Uncategorized – Page 12 – Hammad & Al-Mehdar Law Firm

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.

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.

Amendments to the Saudi Commercial Agency Law

Posted on December 6, 2022 - 1:21 pm by perpetual-admin

Every commercial agency operating in Saudi Arabia is governed by the Law of Commercial Agencies. This law was enacted by Royal Decree back in 1962 and it sets out the legal requirements for businesses to operate as commercial agents in Saudi Arabia. As the Kingdom of Saudi Arabia continues to modernize and develop, the government has decided to review and amend the law in order to help ensure that businesses can operate more efficiently and in line with economic developments. In this article, we will discuss some of the key amendments to the Saudi Commercial Agency Law and how this will affect businesses moving forward.

What’s Changing?

Under Saudi law, a commercial agent can be defined as any entity that “contracts with a manufacturer or his representative in his country for commercial activities”. This covers agents, distributors or franchisees. The Law of Commercial Agencies was originally designed to protect the interests of Saudi citizens against the influx of foreign labor and capital. Currently, the law puts forth that only Saudi citizens may act as commercial agents within the Kingdom. This means that foreign companies were required to partner with a local agent in order to do business. Additionally, local residents who did not hold Saudi citizenship were unable to enter into commercial agency agreements.

However, with the growing presence of international businesses in Saudi Arabia, the government has recognised that there is an opportunity for economic growth if foreign companies are allowed to operate directly. To this end, the government has proposed amendments to the law that would allow foreign companies to appoint either local or foreign commercial agents to operate in Saudi Arabia. This would create a more open market for foreign businesses and could lead to increased competition and investment within the Kingdom.

The new law will also put forward several other changes that may affect businesses operating within Saudi Arabia as shown below.

Intellectual Property Rights

The upcoming law will let commercial agents and distributors use their principals’ trademarks and other intellectual property within the terms of the agreement. This means some registration requirements from Saudi IP law can be bypassed.

Exclusivity

Furthermore, the latest edition of the law modifies how exclusive agency and distributorships are to be treated. In general, exclusive agreements are allowed. However, if necessary, goods or services in the Kingdom would be prevented from being supplied due to said exclusivity, then the Ministry of Commerce has the authority to nullify the agreement.

Consequently, if the exclusive agent or distributor is unable to meet the market’s demands, or if the agent/ distributor creates scarcity artificially, then exclusivity may be voided by the Ministry. In addition to safeguarding supply and market integrity, this policy towards exclusivity also gives principals leeway to revoke an agent/ distributor’s exclusivity in Saudi Arabia should they fail to perform adequately.

Termination & Indemnity

The new law’s provisions concerning terminating limited-term agreements largely resemble those for commercial agency or distributor agreements. Limited-term agreements can only be ended before their expiration date if (1) both parties agree to it, or (2) there is justifiable cause. What entails justifiable cause for termination is specified in a catalog found within the draft of the new law and notably, force majeure does not qualify.

The new law not only changes but also thoroughly explains how to end an agreement that doesn’t have a set expiration date. If you want to dissolve a business relationship with someone who you’ve had an open-ended contract with, you must now give one month’s notice for each year the agreement was effective.

What Does the New Law Mean for Business?

The new amendments to the Saudi Commercial Agency Law are a major development for businesses operating in the Kingdom of Saudi Arabia. Not only will this open up the market to foreign companies by allowing them to appoint either local or international commercial agents, but it also empowers principals to better manage their contractual relationships with agents or distributors. Finally, the proposed amendments give all parties in an agreement a secure platform from which to operate, as it sets forth protocols for termination and indemnity. These amendments are expected to come into force around mid-2023, so businesses should prepare for the changes ahead of time.

Overall, these amendments to the Saudi Commercial Agency Law are a step forward in creating a more equitable business environment in the Kingdom and opening opportunities for foreign businesses and local businesses alike.

The Liability of Management and Good Governance in a Saudi Arabian Context

Posted on December 14, 2022 - 2:33 pm by perpetual-admin

Across the globe, businesses are under increasing pressure to adopt sustainable and ethical practices. Known as ESG (Environmental, Social, and Governance), this focus on responsible business practices is becoming more and more important for companies looking to protect their reputation and ensure long-term success.

In Saudi Arabia, where businesses are just starting to come to terms with the need for ESG compliance, there is still some work to be done to create a corporate culture that embraces these values. In this article, we will explore the importance of effective management and good governance in a Saudi Arabian context, looking at what this means in practice and the benefits that will be gained by businesses that fully embrace it.

