Finance Companies Control Law

Purpose and scope

• Applies to licensed finance companies, which conduct finance in line with Sharia as decided by Sharia committees they choose (Articles 2 and 3); the central bank supervises them.

Key rules, rights and obligations

• Finance activities require a licence, and unlicensed persons may not use anything suggesting they carry them on (Article 4).
• A finance company may not carry on any other activity or trade in currencies, gold, securities or real estate (Article 11), lend without security except as the regulation allows, lend against its own shares, or finance businesses of its directors (Article 12).
• Before contracting, the company must disclose the early-repayment discount formula (Article 33), and directors and staff must disclose in writing any interest in a contract (Article 20).
• The board, general manager, senior executives and branch managers are liable within their remit (Article 17).

Violations, penalties and common problems

• For professional breaches or putting shareholders or creditors at risk, the central bank may warn the company, require a correction plan, stop some operations or bar dividends (Article 29), and fine up to two hundred and fifty thousand riyals (Article 34).
• Breaching the law or regulation: a fine of up to two million riyals or 10% of the finance carried on, whichever is higher, and prison of up to two years, or either; the central bank may freeze assets of anyone financing without a licence (Article 35 as amended).
• A debtor proven to delay payment deliberately is fined up to twice the profit on the obligation for the delay period, repeated for each delay (Article 35).

Procedures and key deadlines

• Anyone concerned may challenge central bank decisions before the competent court within sixty days of learning of them (Article 30), and the competent court hears disputes and violations (Article 31).

An advisory summary prepared by Al-Bayan Al-Wadih Law Firm. It is not an official text and does not replace the law, its implementing regulations, or advice from a specialised lawyer. The official published text and its amendments prevail.