Understand the Kingdom of Saudi Arabia's capital market regulations, renowned as among the most advanced and sophisticated in the MENA Region.
As an established legal practice, we specialize in advising a diverse clientele, including domestic and international corporations, institutions, investment banks, and funds, on a wide spectrum of capital market transactions and the relevant regulatory compliance matters.
With a wealth of expertise in this dynamic field, we are dedicated to providing tailored guidance and support to help our clients navigate the complexities of the Kingdom's regulations with confidence and success.
With over half a century of experience handling capital market matters under both conventional and Islamic law, our Capital Markets Practice regularly advises clients on equity and debt derivatives (in both conventional and Islamic law), including equity-linked products, securitization, Sukuk, and structured finance transactions. These instruments align with the Sharia principles and cater to the growing demand for Islamic finance solutions in the Saudi financial landscape.
Saudi Arabia's IPO Landscape and Corporate Governance
Saudi Arabia has been actively pursuing an agenda of economic diversification and privatization as part of its Vision 2030 initiative, which aims to reduce the Kingdom's dependency on oil revenues and stimulate growth in non-oil sectors. As part of this initiative, the Saudi government has been encouraging both the state-owned enterprises and the private entities to go public through Initial Public Offerings (IPOs) on the Saudi Stock Exchange (Tadawul).
Consequently, the IPO fundraising jumped in Saudi Arabia during the first half of 2024 wherein Saudi companies raised $2.1 billion in 19 offerings, a 141% increase compared to the first half of 2023.
In terms of corporate governance, the Saudi Capital Market Authority (CMA) plays a crucial role in regulating the securities market and ensuring transparency and accountability in corporate practices. The CMA has introduced a number of regulations and guidelines to improve corporate governance standards for listed companies in Saudi Arabia, aligning them more closely with international best practices. One significant development was the permission granted to foreign investors to participate in IPOs under certain conditions, which included being classified as a Qualified Foreign Investor (QFI).
The QFI program was established to allow foreign institutions to invest directly in the Saudi stock market. To qualify as a QFI, foreign investors need to meet specific criteria set by the CMA, such as having a minimum level of assets under management and a track record of successful investment. By opening up IPOs to QFIs, Saudi Arabia aimed to increase foreign investment in the country's stock market and promote economic growth.
In 2017, Tadawul had launched a parallel market, called Nomu for SMEs to raise capital. Nomu has lighter listing requirements compared to the conventional market. However, it is restricted to offering shares to qualified investors and not the general public.
AlGhazzawi and Partners specializes in assisting companies in completing their IPOs in the Saudi Arabian market and preparing the necessary regulatory documentation required for an IPO. This involves working closely with clients to draft prospectuses, offering memorandums, and other legal documents that comply with CMA's regulations. In addition to documentation preparation, we provide strategic counseling to companies throughout the IPO process. This includes advising on the structuring of the offering, conducting due diligence, navigating regulatory requirements, and addressing any legal issues that may arise during the IPO process. The firm's team of experienced lawyers works closely with clients to develop tailored strategies that align with their business objectives and ensure a smooth and successful IPO.
Our long-standing working relationship with the regulators and the CMA acts to simplify and streamline processes, reduce complications, and yield timely results for our clients' capital market activities.
About Our Capital Market Lawyers
Our legal team has over five decades of experience in handling complex capital market transactions under both conventional and Islamic law. In fact, our Islamic finance specialists have advised on several "first-ever" Sharia-compliant capital market transactions – including the first fully limited recourse Sukuk structure and Sharia-compliant securitization structures.
Notable Capital Markets projects include:
- Guiding a well-known healthcare company in its own restructuring and that of its subsidiaries, in preparation for an initial public offering (IPO).
- Advising a leading Saudi company engaged in the industrial sector in preparation for a private placement and a potential offer.
- Aiding a group of investors in setting up foreign investment companies in real estate development, financial, and insurance services sectors.