Article 23 of the Saudi Finance Companies Control Law
المادة 23 من نظام مراقبة شركات التمويل
The article requires a finance company to comply with the capital adequacy ratio rules as the Regulations specify.
Official text (Arabic)
This article has not been amended since the law was issued.
يجب على شركة التمويل أن تتقيد بقواعد معدل كفاية رأس المال وفقًا لما تحدده اللائحة.
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 23 explained in plain English
This article requires a finance company to comply with the capital adequacy ratio rules.
Put simply, capital adequacy means that the company has enough capital in proportion to the volume of finance it provides and the risks it bears, so that it can absorb losses without being unable to meet its obligations.
What to note:
- The article did not specify the required ratio or how it is calculated.
- All of this is as the Regulations specify.
It is preceded by Article 22, which makes the maximum total finance the company may provide and the minimum security ratios in certain contracts among the subjects of the Regulations. It is followed by Article 24, which requires the 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. These articles share the aim of preserving the company's solvency.
Companies that need to apply these rules can consult a lawyer who specializes in banking and finance.
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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Lawyers who handle this kind of case
Dr. Ali Al-Rubaie Law Office and Ittihad Al-Asr Legal Company
Dr. Saleh Altayyar & Partners Law Firm
Frequently asked questions about Article 23 of the Saudi Finance Companies Control Law
Are finance companies bound by a capital adequacy ratio?
Yes. A finance company must comply with the capital adequacy ratio rules.
What capital adequacy ratio is required?
The article does not specify it but refers its determination to the Regulations.
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 14
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.
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 ال
- 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 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.