreements
Contracts

The company looking to get involved in a M&A will request the following documents from the target company:

Material contracts

The buyer must review all the seller’s material and commitments. The contracts that must be reviewed include:

Guarantees and credit agreements
Indemnification agreements
Employment agreements
Customer and supplier contracts
Partnership or joint venture agreements
Settlement agreements
agreements on past acquisition
Equipment leases
Government contracts
Any other relevant contracts the company is involved in

Employee & Management Issues

The buyer should also try to understand all the issues affecting the employee and the management. Such documentation includes:

Policies or allegations involving sexual harassment
Allegations of any sexual misconduct
Any labor disputes
Relevant information involving previous, pending, or threatened labor stoppage, slowdown, or other similar labor activity.
Any key employees and company officials involved in any criminal proceedings or civil litigation

Litigation

A review of any pending, threatened, or settled litigation or arbitration the seller is involved in. Some documentation to be reviewed include:

Attorneys’ letters directed to the auditors
lawsuits brought against the company

Governmental Regulations, Filings, and Compliance with Laws

The buyer would want to know whether the seller was involved in any regulatory requirements by reviewing the following documents and citations.

Any current or pending governmental proceedings
Government agencies’ citations or notices issued to the seller
Certification of compliance with respect to the company’s regulatory standard
Any cancelled or terminated company permits or licenses.

Once all the information is reviewed and relevant data collected, a business can make informed decisions.

Why is Legal Due Diligence Needed?

Due diligence offers the following advantages, which are all crucial in an M&A deal:

1. An opportunity to understand the target company.

When conducting legal due diligence, all the relevant documents touching on any current or potential legal exposure are collected. All these documents help the buyers understand more about the target.

2. Understand the Target’s Fair Price

Having financial information about the company, including lawsuits, can help come to a conclusion on how much the company is worth. The information gives each party room for negotiation, especially in an M&A transaction.

3. Identify Possible Future Risks

Certain risks a company is facing can become a big problem after an M&A transaction. Identifying all the risks early on can help a company better prepare on how to handle them. Identifying the risks early on can also help a buyer decide whether to proceed with the M&A transaction.

4. Helps Prepare an M&A Contract

Legal due diligence helps identify existing problems that can prevent the deal from going through. When all the parties are aware of these problems, they can discuss solutions that will ensure a smooth transaction.

Significant M&A Transactions in Saudi Arabia

Saudi Aramco closed a US$12.4 billion deal that involved selling a 49% stake in Aramco Gas Pipeline to a consortium of international investors. The investors included Keppel Infrastructure Trust, Silk Road Fund, China Merchants Capital, and Hassana Investment. The deal is part of ongoing Saudi Arabia’s efforts to sell assets and use the proceeds to find other industries and increase oil and gas output.

The private equity sector has also witnessed an increase in M&A activity over the past few years. In the first half of 2020, the venture capital got 45 deals valued at US$95 million. During the same year, the Public Investment Fund allocated US$1 billion to develop the private equity and venture capital ecosystem.

When it comes to prominent industries in Saudi Arabia, the e-commerce industry is still the most targeted industry for the second consecutive year. Along with the fintech industry, the e-commerce industry represents 30% of all the total M&A transactions.

Choosing Who To Manage the Due Diligence Process

Choosing who to conduct and manage the due diligence process is critical. They should be able to communicate the due diligence process, what is covered in the review and what is commercially material to the buyer.

Conducting due diligence on the petroleum and gas business is different from the construction industry. A buyer should choose a legal counsel that is experienced and knowledgeable in matters related to M&A.

Additionally, reviewing all documents in the legal due diligence process is challenging for one person, which is why a buyer should choose a legal firm for the job.

For a smooth M&A transaction, relevant people must be involved to undertake all the work involved in legal and due diligence. Having an experienced legal firm overseeing the whole process will ensure that potential risks are pointed out and worked on early on.

At Hammad & Al-Mehdar Law Firm, we will represent your interests and help conduct the legal due diligence for M&A transactions. As one of the leading private legal practices across Saudi Arabia and the wider Gulf Cooperation Council (GCC) we have decades of experience in M&A transactions. Contact us today to learn more on how we can help you conduct legal due diligence.