What Is Governance?

At its most basic level, governance refers to the systems and processes that are put in place by an organization to ensure that operations run smoothly and effectively. Often used interchangeably with management, governance is a broader concept than simply managing day-to-day operations; it encompasses a range of different factors such as ethics, risk management, compliance requirements, and stakeholder relationships, among others.

In Saudi Arabia, the importance of governance has become particularly clear in recent years. Hence, the Capital Market Authority (“CMA”) issued the Corporate Governance Regulations by Resolution No. 8-16-2017 dated 12-02-2017 G (The “Regulations”) as it aims to enforce the global governance standards on the joint stock companies.

The Regulations broadly define Governance as a set of rules that aim to regulate the relationship between the management team and the shareholders of the company, by establishing rules and procedures in relation to the mechanisms of decision-making, add clarity and more transparency and credibility in order to protect the rights of shareholders, achieve greater clarity and more transparency on the Saudi Stock Exchange and the business environment in general.

As the local authorities have come to realize the importance of governance and the potential risks and liabilities associated with not following its best practices, the Ministry of Commerce issued the Corporate Governance Regulations for Non-Listed Joint Stock Companies (commonly known as Closed Joint Stock Companies) for guidance. Both regulations aim at establishing an effective legal framework to govern the company, and particularly aim at (i) enhancing the role of the company’s shareholders and facilitating the exercise of their rights; (ii) stating and clarifying the rules and responsibilities of the management team; (ii) enhancing the role of the management team and the internal committees in order to develop their capabilities to enhance the company’s decision-making mechanisms; (iv) achieving transparency and credibility to reach greater clarity and more transparency between the management team, shareholders, related parties, and any person is dealing with the company; (v) providing effective and balanced tools to deal with conflicts of interest; and (vi) enhancing accountability and control mechanisms for the Company’s employees.

Why is Good Governance Essential for Saudi Businesses?

There are many benefits for Saudi business owners who embrace good governance and effective management. For one, this approach helps companies maintain strong reputations, both within the local community and on a global scale. It also ensures compliance with regulatory requirements, which can reduce risk and help to prevent any potential legal liabilities for the management team that may have direct or indirect impacts on the company’s operations.

As the management’s liability differs according to the type of company, the recent Companies Law sets out general and strict governance rules that apply to the management team regardless the type of the company.

As shown hereunder, these rules aim to enhance transparency and credibility between the management team and shareholders:

Declaring Interest: without obtaining shareholders’ approval, none of the management team shall have direct or indirect personal interest in the business activities and contracts executed on behalf of the company.
Declaring Competition: without obtaining shareholders’ approval, none of the management team may participate in any business that would compete with the company or may compete with any business area that the company is practicing.
Exploitation: none of the management team shall exploit the company assets, information or investment opportunities presented to him in his capacity as manager or presented to the company to achieve a direct or an indirect interest for himself.

In addition to the above, robust management practices have been shown to improve employee productivity and foster creativity and innovation in the workplace, while good governance helps companies attract investors and achieve long-term success.

What Does Effective Management Look Like?

While there is no single definition of effective management, we may consider several key factors. These include clear and consistent communication, an emphasis on accountability and transparency, and overall, the ability of an organization and its leaders to effectively plan, organize, and implement strategies that enable it to achieve its objectives. This often involves a focus on metrics such as profitability, productivity, efficiency, and customer satisfaction, as well as values such as integrity, responsibility, and trust.

The following are some key strategies that Saudi businesses can implement to improve their management and governance practices:

Establish a culture of accountability and transparency. This requires creating clear processes for employee evaluation and promotion, as well as allowing employees to provide input on important decisions and policies affecting the organization.
Build systems for measuring performance and monitoring progress. This can involve the use of tools such as dashboards, KPIs, and performance scorecards.
Invest in leadership development programs. This can help managers to grow and develop their skill sets. It may include the provision of training on topics such as project management, HR best practices, and change management.
Commit to ongoing learning and education. Businesses can achieve this by forming partnerships with local educational institutions and professional organizations. This can help to foster a spirit of innovation and continuous improvement in the workplace.

Ultimately, good governance and effective management are essential for building strong businesses in Saudi Arabia. By embracing these principles, companies can ensure that they are meeting the highest standards of ESG compliance and maintaining their reputations as responsible corporate citizens.

