|
 |
| |
|
Issue No: 22 -September - December 2006
|
| |
|
|
| |
|
|
In recent years, Saudi citizens have been victimized by unscrupulous real estate dealers offering phony investments in real estate ventures. The booming real estate market in the Kingdom has created the need for better regulation and oversight to protect investors.
The Capital Market Authority (CMA) has taken the lead in addressing this situation by offering proposed regulations for all real estate investment funds operating in the Kingdom. The CMA proposes that anyone seeking to offer a real estate initial public offering to potential Saudi investors must first present a plan to the Ministry of Commerce and Industry after obtaining a license from the CMA.
In order to obtain a license, the applicant must name a treasurer for receiving the fund assets and a fund manager who is required to enter into a contract with the fund’s investors. The project must have a well-defined feasibility study specifying the fund type, its purpose, and the project commencement date and duration.
The applicant must also nominate a certified accountant to audit the fund in accordance with the standards issued by the Saudi Commission for Chartered Accountants and name the actual project developer hired to undertake and complete the real estate development.
The proposed regulations divide real estate investment funds into three types: preliminary raw land development; residential and commercial development; and sales of developed properties and ultimate liquidation of the fund. Each fund shall terminate on any one of the following occurrences: expiration of the fund’s defined period; expiration of the fund’s purpose; issuance of a court ruling dissolving the fund; or expiration of certain events stipulated in the fund’s organizational documents.
The CMA will review and approve all forms used by the applicant to seek funding from interested investors and will assess licensing fees for the project.
Every real estate investment fund will be supervised by a Supervisory Council appointed by the Investment Manager after receiving CMA approval. At least one-third of the Council’s members (but not less than two members) must be independent of the fund’s management, and the Council will make sure that the fund manager is properly performing his duties to protect investors. The CMA retains final authority in determining if a fund is fully complying with all regulations and, if not, the Authority can dissolve the Supervisory Council and appoint a new one.
It is expected that these requirements will provide uniformity among real estate offerings and encourage new investments in the Kingdom. Licensure should address the past problems experienced by investors who suffered losses when inadequately funded projects failed. Most importantly, the issuance of the organizational regulations for real estate investment funds promises to lead to a revival in the Saudi real estate market. |
| Top |
|
|
After two years of planning, the King Abdullah Financial District is ready to begin construction in Riyadh. Saudi Arabia, already the world’s oil capital, will now consolidate its position as the Middle East’s financial capital.
Following the successful launch of Tadawul, one of the world’s most technologically advanced stock exchanges, and the Capital Market Authority, which has introduced world-class capital market regulations, the new Financial District will complement the Kingdom’s carefully planned program of financial modernization.
Many of the world’s major financial institutions and professional service companies intend to locate in the District which will be near the business center of Riyadh. Over a construction period of three years, the District will encompass 1.6 million square meters and offer over 3 million square meters of floor space in a state-of-the-art business center.
The Saudi Public Pension Agency will actually own and develop the entire project and provide a new home for the Capital Market Authority and Tadawul as well as offices for lawyers, accountants, auditors, information technology providers, and consultants.
A centerpiece of the District will be a financial academy designed to train and enhance the skills of persons working in the financial services sector. Conference facilities and multimedia devices will be available to provide financial seminars and support the many banks and financial institutions located within the District.
Although financial districts exist in other Gulf countries, it is expected that the King Abdullah Financial District, when completed in 2010, will be the pre-eminent financial center in the Middle East on a scale equal to the major financial centers in the world. |
| Top |
|
|
The Shoura Council is debating a new law to prevent electronic crimes in the Kingdom. The law seeks to prevent use of the Internet to defame or harm individuals, companies and organizations. The statute, known as the Cyber Crimes Combat Law, has been drafted in light of the existing rules on Saudi criminal procedures, the anti-money laundering law, the Arab law to combat cyber crimes, and the European Agreement on Computer Crimes. It has been designed to provide security for personal information and preserve public morality and safeguard the national economy.