Dubai’s Virtual Asset Law

Posted on June 21, 2022 - 6:43 am by perpetual-admin

The digital era is emerging at a rapid pace globally, which is synonymous with the success across the United Arab Emirates, and in particular Dubai, who is ensuring that it remains up to speed with its digital advancement.

From the issuance of the first of its kind Law No. 4 of 2022 on the Regulation of Virtual Assets (the “Virtual Assets Law”), to the establishment of the Virtual Asset Regulatory Authority (the “VARA”) that would regulate and oversee the sector, Dubai is working towards “shaping this new ever-evolving sector” as tweeted by the Vice President and Ruler of Dubai, his Highness Sheikh Mohammed bin Rashid.

Virtual Assets are defined under the Virtual Assets Law as a digital representation of the value that can be digitally traded or transferred, or can be used as an instrument for exchange, payment, or investment purposes, including virtual tokens, and any digital representation of any other value specified by the VARA in this regard.

VARA is an independent authority, established under the Dubai World Trade Center Authority, to oversee the Virtual Assets Law, licensing and governance of virtual assets, non-fungible tokens (NFTs), and cryptocurrencies. The Virtual Assets Law specified VARA’s main responsibilities, which include, but are not limited to the following:

Regulating and licensing the issuance of virtual assets and virtual tokens;
Regulating and licensing virtual asset service providers, in addition to controlling and supervising their activities to ensure their compliance with the provisions of the Law;
Organizing and controlling the operation and management of virtual asset platforms, distributed ledger technology, and virtual asset portfolios;
Monitoring digital trades and transactions; and
Preventing manipulation of virtual asset trading prices.

The provisions of the Virtual Assets Law apply to virtual asset services provided all over the Emirate, including special development zones and free zones, with the exception of the Dubai International Financial Centre (“DIFC”); the Dubai Financial Services Authority, which regulates all the companies in the DIFC, who is preparing its own regulations for the virtual asset sector.

According to the Virtual Assets Law, it is prohibited for any person to carry out any of the below listed activities in Dubai, or any of the freezones therein, unless they are duly permitted to do so by the VARA.

Furthermore, they must obtain the necessary prior approvals and permits from the VARA before commencing the procedures for licensing it from the competent commercial licensing authority. The following activities are subject to the VARA’s permits and controls in accordance with the provisions of the Virtual Assets Law:

Provision of virtual asset platform operation and management services;
Provision of services of exchange between virtual assets and currencies, whether national or foreign;
Provision of services of exchange between one or more form(s) of virtual assets;
Provision of virtual asset transfer services;
Provision of virtual asset custody, management or control services;
Provision of services related to virtual asset portfolios; and
Provision of services related to offering and trading in virtual tokens.

Additionally, a person wishing to carry out any of the above activities must have the headquarters of their business in Dubai, provided that they take one of the legal forms approved by the competent commercial licensing authority in the Emirate.

Following the issuance of the Virtual Assets Law, crypto firms are rushing to launch in Dubai. Notably, FTX, a global crypto derivatives exchange, and Binance, the world’s largest cryptocurrency exchange set up operations in Dubai after they secured approvals from the VARA. Similarly, BitOasis, the region’s leading virtual assets provider, based in the United Arab Emirates, has received provisional approval from the VARA, to continue its business operations in Dubai, while applying for a license in accordance with the VARA’s requirements.

Moreover, Dubai exceeded its digital advancement efforts, with the recent announcement by the VARA on the establishment of its Metaverse HQ, making it the first regulatory authority to have presence in the emerging digital space.

An Overview of IPO Readiness and Future Trends in the GCC Region

Posted on July 24, 2022 - 7:03 pm by perpetual-admin

There has been a recent surge of mega listings across the Gulf, driven by Saudi Arabia and the United Arab Emirates. Investors from around the world are increasingly attracted to the promise of substantial dividends from promising industries and innovation across the region.

Nations in the GCC region are actively taking advantage of the increasing demand and high energy prices to publicize state-owned businesses. Are you planning to be a part of the booming Initial Public Offering shift? Will your company benefit from going public? Are you IPO-ready? Here is all you need to know about IPO readiness and upcoming trends in the Gulf region.