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 Importance of Effective Family Governance

Posted on December 14, 2022 - 2:38 pm by perpetual-admin

Family governance is essential for family businesses to achieve their goals and maintain success across generations. A well-structured family governance model covers all aspects of the family system, including communication, values and traditions, decision-making, conflict resolution, and succession planning. The one thing all family businesses have in common is the need to maintain trust and unity, as well as a shared vision of success. Establishing effective governance helps ensure that family members have the same understanding of values, goals, and objectives.

In this article, we will discuss the importance of good family governance, what it involves, and why families need to institutionalize their governance model.

Institutionalizing Family Governance: The Need for Change

In today’s competitive, globalized market, family businesses must be prepared to face new challenges and changing conditions. Family businesses are increasingly being challenged by competition, new industries, emerging markets, and international investment. As a result, it is essential that family businesses adopt a progressive governance model that allows for agility and adaptation. Institutionalizing a governance system ensures that the family business is run efficiently and effectively, with clear roles and responsibilities, and long-term goals are met.

Here are a few key reasons why it is important to institutionalize family governance:

To remain competitive. International players are increasingly entering family businesses’ traditional markets, making it more difficult for them to maintain their competitive edge. By institutionalizing the governance model, families can ensure that they remain competitive in today’s fast-moving market and deliver strong, consistent performance.
To comply with global best practices. The world of business is increasingly interconnected. Standards of corporate governance are becoming more stringent, and families must ensure they comply with international rules and regulations if they want to enjoy market access. Instituting a formal governance system ensures that family businesses remain compliant and do not fall foul of international standards.
To meet consumer needs. Customers expect the highest level of service and quality, regardless of a company’s size or structure. Delivering on these needs requires good governance and effective decision-making. By institutionalizing a sound framework, families can ensure that their business is ready to meet the needs of customers.
To meet ESG requirements. Environmental, social, and governance (ESG) considerations are becoming increasingly important in the business world. Expectations around responsible and sustainable business practices are higher than ever before, and family businesses must ensure that their governance model is fit for purpose.

Legal Elements of Good Governance

The legal elements of effective family governance are essential. The law provides a useful framework for families to manage their businesses and protect the family’s wealth. It is important to recognise the legal implications of any business decisions and ensure that family governance documents, such as wills, trusts, and shareholder agreements are up to date. Families must be aware of the relevant legal requirements in their jurisdiction and ensure that they comply with them.

Here are a few key legal elements to consider:

Shareholder agreements. Shareholder agreements are legally binding documents, which set out the rights and obligations of the shareholders in relation to the business. These documents can include information about board structure and responsibilities, transfer of shares, decision-making processes, dividend policy, and much more.
Family constitutions. Family constitutions provide families with a framework for decision-making and help ensure that the family’s interests are represented in the business. These documents should be adapted to the evolving needs of the family and updated regularly.
Wills. Wills are a key part of succession planning and should be reviewed and updated periodically. Doing so ensures that the family’s assets are distributed according to their wishes and that any tax liabilities are minimized.
Trusts. Trusts can be used to protect family assets and provide tax benefits. It is important that families understand the legal implications of setting up a trust and ensure that it is tailored to their needs.

Family Businesses Must Prepare for the Future

Family businesses are the backbone of many economies. Their longevity and resilience make them an attractive option for investors, customers, and employees alike. But to remain competitive and successful in an ever-changing business environment, families must ensure they have the right governance model in place. By instituting a formal framework and keeping on top of the legal elements, they can ensure that their business is ready to meet the challenges of tomorrow. If done well, family governance can be the key to a successful and prosperous future.

The 2022 Roundup of KSA’s Sports & Media Industries

Posted on January 29, 2023 - 11:34 am by perpetual-admin

The sports and media industry in the Kingdom of Saudi Arabia (KSA) has undergone a significant transformation in the past few years. KSA is now home to a number of high-profile sports teams, such as Al-Hilal and Al-Nassr, who have made significant progress in their respective leagues. In addition to this, investment has been poured into the development of stadiums and other facilities to support the development of these teams, allowing them to compete at a high level both domestically and internationally.

The media industry also saw several positive initiatives and regulatory changes in 2022. In this article, we’ll explore some of the key developments in the sports and media industry in KSA over the course of 2022, as well as looking at what is likely to happen in 2023.

What Did 2022 Bring for the Sports & Media Industries?

