The terms and phrases mentioned below - wherever they appear in this Law - shall have the meanings specified next to each of them, unless the context requires otherwise:

• Law: Law on the Supervision of Financing Companies.

• Regulation: The Implementing Regulation of this Law.

• Bank: Saudi Central Bank.

• Governor: The Governor of the Bank.

• Financing Company: The joint-stock company licensed to engage in financing activities.

• Beneficiary: The person receiving the financing.

• Consumer: The individual to whom the services of financing companies are directed.

• License: The authorization issued by the Bank to a company to engage in financing activities.

• Financing: The provision of credit through contracts for the activities specified in this Law.

This Law shall apply to finance companies licensed pursuant to its provisions.

Finance companies – licensed pursuant to this Law- shall engage in finance activities in a manner not conflicting with principles of Sharia as defined by Sharia committees, whose members are selected by these companies, without prejudice to the integrity of the financial system and fairness of transactions.

1. The practice of any of the financing activities specified in this Law is prohibited unless a license is obtained in accordance with the provisions of this Law or other applicable regulations.

2. It is prohibited for any unlicensed person to use - by any means - any indication of practicing the financing activities specified in this Law or any implication of their meaning, or to use in their documents, papers, or advertisements, any word or phrase that corresponds to them.

3. Notwithstanding the provisions of paragraphs (1) and (2) of this article; the Regulation organizes the provisions for the practice of a natural or legal person financing the goods or services of their establishments for their customers; in a manner that enables the bank to exercise its monetary authority, protects the financial system, and achieves consumer protection.

First: The founders of the financing company - or their representative - shall submit the license application to the bank, and the following conditions must be met for the issuance of the license:

• 1. Submission of the administrative structure of the company, its operational systems, and an investment plan that demonstrates its technical capacity to conduct the activity, as specified by the regulation.

• 2. The company's capital must not be less than the amount determined by the bank and must not be less than the capital specified in the Companies Law, and the foreign share - if any - must not exceed the percentage determined by the bank.

• 3. Each founding member of the company must meet the requirements of legal and regulatory capacity, with the following conditions:

  • A- They must not have breached any obligation towards their creditors.

  • B- They must not have violated the provisions of the Capital Market Law and its regulations, the Banking Control Law, the Cooperative Insurance Companies Control Law, or the Financing Laws.

  • C- They must not have declared bankruptcy.

  • D- They must not have been convicted of any crime involving dishonesty, unless they have been rehabilitated according to the regulations, or as determined by the regulation.

• 4. The individuals nominated for supervisory and executive positions in the company must meet the requirements of professional capacity, and the following conditions must apply to them:

  • A- They must possess theoretical and practical knowledge in the financing activity.

  • B- None of them must have violated the provisions of the Capital Market Law and its regulations, or been convicted of violating the Banking Control Law, the Cooperative Insurance Companies Control Law, or the Financing Laws.

  • C- They must not have been convicted of any crime involving dishonesty, unless they have been rehabilitated according to the regulations, or as determined by the regulation.

• 5. Fulfillment of any other condition specified by the regulation for the issuance of the license.

Second: The bank - after the application is complete - shall issue a decision of approval or reasoned rejection within a period not exceeding sixty days, taking into account the competitiveness and safety of the industry, and the quality of services in the licenses.

Third: The applications - after approval - shall be referred to the Ministry of Commerce and Industry to complete the procedures for establishing the company and registering it according to the Companies Law.

Fourth: After the establishment of the company is completed and the commercial register is issued; the bank shall issue a license for the company to conduct the activity, and the duration of the license shall be five years.

Fifth: The regulation shall specify the financial fee for issuing, renewing, and amending the license.

The financing company must commence its activities within a maximum period of one year from the date of obtaining the License, and it may not, after commencing its activities, cease operations for a continuous period exceeding (three) months except with the approval of the bank, and the Regulation specifies the necessary controls for that.

The bank has the right to revoke the license if it appears that the financing company provided the bank with false information, or omitted to declare material information that it was required to disclose for licensing purposes in accordance with the regulations.