Article 14 of the Saudi Finance Companies Control Law
المادة 14 من نظام مراقبة شركات التمويل
The article allows a finance company to issue securities and sukuk under the Capital Market Law and its regulations, in proportion to its assets and financial position and without prejudice to Article 3.
Official text (Arabic)
This article has not been amended since the law was issued.
مع عدم الإخلال بما ورد في المادة (الثالثة) من هـذا النظام؛ يجـوز لشـركـة التمويـل - وفق ما تحدده اللائحة وبما يتناسب مع أصولها ومركزها المالي - إصدار الأوراق المالية والصكوك وفقًا لأحكام نظام السوق المالية ولوائحه.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 14 explained in plain English
This article opens to a finance company the door to issuing securities and sukuk, which is a way of raising the funds it needs to finance its customers. But it restricts this with several controls:
- Without prejudice to Article 3: which requires licensed companies to carry on finance business in a way that does not conflict with the provisions of Islamic Sharia, based on what Sharia committees whose members those companies choose decide, and in a way that does not undermine the soundness of the financial system and fairness of dealings.
- As the Regulations specify.
- In proportion to its assets and financial position, so the issue may not exceed the company's financial capacity.
- In accordance with the provisions of the Capital Market Law and its regulations, that is, the issue is also subject to the regulation of the financial market.
The article thus combines two references: this Law and its Regulations on one side, and the Capital Market Law and its regulations on the other, and it did not detail the procedures but referred them to those.
It is preceded by Article 13, which requires the company to set aside a provision for potential operating losses, and followed by Article 15 on the confidentiality of customer data.
Companies considering issuing sukuk are advised to consult a lawyer who specializes in banking and finance or one who specializes in securities.
Practical example
A real estate finance company in Riyadh needed liquidity to expand its activity, so it decided to issue sukuk. It must ensure that the issue does not conflict with what its Sharia committee decides, that its size is in proportion to its assets and financial position, and that it complies with the Capital Market Law and its regulations.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 14 of the Saudi Finance Companies Control Law
Is a finance company entitled to issue sukuk?
Yes. It may issue securities and sukuk as the Regulations specify and in proportion to its assets and financial position, in accordance with the Capital Market Law and its regulations.
Must the sukuk comply with Sharia?
The article requires that Article 3 not be prejudiced, which requires carrying on finance in a way that does not conflict with Islamic Sharia based on what the Sharia committees decide.
Articles this article refers to
More articles on Financial Solvency of Finance Companies
- Article 13
The article requires a finance company to set aside a provision to meet potential operating losses according to the standards the Regulations specify.
على شركة التمويل أن تضع مخصصًا لمواجهة خسائر التشغيل المحتملة وفق المعايير التي تحددها اللائحة.
- Article 22
The article lists subjects the Regulations organize, including finance limits, security ratios, disclosure of the cost of finance, consumer protection, advance payments and debt collection.
تنظم اللائحة ما يأتي: 1- الحد الأعلى لمجموع التمويل الذي يجوز لشركة التمويل تقديمه. 2- منع شركة التمويل من إجراء تعاملات ائتمانية معينة، أو تقيـيـدها في ذلك. 3-
- Article 23
The article requires a finance company to comply with the capital adequacy ratio rules as the Regulations specify.
يجب على شركة التمويل أن تتقيد بقواعد معدل كفاية رأس المال وفقًا لما تحدده اللائحة.
- Article 24
The article requires a finance company to diversify the risks of its activity and bars it from financing a single establishment or a group of interconnected ownership beyond the percentage the Regulations specify.
يجب على شركة التمويل تنويع مخاطر نشاطها، ولا يجوز أن تمنح تمويلاً لمنشأة واحدة أو لمجموعة مترابطة الملكية بما يتجاوز النسبة التي تحددها اللائحة.
- Article 25
The article requires SAMA's approval to amend a finance company's capital or articles, or for its merger into or acquisition of a similar company, subject to other laws.
مع مراعاة ما تقضي به الأنظمة؛ يجب الحصول على موافقة المؤسسة لتعديل رأس مال شركة التمويل، أو تعديل نظامها، أو اندماجها في شركة مماثلة، أو استحواذها عليها.
- Article 26
The article requires a finance company to obtain SAMA's approval to open a branch, agency or office inside or outside the Kingdom, or to close any of them.
يجب على شركة التمويل الحصول على موافقة المؤسسة عند فتح فرع، أو وكالة، أو مكتب داخل المملكة أو خارجها، أو إغلاق أي منها.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.