The previous year was a milestone for the sports and media industries in Saudi Arabia. No roundup would be complete without a mention of Saudi Arabia’s impressive performance during the World Cup in Qatar. However, there have been many other notable developments that are set to shape the sector in 2023 and beyond. Let’s take a look at some of the highlights.

Sports

Football remains one of the most popular sports in the Kingdom. Out of all the Saudi residents who practise any sport, approximately 25% are participating in football. So it comes as no surprise that the KSA government is continuing to make huge investments in the development of football stadiums, training facilities, and academies to support grassroots development. In 2022, as part of this initiative, the Public Investment Fund (PIF) funnelled an impressive $2.3 billion worth of football sponsorships towards supporting football clubs and facilities in the region.

Saudi Arabia’s Sports for All Federation (SFA) also announced its ambition to construct six key sports facilities across the nation, each with 30-40 courts catered towards various sporting activities. It is estimated that more than 250,000 people will be drawn in to participate within the first year of operations.

2022 also saw the inaugural Saudi Games and NEOM Beach Games – two major sporting events that attracted both local and international competitors. With the success of these events and the continued investment in sports infrastructure, we can expect to see an increase in interest and investment from both local and foreign stakeholders within this sector.

Media

With the intent to stimulate creativity and innovation and propel Arab media into a globally competitive place, Saudi Arabia initiated the Montij initiative at the 22nd Arab Radio and Television Festival held in November 2022.

Meanwhile, new regulations for digital media creators were also introduced, with the announcement that social media advertisers and influencers were required to submit their application for a licence to the General Commission for Audiovisual Media (GCAM) before October 1, 2022, or risk a fine.

With regard to digital content platforms, the CITC announced a revised version of its Digital Content Platform Regulations in February 2022. After public consultation, the amended regulations were finally published in April 2022. This updated set of regulations is designed to provide a more precise regulatory framework for the digital content industry, demonstrating an alteration in the Kingdom’s handling of platform operators. For instance, language requiring platform operators/service providers to have a physical presence within the Kingdom has been relaxed.

Future Developments: 2023 and Beyond

With 2023 kicking off with the announcement that football mega player Cristiano Ronaldo would be signing for Al-Nassr, the sports industry in KSA is expected to draw even more global attention. As for the Kingdom’s media industry, the landscape is continuing to evolve rapidly.

Diriyah E-Prix – a Formula E Championship event in KSA held at the Diriyah Circuit – is set to be held from Jan 27th until Jan 28th 2023.
Saudi Media Forum 2023 – an annual event that brings together media professionals, specialists, and decision-makers from the region to discuss opportunities and challenges in the sector – is also set to take place in the Kingdom in 2023.
Bid for 2030 World Cup. Despite rumours of the Saudi Ministry of Tourism denying any plans for an official joint bid, they also have not ruled it out.

The developments of 2023 are expected to further fuel investment and innovation in the sector, as well as create greater opportunities for local and international stakeholders. With the right regulatory framework in place, and with continued government backing, KSA’s sports and media industry is set to become an even more competitive global force.

Saudi Arabia’s Evolving Data Privacy Landscape

Posted on January 31, 2023 - 7:29 am by perpetual-admin

As technology continues to develop, countries worldwide have begun to recognise and address the importance of data privacy. Saudi Arabia is no exception. As part of its Vision 2030 economic reform plan, the government has prioritised data privacy and security, creating new regulations to ensure that financial information is collected, used, and stored securely.

In the past, financial institutions have had the freedom to collect, store, and process customers’ personal information with few restrictions. With the introduction of the new regulations, however, financial institutions in Saudi Arabia must now comply with strict data privacy requirements to ensure customer data is protected. This will bring Saudi Arabia in line with international standards, while also providing greater protection for its citizens. In this article, we will explore these changes and the implications for financial institutions in Saudi Arabia.

How are Data Privacy Laws & Regulations Changing?

The government of Saudi Arabia announced the new Personal Data Protection law in 2021, which aims to protect and regulate the collection, storage, and use of personal data by institutions and businesses in the Kingdom. Since the initial announcement, there was a delay in the implementation of the law to give more time for consultation with stakeholders. After these considerations are taken into account, the law is expected to come into force in March 2023.

The new data privacy regulations aim to safeguard customer information and protect it from misuse or abuse. Financial institutions are required to meet the requirements of these laws, which include implementing specific measures to ensure the security and confidentiality of customers’ personal data.

