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Issue No: 15 - January - April 2004
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Saudi Arabia recently passed a new Capital Market Law to promote publicly traded stock companies. Acknowledging a desire to stimulate economic growth, the law provides for the establishment of a “Saudi Stock Exchange Commission” (SSEC) which will regulate listed joint stock companies and penalize those companies that fail to adhere to the regulations. The SSEC is given many responsibilities including the prosecution of fraud, furtherance of board independence, full disclosure of corporate balance sheets, and the reduction of stock speculation which can hurt small investors.
Although fraud can never be completely eliminated, it can be prosecuted to protect innocent investors. Saudi companies will no longer be allowed to skip a few quarters in reporting their earnings with impunity. Failure to issue regular financial reports now will result in suspending trading in the offending company’s stock. The SSEC is given the authority to impose fines upon those companies that fail to adhere to the new regulations.
More than 11,000 family businesses exist in the Kingdom, and many of them will now be encouraged to publicly list their stock to ensure their continued success. Past experience suggests that if large companies fail to widen their base of ownership, they may cease to exist and thereby disrupt a country’s economy by contributing to the unemployment rate.
If companies are publicly listed and their shares are traded on the stock exchange, such companies must implement appropriate safeguards to protect the rights of their shareholders. Improving corporate governance results in increased protection for shareholders which necessarily leads to greater investor confidence and more efficient use of capital. If Saudi companies are to attract foreign investment, they must pay strict attention to corporate governance standards which are compatible with international standards. This process will start with state-owned companies, because greater investor confidence will encourage more investors to purchase company stock when these companies are privatized. Similar experience in other nations suggests that benefits will result in terms of greater revenue, improved productivity, increased investment, and enhanced quality of services. The SSEC is expected to focus on furthering the independence of board members, clarifying and standardizing the listings of publicly traded companies, and streamlining the procedures required of companies to be listed on the exchange.
The new Capital Market Law is just one more reason Saudi Arabia is looking more attractive to the international community as it seeks accession to the World Trade Organization. |
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Inspired by more disputes arising in the area of inheritances, we are proud to announce that the Law Firm of Dr. Khalid Alnowaiser has established a new practice area in the field of Inheritance, Trusts and Estate Planning to meet the needs of our clients. In furtherance of our continuing goal to provide a full range of legal services, we offer comprehensive inheritance, estate and trust legal services for individuals and businesses.
All of us are faced with certain financial challenges: ensuring that our business continues after our death, providing for our loved ones if we die prematurely, planning for the possibility of outliving our assets, coping with unexpected emergencies, and dealing with mental and physical incapacities. By overcoming these challenges, our new Inheritance, Trusts and Estate Planning practice area can help you get organized and accomplish your estate planning objectives.
Our services include the preparation of wills, trusts, family partnership agreements, marital property agreements, business succession agreements, asset preservation plans, charitable and family gifts, and other financial planning transactions, including life insurance and retirement planning.
We anticipate that this new practice area in the field of Inheritance, Trusts and Estate Planning will be of interest to you and your family, friends, and business associates. Please contact us if we can assist you in planning for the future. |
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The Law Firm of Dr. Khalid Alnowaiser (LFKAN) has opened a new office in Riyadh, expanding its dominance of the legal service sector in Saudi Arabia. Opening this new office will improve LFKAN’s ability to fulfill its clients’ legal needs in the area. LFKAN recently opened the Riyadh office in response to the continued growth of its national practice. LFKAN’s Riyadh office is located in the Kingdom Center, Floor 23, Office No. NLA4B, P.O. Box 1631, Riyadh 11311. For more information regarding LFKAN’s Riyadh office, contact 966 1 2110088 or email us at  . |
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Last November, the Saudi Government, approved the executive regulations governing Saudi Arabia’s new law on the environment. The regulations are intended to promote conservation and protect the environment from pollution. The media is being asked to inform people about the need to safeguard the environment and public health from the threat of air and water pollution.
Although the regulations’ goal is to protect the environment rather than punish polluters, the move does detail inspection and enforcement procedures to monitor and protect the environment. Violators will be prosecuted in the Court of Grievances in an expedited manner without having to wait for the processing of routine claims. |
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The Saudi Arabian General Investment Authority (SAGIA) reports that the investment climate in the Kingdom has become very attractive to investors since implementation of the Foreign Investment Law in April 2000. Within the next 20 years, the SAGIA estimates that investment opportunities in the Kingdom could exceed $1 trillion (SR3.75 trillion).
Potential investment opportunities exist in the areas of power generation, communications, agriculture, railways, petrochemicals, information technology, tourism, education and infrastructure projects. The SAGIA is facilitating inquiries from both national and international investors.
Saudi Arabia is the largest free market economy in the Middle East, accounting for 25 percent of the gross national product of Arab nations. The Kingdom has a strong and stable financial system, which is essential to handle the volume of investment capital needed to provide liquidity for projects.
Foreign investors are allowed to completely own a project’s capital and have all of the benefits enjoyed by Saudi nationals, including industrial loans. The Kingdom’s insurance law and the new stock market law are also designed to attract foreign investments. These developments are yielding dividends. The SAGIA reports that it has issued more than 2,000 licenses to establish projects worth more than $15 billion (SR56.25 billion) in the past few months. |
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The Saudi Council of Ministers approved a new income tax law in mid-January to replace the existing 48-year-old law taxing foreign investors. The new law slashes the tax rate from 45 to 20 percent for foreign companies and individuals, excluding citizens of GCC countries, who do business in Saudi Arabia.
In a continuing effort to attract foreign investment in the Kingdom, the lower tax rate will apply to companies set up with capital from non-Saudi shareholders, non-Saudi residents doing business in the Kingdom, and non-residents who conduct business in the country through a permanent office or location.
The 20 percent tax rate, however, does not apply to persons working in the areas of natural gas investment and oil and hydrocarbon production. The tax rate is 30 percent for those taxpayers working in the area of natural gas investment only, and is 85 percent for those persons working in the production of oil and other hydrocarbons.
The new income tax law will be enforced ninety days after its publication in the Gazette. |
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| 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. |
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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
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