Guidelines Offer Pathways for Foreign Companies to List Securities in Saudi Arabia

Key Highlights:

• The Saudi Capital Market Authority (CMA) allows cross-listing and dual-listing of securities on the Saudi Exchange’s Main Market. 
• The newly released guidelines now clarify the criteria and simplify the process for these listings.
• The regulations and new guidelines do not permit primary listings of non-Saudi companies on the Main Market unless the company is already listed on a recognized exchange (cross-listing), undergoing a concurrent offering and listing (dual-listing), or restructuring to become a Saudi-incorporated issuer.
• A preliminary assessment process is introduced to help non-Saudi companies obtain initial approval before preparing their listing applications.
• Non-Saudi companies must demonstrate their contribution to the Saudi Exchange and the Saudi economy to qualify for listing on the Main Market.

The Saudi Exchange has published a guideline manual for foreign companies seeking to offer and/or list their securities on its Main Market. While existing regulations in Saudi Arabia allow such offerings, the absence of clear criteria and processes has led to uncertainty among potential non-Saudi issuers, possibly deterring them from pursuing listings or requiring them to restructure to incorporate in Saudi Arabia before listing. To date, there have been no cross-listings on the Saudi Exchange and only one dual-listing, Americana Restaurants, concurrently listed in Saudi Arabia and the United Arab Emirates in December 2022.

The Saudi Exchange is the largest in the Middle East and North Africa (MENA) region and ranks among the largest globally, with a total market capitalization of SAR 11.2 trillion (approximately US$3 trillion) at the end of 2023 and an average daily traded value of SAR 5.3 billion (approximately US$1.4 billion) during 2023. By providing clear criteria and a streamlined process for non-Saudi company listings, the Saudi Exchange aims to attract more foreign capital, enhance market liquidity, and support Saudi Arabia’s ambitions to become a leading financial hub in the MENA region.

The guidelines intend to:

• Provide clear criteria and requirements for non-Saudi companies to offer and list their shares on the Main Market, simplifying the process of obtaining necessary regulatory approvals.
• Establish an initial process for non-Saudi companies to evaluate their preparedness for listing on the Main Market before formally applying to the Saudi Capital Market Authority and Saudi Exchange.

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Cross-Listing, Dual-Listing, or Reorganization

Non-Saudi companies have three pathways to list their shares in Saudi Arabia. The guidelines provide further clarity on the first two methods:

Cross-Listing: A non-Saudi company already listed on a stock exchange in its home country can cross-list its shares on the Main Market.

Dual-Listing: A non-Saudi company can simultaneously offer and list its shares on both its home country’s stock exchange and the Main Market, as demonstrated by Americana Restaurants.

Reorganization: Shareholders of a non-Saudi company can establish a joint stock company in Saudi Arabia, reorganize the group’s operations under this Saudi holding company, and then list it through an initial public offering.

There is no provision for cross-listing or dual-listing a non-Saudi company on the Saudi Exchange’s Parallel Market (Nomu).

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Eligibility Requirements

The guidelines outline specific eligibility criteria for a non-Saudi company to cross-list or dual-list its shares on the Main Market.

Regulatory Supervision

A non-Saudi company must be regulated by an authority that is a signatory to the Multilateral Memorandum of Understanding (MMoU) of the International Organization of Securities Commissions (IOSCO), which includes the Saudi Capital Market Authority. Currently, 130 signatories to the IOSCO MMoU include major and regional regulators such as the Financial Services Regulatory Authority in Abu Dhabi, the Central Bank of Bahrain, the Dubai Financial Services Authority, the Capital Markets Authority of Kuwait, the Financial Services Authority of Oman, and the Qatar Financial Markets Authority.

Company Type

The non-Saudi company must be a joint stock company or an equivalent entity in its home country. An equivalent might include any company type eligible for listing on its local stock exchange, subject to the discretion of the Saudi Capital Market Authority and the Saudi Exchange. Additionally, the non-Saudi company must meet all regulatory requirements in its home country before offering and/or listing in Saudi Arabia, if applicable.

Minimum Market Capitalization

A non-Saudi company must have a minimum market capitalization of at least SAR 4 billion (approximately US$1.1 billion). For companies already listed on another stock exchange and seeking to cross-list, this minimum market capitalization must be maintained for at least six months prior to submitting the listing application.

Added Value to Saudi Arabia

To cross-list or dual-list on the Main Market, a non-Saudi company must demonstrate the added value it will bring to the Saudi Exchange and the Saudi economy. While the guidelines do not specify clear criteria for this, companies must show their ability to contribute to Saudi Arabia’s strategic objectives, including enhancing the capital markets and the broader economy. The Saudi Exchange has introduced a preliminary assessment process for companies to present their case to the regulators and obtain initial approval before preparing a listing application.

Directors Residency

A non-Saudi company must appoint at least two board members who reside continuously in Saudi Arabia, regardless of their nationality. Although the guidelines do not detail how residency is assessed, it is understood that regulators will consider the residency status and the actual time these directors spend in Saudi Arabia.

Preliminary Assessment Process

The guidelines introduce a preliminary assessment process for non-Saudi companies interested in cross-listing or dual-listing in Saudi Arabia. Through this process, companies can undergo an initial assessment, after which the Saudi Exchange will provide an initial approval or rejection regarding their eligibility. This step aims to prevent non-Saudi companies from incurring significant costs in preparing a listing application only to be rejected later. Upon receiving initial approval from the Saudi Exchange, companies can then proceed with preparing their cross-listing or dual-listing application.

Additional Requirements

Non-Saudi companies must meet specific additional requirements for cross-listing or dual-listing, including:

Financial Statements: The company’s financial statements must be prepared and audited according to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

Financial statements must be disclosed in Saudi Riyal, alongside the currency of the company’s home country.

Financial statements must be disclosed in Arabic.

Auditor: The company’s auditor must be one of the following firms: Deloitte, Ernst & Young, KPMG, or PricewaterhouseCoopers. Additionally, the company and its auditor must commit to providing the Saudi Capital Market Authority with any requested information and access to all audit records.

Directors and Officers (D&O) Liability Insurance: The company must secure adequate D&O insurance coverage from a Saudi Arabian insurance company, appropriate for the nature and scale of the company’s operations, meeting certain minimum standards.

Lock-Up: Major shareholders owning 5% or more of the company’s capital will be subject to a lock-up period of at least six months from the start of trading on the Main Market.

Compliance With Certain Regulations: Non-Saudi companies looking to cross-list or dual-list on the Main Market must adhere to regulations issued by the Saudi Capital Market Authority, including:

• Regulations on capital increases, reverse takeovers, and ongoing obligations;
• Regulations on book-building, allocation, and price stabilization in initial public offerings;
• Regulations on corporate governance, public mergers and acquisitions, listed joint stock companies, and announcements, as well as disclosure requirements for accumulated losses.

If these regulations conflict with the laws of the non-Saudi company’s home country, the company may request a waiver from the Saudi Capital Market Authority, which will be considered at its discretion.