To comply with these laws, financial institutions must take the following steps:

Create and implement a data protection policy
Appoint a Data Protection Officer (DPO) to oversee compliance
Implement technical and organisational measures to protect customer data
Conduct regular risk assessments and audits
Ensure that all customer data is securely stored and processed
Use robust encryption technologies to protect customer data
Provide customers with clear and adequate information on how their data is being used
Put in place procedures for dealing with data breaches
Put in place mechanisms for customers to exercise their rights under the regulations

It is important to note that these regulations are still in the process of being developed and, while they may be subject to change, all financial institutions must ensure that they are aware of the latest developments and regulations by March 2023 to remain compliant.

The Collaboration of Finance & Tech Teams is Key

The process of compliance with data privacy regulations can be a daunting task for any financial institution in Saudi Arabia. But the responsibility for compliance does not lie solely with the finance teams. It requires a collaborative effort between the finance and technology teams to ensure that all regulations are being met and that customer data is adequately protected.

Technology teams must be involved in the implementation of any regulatory requirements, as they are the ones with the technical expertise to implement the necessary measures. Inter-departmental communication and collaboration are essential to ensure that all requirements are being met. This includes sharing information and knowledge between the finance and technology teams to ensure that everyone is on the same page. Everything from the training of staff to developing and implementing an internal data protection policy must be done in collaboration with the technology team.

By working together to understand and comply with the new data privacy regulations, financial institutions in Saudi Arabia can ensure that customer data is adequately protected and remain compliant with the law.

The Evolution of Saudi Arabia’s Legal Framework

Posted on February 5, 2023 - 6:28 am by perpetual-admin

Over the past two decades, Saudi Arabia has been undergoing a remarkable transformation, which has touched nearly every aspect of life in the Kingdom. This is especially true of its legal framework, which has been a critical part of this transformation process.

To better understand how this evolution has taken shape and the potential implications for businesses, it is important to explore what has changed and what is still changing. In this article, we will explore the changing legal framework in Saudi Arabia, the impact this has had on businesses in the Kingdom, and what changes are expected to come in the near future.

Saudi Arabia’s Changing Legal Landscape

The Saudi government’s National Transformation Program put in place in 2016 marked a dramatic shift toward modernization. As part of this, the government has made a concerted effort to modernize its legal framework, create new standards for businesses, and promote transparency and accountability. Here are some of the highlights:

One key change has been the overhaul of the Kingdom’s arbitration laws and the establishment of the Saudi Centre for Commercial Arbitration in 2016. This has led to a dramatic increase in the number of arbitration cases, providing businesses with a more efficient and cost-effective way to resolve disputes outside the courtroom.
In 2018, the Ministry of Justice published a book detailing Shariah-guided legal principles and a history of previous rulings to provide guidance for litigants in civil and commercial courts. While there is no system of judicial precedents in the Kingdom, this book represented a step towards providing greater legal certainty.
In 2020, the new Commercial Courts Law was enacted, providing a modernized and streamlined framework to resolve business disputes that required court action.
Another major change was the introduction of e-filing systems and remote hearings for courts, initially triggered by the global pandemic in 2020. This has made it easier for businesses to file legal documents and launch court cases without the need to travel, leading to a marked improvement in the efficiency of the legal system.
The Law of Evidence was introduced in 2022, with the aim of reducing court discrepancies in relation to the consideration of evidence across all civil and commercial transaction disputes. This law brings Saudi Arabia further in line with international legal standards and will make it easier for businesses to present their cases in court.

What’s on the Legal Horizon?

The evolution of Saudi Arabia’s legal framework is set to continue in the coming years. In particular, there are plans for further reforms and improvements that will provide additional clarity, consistency, and transparency for businesses in the Kingdom in relation to subjects such as data protection and cyber security. The Personal Data Protection Law, which was initially introduced in 2021, is still being modified and will eventually provide businesses and individuals with a clear set of legal rulings with regard to how they should protect customer data and ensure privacy.

In addition to this, the licensing of foreign law firms is set to become increasingly open and streamlined, making it easier for businesses in the Kingdom to access foreign expertise when needed. Laws related to property and real estate are also expected to become more aligned with international standards, allowing for foreign investments in the sector.

Preventative justice will also become a focus for the Ministry of Justice, with a new committee currently being established to develop a strategy for the implementation of this concept in the Kingdom. This is expected to be beneficial for businesses, providing them with greater clarity and guidance on how to obey the law and avoid legal disputes.

