Finance – Page 4 – Hammad & Al-Mehdar Law Firm

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:

GLI-M&A22_Chapter 12_Saudi Arabia GLI-M&A22_Chapter 12_Saudi Arabia

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.

Market View: Egypt

Posted on October 19, 2022 - 9:01 am by perpetual-admin

Egypt’s economy is one of the most diversified in the Middle East and North Africa. The country’s strategic location, rich natural resources, and large population have made it a regional hub for trade and investment.

Egypt’s economy has been growing at around 3-5% per year since 2017 and is expected to grow by around 5.5% by the end of 2022. This growth has been driven by several factors, including strong foreign direct investment inflows, positive economic reforms, and robust domestic consumption.

Exploring Egypt’s Economic Opportunities

Egypt offers numerous advantages for businesses looking to invest in the country. For starters, Egypt’s population of over 100 million provides a large potential market for businesses. Additionally, the country’s geographic location also provides an excellent potential to develop the region as a hub for trade and investment.

Young Population

Egypt has a young and rapidly growing population. Over 60% of the population is under the age of 30, making it an attractive market for consumer-oriented businesses.

Strategic Location

Egypt is located at the crossroads of Africa, the Middle East, and Europe. This makes it an excellent location for businesses looking to tap into regional markets across all three continents.

Rich Natural Resources

Egypt is home to several valuable natural resources, including oil, gas, and minerals. These resources provide a great source of revenue for the government and offer opportunities for businesses in the mining and energy sectors.

Egypt’s Most Well-Developed Sectors

Egypt has many thriving industries, which offer opportunities for businesses looking to invest in the country and local businesses looking to expand their operations.

Agriculture

Egypt is a major producer of agricultural commodities, such as wheat, rice, and cotton. The country’s large agricultural sector provides the largest portion of employment in the nation, representing 21% of the entire workforce.

Manufacturing

Egypt has a large manufacturing sector, which accounts for around 15% of its total GDP. The manufacturing sector is dominated by the textile and food processing industries.

Tourism

Egypt is a major tourist destination, with around 13 million tourists visiting the country in the year prior to the pandemic. Tourism accounts for around 12% of the nation’s total GDP and employs around 2.2 million people.

Oil and Gas

Egypt is a major producer of oil and gas. The country’s oil reserves are estimated at around 4.4 billion barrels, while its gas reserves are estimated at around 77 million cubic feet.

Egypt’s Trade Relationship with Saudi Arabia

Egypt is a major trading partner of Saudi Arabia and has been so for a few decades. In 1989, the two countries signed a trade agreement, which was followed by several other agreements in the 1990s. The two countries continue to have strong economic ties to this day and are both members of the Arab League and the Organization of Islamic Cooperation.

Inbound Trade

Egypt imports a significant amount of Saudi Arabian products, with the number one being crude petroleum. This exchange was worth USD$1.63 billion in 2020. Saudi exports to Egypt continue to grow each year and have increased by 10.1% in total over the past two and a half decades.

Outbound Trade

Egypt also exports a significant number of products to Saudi Arabia. Refined petroleum is the number one export, representing USD$3.88 million in 2020. In total, Egypt exported USD$2.8 billion worth of products to Saudi Arabia in the same year.

Investment

Saudi Arabia is a major investor in Egypt. This year, Saudi Arabia and Egypt signed 14 agreements representing USD$7.7 billion worth of investment. The majority of these deals were signed in relation to renewable energy, fintech, and petroleum-related industries. Saudi Arabia remains Egypt’s largest source of foreign investment and continues to contribute a hefty US$10 billion to the Egyptian economy each year.

Egypt – An Economy on the Rise

The Egyptian economy is growing rapidly, driven by reforms and strong domestic demand. The country has a diversified economy with a strong focus on sectors such as agriculture, manufacturing, tourism, and oil and gas.

There are also some rapidly emerging industries, which have enjoyed recent foreign investment, such as the renewable energy sector and the fintech industry. The Egyptian government has made it easier to start and operate businesses and has worked to attract foreign investment. These reforms have helped to improve the business environment and spur economic growth.

Investment Strategies & Access to Finance in KSA

Posted on December 11, 2022 - 10:37 am by perpetual-admin

Saudi Arabia is a lucrative market for businesses to expand their operations, with a booming economy and a rapidly diversifying range of industries. But every business requires a certain amount of capital before they can begin trading in a new market, so understanding investment strategies and how to access finance is crucial. Thankfully, Saudi Arabia is a favorable investment destination for corporations, with many pathways available to secure the necessary funding. In this article, we will outline some of the investment strategies and forms of finance available to businesses in KSA.

