Saudi-Arabien Wirtschaftshandbuch Saudi Arabia Business ... - Ghorfa

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the technical and scientific office
The technical and scientific office has the task of supporting
the activities of the Saudi commercial agent/distributor.
An office like this may not develop any economic activities,
it is financed by the foreign parent company and
must be seen initially as a ‘cost centre’. From a legal point
of view it is a dependent office of the parent company.
The TSO is statutorily regulated in a ministerial resolution
(No. 1532 dated 6.6.1395 H (15.06.1975)).
Pharmaceutical companies, which export their products to
Saudi Arabia, must open a technical and scientific office.
the liaison office
The liaison office is similar to the technical and scientific
office. However it also offers a foreign company, which is
realising projects with the Saudi public authorities, the
opportunity to maintain contact with the contracting authorities
via a legal presence (Ministerial edict by the Minister
for Trade No. 1502 dated 8.3.1400 H (26.1.1980)).
the public company
The public company is defined in detail in the Articles 48
to 148 of the Saudi Company Law. Until now, the public
company according to Saudi law had almost no significance
for the foreign investor because, apart from a few
banks that are founded as public companies, no foreign
investments were allowed in this legal form. However this
will change as the Saudi market continues to open, especially
in the field of privatisation projects.
Saudi law recognises the closed and open public company.
Five founding shareholders are required to form a public
company. The minimum capital for a closed public company
is 2 million SR, and for an open public company 10
million SR. The public company is managed by a board
comprising at least three persons. Since 1997, it has been
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possible to turn Saudi limited companies into public companies.
A pre-condition for this is that the limited company
has existed for at least 10 years and has a value of
75 million SR.
Shares can be traded on the Saudi Arabian stock exchange,
www.tadawul.com.sa. The Tadawul system was originally
operated and controlled by the Saudi commercial banks.
Shares can only be purchased by Saudi citizens or companies
that are completely owned by Saudis. A law was enacted
in July 2003 to regulate the capital market (Capital
Market Law, Royal Decree No. M/30 dated 2/6/14124
H (31.7.2003)). This introduced the so-called Capital
Market Authority – also known as the Securities and
Exchange Commission – which controls the implementation
of the statutory regulations. It is safe to assume that
foreign investors will be allowed to purchase shares in the
near future. In March 2007, Tadawul itself was granted
permission by the Council of Ministers to convert into a
public company with a capital of 1.2 billion SR and to call
itself the Saudi Financial Market Company. The objective
is to partially privatise Tadawul. Initially, the public company
completely belongs to the Public Investment Funds
before some of the shares are released to the free market.
The aim here is to attract more investor participation in
developing a stock market and stock exchange.
At the latest since the successful partial privatisation
of the Saudi Telecom Company by means of a peoples
share in 2003, the public company as such is widely accepted
within the Saudi population. This in itself was a
boost to motivation. In October 2004, the second mobile
telephone operator Etihad Etisalat (Mobily) was launched
onto the stock market. This public company with a capitalisation
of 5 million SR is currently held to 35% by the
Emirate Etisalat, to 45% by five Saudi large investors, and
20% of the shares are held Saudis distributed on the stock
exchange. In 2005, permission was granted to partially
trade shares in NCCI, the National Cooperative Company
for Insurance. Emaar Economic City AG, which went
public in September 2006, is also strategically important
as a joint-venture of Emaar Properties PJSC from Dubai
and Saudi investors for the development of the King Abdullah
Economic City. Its launch onto the stock market
was highly successful; the willingness of the Saudi population
to subscribe for shares was greater than expected.
The lesson learnt here was that the public company is a
project financing tool. For this reason, a newly founded
railway development company called the Saudi Company
for Railways is due to go public. The purpose of this company,
which is currently owned by the Public Investment
Funds, is to realise the North-South railway project.
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