Persons eavesdropping on private e-mail messages or misusing mobile cameras will be sentenced to jail and a stiff fine. Those who seek to disrupt Internet services through hacking will also face criminal prosecution. Anyone running a website showing pornographic materials or facilitating illegal drug trafficking will be severely punished.
The proposed law also will punish those who establish websites for terrorist organizations, promote terrorist ideologies, or publish information on how to make bombs or breach national security. Exploitation of women and children also is strictly proscribed.
All Internet users in the Kingdom are required to refrain from publishing information that breaches public decency, damages the armed forces or the dignity of governmental leaders, or violates the sanctity of Islam. Those persons who violate the new law can be sentenced to 10 years in prison and fined up to SR 5 million. |
| Top |
|
|
In July, the Saudi Arabian Monetary Agency approved a new automobile insurance policy to standardize coverage throughout the country. All vehicle owners and drivers are now subject to the new requirements. The insurance follows the automobile rather than the owner or driver, so coverage exists at all times.
The new regulations seek to curb fraud, cheating and forgery, thereby reducing the actual cost of compulsory automobile insurance. Coverage is also extended to minors under age 21 upon an additional subscription. Policy limits are set at SR 5 million for any one accident, and the policy period is one Hegira year.
In a related development, the Gulf states are working on a “Green Card” to unify automobile insurance throughout the region. The current system requires motorists to pay insurance money when they enter each GCC state. The “Green Card” system seeks agreement on how to collect the insurance money from automobile owners in a lump sum. Saudi Arabia has not yet decided whether to participate in this new system, but the passage of the new Saudi insurance policy requirements may spur Kingdom participation with its fellow GCC members. |
| Top |
|
|
The Saudi Department of Zakah and Income Tax is stepping up its enforcement against those who fail to pay Zakat as required by Saudi law. The Department depends upon the ledgers maintained by payers to determine the correct amount of Zakat. All of the amounts collected are transferred each day to the Saudi Arabian Monetary Agency to support needy people in the Kingdom. In the past fiscal year, the collected Zakat reached SR 3.6 billion, which was a 20% increase from the preceding year.
The Department plans to punish defaulters by banning them from recruiting foreign manpower from abroad, suspending their local bank accounts, and seizing their transactions with governmental departments until they settle their outstanding Zakat obligation.
The Riyadh Branch of the Zakah and Income Tax Department issues 113 Zakat certificates each day and has implemented a computer program to streamline the issuance process. |
| Top |
|
|
The Saudi Justice Ministry has announced approval of a list of 636 arbitrators qualified to preside over commercial disputes in the Kingdom. Each arbitrator is listed by scientific qualification, address, and postal or e-site to facilitate communication with others.
The increased popularity of arbitrators is due to the promise of quick and competent dispute resolution as well as the secrecy inherent in arbitration as contrasted with public court proceedings.
Dr. Khalid Alnowaiser is one of the approved arbitrators and an expert in arbitration and frequently lectures on its value in resolving commercial disputes. Our law firm has a very active arbitration practice which has proved of great value to many of our business clients. |
| |
| Top |
| Disclaimer |
| Material contained in this newsletter is for general information only and should not be interpreted as legal advice on any particular matter. Readers are advised to consult their legal advisor directly on any issues discussed herein. Transmission of this document does not create any attorney-client relationship. Although considerable care has been taken to ensure the accuracy of the material in Legal Update, the Law Firm of Dr. Khalid Alnowaiser is not responsible for any errors contained herein. |
|
| Top |
|
|
| |
|
|
| |
|
|
|
|
|
|
 |
| |
12/4/2009:Ministry steps up clampdown on copyright piracy 12/4/2009:Construction of New Office is near to completion 14/4/2009:JCCI preparing black list of car rental defaulters 7/4/2009:Justice Ministry warns ‘lawyers’ without permits
|
|
|
| |
|
|
| |
| |
|