Finance Options for Saudi Businesses

There are a variety of investment strategies available for businesses considering entry into KSA, depending on the business’s goals and risk profile. If your business is already well-established outside of KSA and looking to expand its operations, your options will be more diverse. Here is a breakdown of some of the finance options available:

Venture Capital

One of the most popular investment strategies is venture capital. Venture capitalists will usually provide companies with access to funding in exchange for a stake in their business and/or influence over how it is run. In KSA, venture capitalists often seek out ambitious projects that can generate high returns in a relatively short period of time. If you have an especially innovative or ground-breaking idea for a business that seems to have potential, you might have more success in catching the attention of venture capitalists.

Joint Venture/Partnership

A joint venture or partnership is a great way for businesses to gain access to the Saudi Arabian market without having to go it alone. By partnering with an established local business, companies can benefit from their knowledge and experience of the local environment as well as access to capital, resources, and a ready-made customer base. It is important to do your due diligence before entering into any joint venture or partnership, as it can be a risky venture if the partner company is not fully vetted.

Mergers and Acquisitions

Merging with or acquiring an existing company in KSA is one way to quickly gain a foothold in the region. This is often the strategy of choice for larger companies looking to expand their operations into KSA. Businesses should be aware that the process of acquiring a company in KSA can be complicated and may require specialist legal advice.

Private Finance

Businesses in KSA can also access finance through bank loans. Banks in the region offer a range of financing options, including long and short-term loans, letters of credit and mortgages. Companies should be aware that different banks have different requirements for obtaining finance, so it is important to do your research before applying.

Grants

In some cases, businesses may be eligible for grants or other forms of financial assistance from the Saudi Arabian government. These grant programs are highly competitive, and businesses should ensure they meet all the necessary criteria before applying. Certain regions, such as new economic cities, may offer various incentives and subsidies to businesses as well.

Preparation is Key

Ultimately, the success of any business venture in KSA depends on preparation. Understanding the investment strategies available, and how to access finance, is a crucial step in the process. With careful research, planning, and execution, businesses in KSA can be successful and profitable.

There are a few key things to remember when embarking on an investment strategy in KSA:

● Do your research. Make sure you understand the local market, regulations and procedures before starting.

● Develop a comprehensive business plan that outlines your goals, objectives and strategies for achieving them.

● Utilize all available resources, from local businesses to grant programs, to maximize your chances of success.

● Talk to professionals and experts in the field who can provide advice and guidance.

● Make sure you clearly understand the associated risks with each investment strategy.

● Be patient and flexible; the process of setting up a business in KSA can take time, but your efforts will be rewarded.

By taking the time to understand the investment strategies available, and doing your research on finance options, your business is more likely to experience success in KSA. The market has a lot of potential for growth and profit, and with the right preparation and strategy, businesses can enjoy excellent returns.

The Rise of Employee Stock Options in KSA

Posted on December 14, 2022 - 2:36 pm by perpetual-admin

Employee share option plan (the “ESOP”) have seen an impressive rise in popularity across the globe, with more companies offering them as a form of compensation. In KSA, employee share options have recently become a prime option for employers specially tech companies due to the increased flexibility and potential for financial gain that they provide.

Why ESOP are Growing in Global Popularity

ESOP shares offer number of advantages that make them an attractive tool for companies to reward their employees and motivate them to stay with the company: They also provide certain benefits such as:

Equity – ESOP provides employees with a form of equity, allowing them to benefit from the financial success of the company without having to purchase the actual shares.
Potential Gains – ESOP shares offer employees the potential for long-term financial gain as well as short-term performance. This makes them an attractive option for employees looking to benefit from the future success of their company.
Increased Engagement – ESOP shares can also help to increase employee engagement and loyalty by being a shareholder in the company. By providing employees with a sense of ownership in the company, employers can help to boost morale and create a more motivated workforce.

HOW DOES IT WORKS

Usually, the company’s board of director approves the ESOP and set the rules in the form of a plan on how it will work for employees and in most cases grant the chief executive officer of the company the authority to grant the ESOP shares (within the authorised number of shares) based on performance and for talent acquisition purposes since the chief executive office manage the day-to-day business of the company.

We often see in early-stage companies, the board is the administrator of the plan; however, with the growth of the company usually the administration is outsourced to a service provider mainly to assign the fiduciary risk away from management, as well as freeing up of time which the board can instead redirect towards growing the company.

Why Is KSA Prime for ESOP?

Until recently, it was not common for companies in KSA to offer ESOP as a form of compensation. However, the tide is changing, and more employers are now offering them as an attractive option for their employees. Companies have freedom to tailor their ESOP to fit the needs of both the company and the employees, and to modify it as their needs may change. However, stipulations exist on the rights of both the employee and the company when it comes time to “cash-out”.