Saudi Arabia: Creating a Better Legal Landscape for Businesses

The changes that have taken place in Saudi Arabia’s legal landscape over the last 20 years, but especially in the past decade, have been remarkable, and are ongoing even today. Businesses in the Kingdom can benefit greatly from these changes as they provide more clarity and consistency in how legal issues are resolved.

What’s more, greater access to foreign expertise and the introduction of preventative justice will help businesses be more proactive about avoiding legal disputes in the first place. With further changes on the horizon, businesses are strongly advised to ensure that they keep up with these developments and work with law firms to ensure that they are both compliant and well-prepared for the future.

The Legal Considerations of Alternative Funding of Growing Companies

Posted on February 19, 2023 - 1:07 pm by perpetual-admin

Funding your business is a critical part of your growth journey, and in Saudi Arabia, banks are often the first port of call for borrowing funds. Banks, however, have been restricting lending to private businesses globally, and Saudi Arabia is not an exception. To the contrary, bank credit availability to private business in Saudi Arabia can be rather limited. That’s why a business may wish to explore alternative funding sources. In this article, we will explore the different funding sources available and discuss some of the legal implications of each.

What Type of Alternative Funding Sources are Available in KSA for early stage growth?

Saudi Arabia’s venture stage ecosystem is rapidly maturing, and as such, the choice of alternative funding sources available to businesses continues to expand. It’s essential to keep in mind that for in-KSA enforceability, Shari’a compliance may be a legal requirement for recovery of profit charges or “interest”.

Angel Investors

Angel investors are customarily high-net worth individuals who provide capital to entreprenerus during the life of their ventures in exchange for an ownership stake in the business. This type of funding is often more readily available than traditional bank loans and can be used to fund the launch and very early stages of growth of a business.

Legal Consideration: Documentation in angel investment transactions is key, and while some angel investors can be qualifying or accredited investors, they may not be sophisticated. Therefore it is very important that the transaction documentation is prepared by specialists to protect both parties, and to take into consideration the private placement nature of the offering securities given applicable laws. It is also essential to perform due diligence on the investor and ensure that they qualifying or accredited investors.

Venture Capital (VC)

Venture capital is a form of capital provided by specialist investment funds (referred to as venture capital funds) to businesses in exchange for equity. VC is typically available from after the proof-of-concept stages of a business, through advanced scaling stages.

Certain venture capital funds provide debt financing, which can help businesses looking to finance working capital or other aspects of their capital requirements, but without parting way with equity. Customarily venture debt is available to companies that received institutional venture capital equity investments.

Legal Consideration: Both forms of venture capital financing are considered to be private placements or financing, and as such special legal attention should be given to documentation to ensure that they are drafted in line with applicable laws. Additionally, businesses looking to receive venture capital should carryout internal legal and compliance review in preparation for investor legal due diligence.

Additionally, debt funding is likely to be subject to the borrower providing security to the lender, and the perfection of such security. The borrower should consider carefully the scope of security and its ability to perfect the security in favour of the lender, especially if the lender is a foreign party, which is customary.

Equity Crowdfunding

Equity crowdfunding is a form of funding provided by a large group of investors, including retain investors, through a platform in exchange for a share of the business’ equity.

Legal Consideration: Under Saudi law, equity crowdfunding is permitted, subject to certain restrictions. Fundraising must occur via a platform licensed by the Capital Market Authority (CMA).

Debt Crowdfunding

Debt crowdfunding is where investors provide funds in exchange for a fixed return. This type of funding is often used by businesses to meet their short-term cash flow needs or finance a specific project. In Saudi Arabia, two debt crowdfunding platforms recently received licensed from the Saudi Central Bank (SAMA) – Forus and Tameed.

Legal Consideration: In 2021, SAMA issued a new set of regulations that clarify the legal requirements for debt crowdfunding platforms. The platform must be registered with and regulated by SAMA, submit periodic financial statements, and establish a risk management system. If you choose debt crowdfunding, you must ensure that the platform you use is fully compliant.

Key Takeaways

Alternative funding sources are worth considering if you’re looking to finance the launch or growth of your business. However, it is crucial to consider the legal implications of each type of funding before selecting an option. It is also possible for you to utilize a number of funding options in tandem. In Saudi Arabia, angel investment, venture capital, equity crowdfunding, and debt crowdfunding are all viable options for businesses looking to raise capital, but each with its own set of legal implications.

To discuss the legal implications of the options suitable to you, contact our team.