Article 8 of the Saudi Finance Companies Control Law
المادة 8 من نظام مراقبة شركات التمويل
The article bars dealing in a finance company's founders' shares except with SAMA's approval, and requires whoever receives the shares to meet the founders' conditions in Article 5.
Official text (Arabic)
This article has not been amended since the law was issued.
يحظر التصرف في أسهم التأسيس إلا بعد موافقة المؤسسة، ويشترط فيمن تنتقل إليه تلك الأسهم توافر المتطلبات والشروط الواردة في الفقرة (3) من البند (أولاً) من المادة (الخامسة) من هذا النظام.
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 8 explained in plain English
This article regulates the transfer of founders' shares in a finance company, and sets two provisions:
- SAMA's approval: dealing in founders' shares, such as selling or assigning them, is prohibited except after SAMA's approval.
- Conditions for the transferee: whoever the shares are transferred to must meet the requirements and conditions in paragraph (3) of item (first) of Article 5.
Referring back to Article 5, that paragraph requires the founder to meet the Sharia and legal eligibility requirements, and not to:
- Have failed in any obligation to his creditors.
- Have violated the provisions of the Capital Market Law and its regulations, the Banking Control Law, the Cooperative Insurance Companies Control Law or the finance laws.
- Have been declared bankrupt.
- Have been convicted of a crime involving breach of trust, unless he has been rehabilitated under the laws or as the Regulations specify.
The aim is that anyone who enters the company's ownership through founders' shares is subject to the same standards the founders were subject to at licensing, so these conditions cannot be circumvented by later transferring the shares.
Before any transaction in founders' shares, it is advisable to consult a lawyer who specializes in banking and finance.
Practical example
One of the founders of a finance company in Jeddah wanted to sell his founders' shares to another investor. The sale may not be completed except after SAMA's approval, and the buyer must meet the founders' conditions; if he had previously been declared bankrupt he would not meet these conditions.
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 8 of the Saudi Finance Companies Control Law
Can founders' shares in a finance company be sold?
Dealing in them is prohibited except after SAMA's approval.
What conditions apply to someone who buys founders' shares?
He must meet the requirements and conditions in paragraph (3) of item (first) of Article 5, including not having been declared bankrupt or failed in his obligations to his creditors.
Articles this article refers to
More articles on Licensing Finance Companies
- Article 4
The article prohibits carrying on finance activities, or using anything indicating them, without a license, and excepts a person who finances the goods or services of his own establishments to his customers, as the Regulations provide.
1- تحظر مزاولة أي من نشاطات التمويل المحددة في هذا النظام إلا بعد الحصول على ترخيص بذلك وفق أحكام هذا النظام، أو الأنظمة المرعية الأخرى. 2- يحظر على أي شخص غير
- Article 5
The article sets the conditions and procedure for licensing a finance company, including a decision on the application within 60 days, a license term of five years, and offering a percentage of its ownership to the public.
أولاً : يقدم المؤسسون لشركة التمويل - أو من يمثلهم - طلب الترخيص إلى المؤسسة، ويشترط لإصدار الترخيص ما يأتي: 1- تقديم الهيكلة الإدارية للشركة ، ونظم تشغيلها، وخ
- Article 6
The article requires a finance company to begin its activity within a year of the license and bars it from stopping for more than three consecutive months except with SAMA's approval.
يجب على شركة التمويل البدء في ممارسة نشاطها خلال مدة أقصاها سنة من تاريخ حصولها على الترخيص، ولا يجوز لها بعد ممارسة نشاطها التوقف مدة متصلة تزيد على (ثلاثة) أش
- Article 7
The article allows SAMA to cancel a finance company's license if it appears the company provided false information or omitted material information required for licensing.
يحق للمؤسسة إلغاء الترخيص إذا ظهر أن شركة التمويل زودت المؤسسة بمعلومات زائفة، أو أغفلت الإفصاح عن معلومات جوهرية كان يتعين عليها الإفصاح عنها لأغراض الترخيص وف
- Article 9
The article provides that a finance company's license is considered ended if a liquidator is appointed for it or a judgment declaring its bankruptcy is issued.
يعد الترخيص منتهيًا إذا عين مصفٍ لشركة التمويل، أو صدر حكم بإشهار إفلاسها.
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.