ESOP is now positioned as the prime option for employers and employees in KSA due to a number of key factors such as (i) being attractive to institutional investors; (ii) cost effective; (iii)result a high retention and attracts talents.

ESOP in KSA: The Future of Compensation

It is clear that ESOP shares set to be a solid option for employers and employees in KSA, with a stable economy, growing stock market, and low cost, they offer a unique combination of flexibility and potential for financial gains that make them an attractive option for both employers and employees.

As more businesses begin to offer ESOP shares, they may soon become the norm in KSA. By harnessing their potential; however, resident companies in KSA must be mindful of the tax implications of offering ESOP shares to foreign employees operating in the Kingdom as the company may be subject to a 20% tax on income generated by shares owned by non-Saudi shareholders. If you are an employer looking to offer ESOP in KSA, be sure to speak with legal advisors who can help ensuring your compliance with the relevant regulations and maximize the potential of this form of compensation.

The 2022 Saudi Arabia Legal Roundup

Posted on January 12, 2023 - 2:29 pm by perpetual-admin

The Kingdom of Saudi Arabia (KSA) is a vibrant and rapidly changing nation, with new laws and regulations being introduced at an unprecedented pace. In this article, we take a look back at the major legal developments that took place in KSA during 2022 and what to expect in 2023.

From changes to family law to new measures designed to promote economic growth, there have been a number of significant legislative moves made by KSA over the past year. We review these important changes here and consider how they may affect businesses operating in the country going forward.

New Laws Introduced in 2022

As part of the National Transformation Program, KSA implemented several new laws in 2022. Some of the areas of focus included family law, corporate governance and data protection. These changes bring greater clarity and certainty to both businesses and residents in KSA.

Personal Status Law

One of the most significant changes to be implemented in 2022 was the new Personal Status Law. The law addressed several issues related to marriage, divorce, inheritance and child custody. It was designed to protect the stability of Saudi families and provide a clear legal framework for resolving disputes. The law has been widely praised by the legal community for its provision of greater legal clarity for matters related to the family.

Evidence Law

In 2022, KSA also introduced a new Evidence Law, which aimed to streamline the process of collecting, presenting, and assessing evidence in civil and commercial cases. With the imminent enforcement of the Evidence Law, it will supersede all provisions found in both the Law of Civil Procedure and the Law of Commercial Courts regarding evidence law.

The new law brings a breadth of evidence types to the table, ranging from judicial and non-judicial, written in both official or ordinary documents, digital records, testimonies through custom, and habit or oaths taken by witnesses. Additionally, any evidence regulated by Sharia laws can also be entered into consideration.

Companies Law

The new Companies Law streamlined the business registration process and provided greater flexibility to entrepreneurs looking to start their own ventures in KSA. The newest Law, reflecting the Kingdom’s 2030 Vision, introduces far-reaching changes to enable businesses more flexibility while safeguarding their interests. It is also carefully crafted to empower the private sector and adhere to global best practices.

With the New Law in effect, investors are now able to form any of these five types of businesses: Joint Liability Company, Limited Partnership Company, Joint Stock Company, Simple Joint Stock Company, and Limited Liability Company.

Executive Regulations for the Personal Data Protection Law (PDPL)

The Executive Regulations for the Personal Data Protection Law (PDPL) was due to come into force in 2022, although it was first introduced in 2021. The PDPL is designed to increase consumer rights and ensure that organizations are taking appropriate measures to protect personal data.

Under the new regulations, organizations must appoint a privacy officer and implement robust data security measures. They must also ensure that all employees receive data protection and privacy training. Additionally, organizations are required to keep records of their data processing activities and provide clear information about how personal data will be used. However, after consultation with concerned stakeholders, the full enforcement of this legislature is delayed until 2023.

Looking Ahead: 2023

KSA is expected to make further steps towards introducing new legislation in 2023, aimed at strengthening and accelerating the Kingdom’s economic development.

Proposed laws include a new bylaw, which allows tourists to rent short-term accommodation in Saudi, such as through Airbnb and HomeAway. This will open the door to the tourism industry and create increased opportunities for Saudi homeowners to make additional income.

By June 2023, regulations related to the licencing of law firms in the Kingdom are set to change, and legal businesses are encouraged to prepare now. All foreign law firms wishing to operate in Saudi Arabia must now submit an application for a license from the Ministry of Justice and demonstrate that they meet certain prerequisites.

The Executive Regulations for the Personal Data Protection Law (PDPL) will also undergo another review before it comes into full force in March 2023. It is expected that this law will be further enhanced to ensure proper implementation.

Saudi’s efforts to modernize and globalize its legal system will continue, with further laws and regulations being explored in 2023. Looking forward, it is clear that the Kingdom is determined to create a compliant and secure legal environment for all businesses, consumers and investors.