Why An IPO?

An initial public offering does the following:

· It provides real-time access to finance.

· It improves the public’s view of a company by making it more credible and visible.

· It makes it very easy for a company to establish share option plans for its workforce. These plans will serve to motivate employees and help the company find good staff.

· It also enriches capital markets with fresh concepts and investment possibilities.

Putting together an IPO requires careful planning and preparedness.

What is IPO Readiness?

When a business is IPO-ready, it has all the systems in place to comply with the legal requirements for selling stock to the public. These systems include:

· Internal controls

· Financial reporting

· Governance

This information will be available to investors on demand from when your business goes public and throughout the IPO process. Investors, analysts, and the media will closely examine your company’s internal operations and financial data. Moreover, new public firms must adhere to a mass of additional reporting and legal requirements for the duration of their existence.

Why You Need IPO Legal Cover

It is undeniable that you will require competent legal representation if you are commencing the process of making your business public. There are many different aspects to this process that your company must be acutely aware of. If you forget any one of them, the results could be unfortunate.

Legal and professional fees will be recurring expenses, however they are imperative in developing and managing the following:

· Putting together, submitting, and finishing the listing application.

· Providing guidance on the dangers and laws surrounding the IPO transaction, such as publicity and transparency.

· Giving direction on the functions of the leading regulatory players, exchange listing requirements, and securities regulations.

· Counter-examining and confirming everything to ensure no problems would subject the company to lawsuits after the IPO.

IPO Trends in the Middle East to Look Out For In 2022 And Beyond

Bloomberg data shows that IPOs in the Middle East have raised $11.4 billion during the first five months of this year. This is more than any other year’s first six months. Since petrochemicals company Borouge started trading in Abu Dhabi earlier this month – raising $2 billion – the sum will only go up.

For this year, the energy industry is one of the few bright spots for IPOs. This is because oil prices have gone up by 50%, helping Gulf economies and equity markets. Share sales in Europe are at their lowest level in 20 years because of high inflation, rising interest rates, and a depressed economy in general. In contrast, the Middle East has more or less managed to avoid these problems and has continued to successfully attract investors from other countries.

Trends Beyond the Oil Sector

In recent years, diversification has become a top priority for GCC governments. The recovery is being driven by growth in areas other than oil. Sectors like monetary services are doing well since the pandemic. The key to Saudi Arabia’s economic regeneration is its vast domestic market and the government’s commitment to big projects.

Enterprises praise their forward-thinking policies and methods. With half of the world’s people only an eight-hour flight away, the Middle East has now become a true economic powerhouse. It serves as a prime mover for trade, exchange, advancement, and revenue generation.

GCC trade growth will be bolstered by the hope that supply chain slowdowns and cross-border activity delays are set to improve in the next few quarters. If you have been thinking of an IPO, this might be the right time to start getting ready.

In summary

The proliferation of 5G technology and the growth of online platforms and marketplaces are leading to new ways to run successful businesses. As a result, the regional business environment will change in a way that will significantly affect economic patterns and social dynamics. The GCC’s non-oil industries will continue to lead the economy over the next ten years, giving the regional markets and stock prices an immense boost.

What does this mean for you? It simply means that you ought to prepare adequately for that coming IPO. Having the right legal support team by your side is key to making this happen.

Mergers & Acquisitions 2022

Posted on August 3, 2022 - 7:39 am by perpetual-admin

The Saudi market showed more resilience and has started to mature in new sectors such as VC Capital, by attracting global investors and increasing the number of VC firms locally. It is expected that the region in general will witness more M&A deals to streamline costs.

The year 2022 is expected to bring further developments and adoption of new laws and regulations that will aim to boost the Saudi business environment and empower and attract talent. Industry watchers sense Saudi’s Vision 2030 may operate as a long-term economic catalyst to spur deals from companies looking to achieve operational synergy through economies of scale.

We share high-level insights on the M&A market across Saudi Arabia, along with the key legal developments which further reinforce deals.

