Saudi Exchange Releases New Guidelines for Listing Foreign Companies

The Saudi Exchange has recently released the Guideline Manual for Foreign Companies Offering and Listing on the Main Market, which is a new set of guidelines for foreign companies seeking to list shares on the Saudi Exchange (the “Guidelines”). The Guidelines aim to clarify the process of obtaining the necessary approvals while also ensuring compliance with the Exchange Rules and relevant regulations. Additionally, the Saudi Exchange offers foreign companies interested in listing and offering on the main market (the “Applicants”) the opportunity to preliminarily assess their request through a financial advisor before formally applying for approval. It’s important to note that these Guidelines are not the final requirements, rather they are intended to assist Applicants in obtaining the required approvals.

General Requirements

?The Applicant seeking to list its shares must have a minimum market capitalization of 4 billion Saudi Riyals (approximately $1.1 billion), at least six months before the application date. Exemptions from the capitalization requirement may be requested in the application process. The market capitalization is determined by financial advisors and underwriters licensed by the Capital Market Authority (CMA) by using the International Financial Reporting Standards (IFRS), which apply to all listed companies, including foreign companies. Dually listed companies intending to list on the Saudi Exchange need to comply with the same rules. If the Applicant intends to be dually listed, the Applicant must also be listed on the market of its country or intend to offer and list. The Applicant must comply with any regulatory requirements in the country of incorporation before its offering in the Kingdom of Saudi Arabia. The Applicant’s company type must be a joint stock company or equivalent. Additionally, the Applicant must submit the articles of association, bylaws, and all the amendments to date in its application.

Board of Directors

?The foreign Applicant must have sufficient Directors and Officers (D&O) insurance coverage from a local insurance provider. All board members and senior executives must align with the nature and size of the Applicant’s operations. Additionally, at least two members of the Board of Directors must continuously reside in the Kingdom of Saudi Arabia.

Prospectus

When preparing the prospectus, if the Applicant uses a reporting currency other than the Saudi Riyal, it must also state the equivalent value in Saudi Riyals. Additionally, the Applicant must provide information on previously listed shares, including type, quantity, and market listing. If there are differences in trading hours between the country of incorporation and that of the Saudi Exchange, the Applicant must disclose the mechanism for transferring shares in both markets. The Applicant also has continuous obligations as a foreign issuer in the Kingdom and must provide details about taxes imposed on investors as well as auditor information.

Furthermore, the Applicant must disclose the risks inherent in the market where the Applicant’s shares are traded, such as economic downturns and regulatory changes that can affect its performance. Additionally, all risks related to the type of securities (e.g., stocks, bonds) offered and how they are regulated in the country where the Applicant’s company is incorporated, including restrictions and categorizations that impact investor rights and protections, should be included. The Applicant also needs to disclose the risks associated with dual listing, such as currency fluctuations and compliance with multiple regulatory frameworks, both of which may impact the Applicant’s company financial stability and investor confidence.

Other Considerations

The Applicant is required to submit any additional information or documents requested by the authority within the specified period in the application. If the Applicant fails to comply with this requirement, the authority may take any action to protect investors. Continuous obligations apply to foreign companies that have listed their shares on the main market by the listing rules. This includes disclosing all information that has been disclosed in the foreign market to the public in the Kingdom. The Applicant must also disclose all regulations in the incorporation county that conflict with the Capital Market Law and its implementing regulations, if any. Major shareholders in the Applicant are restricted from selling their shares for the first six months after the Applicant’s shares start trading, unless a longer lock-up period is set. Financial statements must be prepared and audited according to International Financial Reporting Standard (IFRS) requirements issued by the International Accounting Standards Board. All documents must be provided in the Arabic language.

Auditor Requirements

The Applicant must appoint an auditor from among the four major accounting firms. The Applicant must grant the Capital Market Authority access to audit sources and the auditor’s work product.

Other Regulations

After successfully listing the foreign company, it must comply with other applicable regulations, including but not limited to, Instructions for Book Building, Corporate Governance Regulations, Merger and Accusations Regulations, and Implementing Regulation of the Companies Law for Listed Joint Stock Companies, as well as Instructions on Price Stabilization Mechanism in OPOs.

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KN Legal is happy to assist foreign companies list its securities on the Saudi Stock Exchange. Please contact us to learn more.

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