By Mulhim Hamad Almulhim
Comment: This marks the first time that class-action lawsuit regulations have been introduced to KSA’s legal community
Saudi Arabia has taken many measures to provide a flexible environment for investors and encourage them to envision the Kingdom as a promising place for investment in many different sectors.
One may observe these evolutionary steps in terms of Saudi’s laws and regulations because the body of Saudi laws that govern its financial system is constantly updated with new information. A great many of these laws have been updated, changed or replaced. Keeping up with these changes may seem like a burden for investors; but, in many ways, the vital, living nature of this legislation improves the way investments in Saudi Arabia are handled. Saudi Arabia’s new laws have provided more protection for investors than existed in the past, and they cover many investment-related issues about which Saudi law had been silent for many years.
The Capital Market Authority (CMA) in Saudi Arabia, along with the Ministry of Commerce and Investment (MOCI), are key players in the financial and commercial arena. A new Saudi Companies Law was issued in 2016, and while many things remain unresolved in this law, it does attempt to fix some of the issues that have arisen over the past 50 years. Most importantly, the new Law assigned the CMA the power to regulate listed companies, and to provide additional rules regarding listed companies when necessary. As a result, the CMA has issued regulations with respect to corporate governance that are considered to be more advanced than those that came before. The CMA has also updated its listing rules and the M&A Regulations, and it issued a class-action lawsuit chapter that will be added -- upon approval -- to the Resolution of Securities Disputes Proceedings Regulations. Recently, the CMA published a series of regulations for public consultation to develop its implementing regulations including class-action lawsuit chapter. Once a class-action lawsuit is approved and implemented. This marks the first time that class-action lawsuit regulations have been introduced to Saudi’s legal community.
The Ministry of Commerce and Investment published a Bankruptcy Law for public consultations, which is another indication of the new movement to enact laws long awaited by investors and corporations. In fact, the Saudi Bankruptcy law seems to favour businesses, in that it provides struggling corporations the opportunity to salvage themselves and start over if they have reasonable plans to restructure and treat creditors fairly.
These reforms and new laws have elevated Saudi’s investment-related legal structure to a more satisfactory level, but it must be developed further. The above examples show movement towards enhancing Saudi’s legal framework for corporations and investors in general. Those corporations and investors interested in investing in Saudi will need to take advantage of such laws and be very well-versed in them to ensure their investments continue to grow on solid ground.