For the full chapter, click here:

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The Growth & Impact of Digital Banking in Saudi Arabia

Posted on September 5, 2022 - 8:37 am by perpetual-admin

As the world becomes increasingly digitised, so too does the way we bank. In Saudi Arabia, the banking sector has undergone a digital transformation in recent years with new technologies and services being introduced to make the banking experience more convenient and efficient for customers.

By 2024, the number of people who use digital banking apps is projected to reach 2.5 billion. In Saudi Arabia specifically, banks are planning to make significant investments in digital over the coming years. Between 2017 and 2019, fintech transaction values have increased 18 per cent year-on-year in Saudi Arabia and are expected to reach USD$33 billion by 2023. This is in line with the Saudi Vision 2030, which aims to make the Kingdom a global investment powerhouse and diversify its economy away from oil.

How KSA’s Digital Banking Sector is Evolving

When it comes to banking, Saudi Arabia is considered a late adopter of digital transformation compared to other countries in the world. However, in recent years, the Kingdom has made great strides in its journey towards a digital future.

As part of Vision 2030, there has been a focus on developing the digital infrastructure and capabilities of Saudi businesses. This has been evident in the investments made by the government and private sector into fostering a healthy digital ecosystem for banking and financial services. Last year, the government granted its first digital banking licences to two locally established banks.

STC Pay was launched by telecoms provider STC in 2018 and is one of the most popular digital banking apps in Saudi Arabia. The app offers a range of features such as the ability to pay bills, send money, and make online purchases. Users can also take advantage of special discounts and offers from STC and partner businesses.

The second digital bank that was approved by the Saudi Monetary Authority (SAMA)

was Saudi Digital Bank, which was created by Abdul Rahman bin Saad al-Rashed and Sons Company — one of the most well-respected construction and real estate businesses in the Kingdom. The bank offers a host of digital services such as personalised banking, mobile payments, and money transfers.

Since the launch of these two digital banks, several more have been approved and there has been an increase in the number of people using digital banking services in Saudi Arabia. According to one survey, 82% of Saudi respondents use a digital bank at least once per week and 88% of people would choose digital banking services over visiting a branch in person.

To further develop the digital banking ecosystem, the government has invested in initiatives to support small businesses. In 2016, the Saudi government launched Monshaat, an online platform that offers a range of services for small businesses, including access to financing. This is in line with the Vision 2030 goal of supporting entrepreneurship and small businesses and will help to create an ecosystem that will promote the development of smaller digital banking and fintech companies in Saudi Arabia.

The Challenges of Digital Banking

Despite the clear benefits of digital banking, there are still some challenges that need to be addressed to further develop the sector in Saudi Arabia. One significant issue is the lack of awareness about digital banking and its benefits amongst the older generation. However, since the majority of Saudi Arabia is under the age of 35, this is likely to change over time as more people become comfortable with using digital banking services.

Perhaps the biggest challenge facing digital banking in Saudi Arabia is the risk of fraudulent activity. Phishing scams are a particular problem and there have been several high-profile cases in recent years. According to the Kaspersky Digital Payments survey, 57% of Saudi respondents have encountered some kind of scam activity while using online banking services. This is a significant concern and something that needs to be tackled to ensure the continued growth of digital banking in the Kingdom.

Overall, digital banking is a key part of the government’s Vision 2030 goal to modernise the Saudi economy and make it more competitive on the global stage. By making it easier for people to access banking services and providing support for small businesses, the government is promoting the development of a thriving digital ecosystem.

Digital Banking & The Future Legal Considerations

Posted on September 29, 2022 - 3:04 pm by perpetual-admin

The digital banking sectors in the UAE and Saudi Arabia are growing exponentially, allowing them to catch up with the more technologically developed countries in the world. The UAE’s fintech industry is currently growing at a steadier rate than Saudi Arabia’s, but the Kingdom is not far behind. Thanks to Saudi Telecom Bank leading the way, Saudi Arabia is quickly gaining ground in the digital banking revolution.

Inevitably, there are legal considerations for some digital banking technologies emerging in these countries. Regulations are being updated and new legislation is being drafted to account for the changes in technology. As such, it is important for businesses to keep up to date with the latest legal developments in order to ensure compliance.

Digital Banking Trends Over the Last Four Years

Starting around 2018, mobile technologies became a key feature of digital banking. Millennials and Generation Z saw the value in digital banking and this growing demand resulted in an increase in mobile banking applications.

Some other major trends in the digital banking sector have included:

A stronger focus on online security in relation to online banking.
A shift from desktop to mobile digital banking.
The emergence of digital banks with no brick-and-mortar presence.
The use of APIs (Application Programming Interface) to create more open banking.
The use of blockchain technology (as part of Web 3 technologies) to help create more private and secure online banking channels.
The emergence of artificial intelligence and the Internet of Things to create more digital banking experiences.
The introduction of the metaverse and the concept of banking in virtual reality.

All these present new legal considerations for digital banking in the region. At the same time, these innovations also present exciting opportunities for businesses to explore. It’s worth looking at a few of these in more detail to see what legal challenges they might face over the next couple of years.

The Cybersecurity Implications of Using APIs in Digital Banking

Open banking is the new norm within Saudi Arabia and UAE. As part of the former’s Vision 2030 initiative, the use of APIs across banking institutions is helping people and companies share banking information faster and more efficiently.

Since much of this financial data is being communicated through third-party applications, security is a major legal concern. Financial information is one of the most sensitive types of data that can be transmitted digitally, and the sharing of this information can sometimes become problematic.

The integration of multiple technologies and applications can increase the risk of cyberattacks, which cause major legal ripples for both banks and customers. Due to many financial institutions wanting to rush API implementation into their financial infrastructure, some technical vulnerabilities might have been overlooked.

When this happens, many legal problems can occur. The affected parties might sue the bank for damages if a security breach occurs. A data breach can also lead to regulatory issues, especially if customers’ personal information is involved. Only a robust cybersecurity investment and a detailed response plan can help to avert and mitigate these potential risks.

Blockchain Technology & Its Unique Challenges

Blockchain technology is a powerful tool that can help businesses overcome certain cybersecurity issues. At the same time, blockchain (or distributed ledger technology) has its own legal implications and risks to consider.

A major aspect of this relates to the lack of accountability during an event in which financial data is compromised. While blockchain is generally considered secure, it’s still possible for data to be breached if passwords or other security keys are stolen.

Data input points could also be compromised, leading to the proliferation of false financial information. Despite the ledgers in blockchain technology being secure, compromising data from the entry point is still a possibility, hence leading to further security risks.

Should data be stolen, the distributed nature of the blockchain makes it difficult to pinpoint responsibility. Pinning blame on one company could create a legal quagmire, resulting in long investigations and little clarity for those who have been affected.

This is one of the key reasons why many businesses have been hesitant to fully adopt blockchain technology. No technology is perfect, which is why businesses need to be aware of the potential legal risks they might face when implementing new digital banking solutions.

The Potential Legal Risks of Newer Technologies Such as the Metaverse

We’ve all heard about the Metaverse and Mark Zuckerberg’s mission to restructure the World Wide Web as an interconnected world based in virtual reality.

However, the Metaverse itself still remains a concept in development. Facebook’s parent company — Meta is still working on perfecting the technology. But with VR technology getting more advanced by the day, it’s only a matter of time until the Metaverse becomes reality.

This means it’s inevitable that someday, digital banking will enter the Metaverse. While some critics may consider the Metaverse as a frivolous concept, it will eventually have a profound impact on the way we bank and do business — with the potential for some interesting implications.

Many financial institutions are recommending that banks get ready to use the Metaverse to help new banking customers build relationships with their banks. Since many people no longer visit their bank in person when they open their first accounts, the Metaverse can offer a new digital way to experience this in virtual reality.

Of course, the legal aspects of using the Metaverse mostly fall in the realm of cybersecurity again. With such a complicated digital landscape to design this, there will be many security aspects to consider. The potential legal risks could be higher than with any other digital banking solution currently available.

The Use of These Technologies in UAE & Saudi Arabia

The rapid arrival of these digital banking technologies in the UAE and Saudi Arabia has led to a big discussion about the legal and regulatory aspects of their use. But it’s also an exciting time for the region, as both countries are working hard to be leaders in the digital banking world. Thanks to the introduction of over 40 financial free zones and the fintech sandboxes in both countries, there are a lot of opportunities for businesses to operate in these economies.