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New Rules for Crowdfunding Announced by The Saudi Central Bank

20 January 2021
On January 11, 2021 The Saudi Central Bank issued new rules for practicing debt-based crowdfunding activities in accordance with the powers granted to them, under the provisions of the Finance Companies Control Law. Read our review of the new legislation from our expert team.


The Saudi Central Bank (SAMA) issued on January 11, 2021 new rules for practicing debt-based crowdfunding activities (the "Rules") in the Kingdom of Saudi Arabia ("Kingdom"), in accordance with the powers granted to SAMA, under the provisions of the Finance Companies Control Law. This new regulatory framework reflects the regulator's role in working towards the Saudi government's overall 2030 vision by supporting economic growth, innovation in financing activities and promotion of financial stability. 

License Application and Requirements

License Application Process
The application for a debt-based crowdfunding license (the "License") may be submitted online and article 5 of the Rules provides a list of the documents (related to the applicant) which need to be provided. These documents include, amongst others:

  • copies of the applicant's constitutional documents (or drafts of such documents for a company under establishment); 
  • a description of the organisational structure of the applicant;
  • an economic feasibility study and business plan;
  • draft agreements and contracts proposed with third parties; and 
  • for a company under establishment applying for a License, an irrevocable bank guarantee of an amount equivalent to the minimum capital set for the activity to be licensed, issued for the benefit of SAMA by a local bank and automatically renewed until full payment of the capital. 

SAMA will inform the applicant of its initial approval or its justified rejection within 60 working days from the date of SAMA's application completeness notification. The application will be referred to the Ministry of Commerce to finalise the company incorporation and registration, or, in the case of an existing company applying for the License, the completion of regularisation procedures. 

Within six months from the date of SAMA’s approval, for a company under establishment, the founding members will need to complete the requirements necessary to practice debt-based crowdfunding. Upon the fulfilment of all requirements and completion of all procedures, SAMA will issue a decision granting the applicant a License to engage in debt-based crowdfunding.

The License issued by SAMA is valid for five years (article 13 of the Rules) and the crowdfunding company may renew its license prior to its expiry. The fees to obtain the License are SAR 5,000 for the issuance and SAR 2,000 for any subsequent renewal or amendment (article 16 of the Rules). 

According to article 14 of the Rules, the License may be revoked by SAMA if the crowdfunding company has not carried out the licensed activities within six months from the date of License issuance or if it has suspended its operations for more than three consecutive months or for six non-consecutive months, without obtaining SAMA’s prior written non-objection.

Minimum Capital Requirements
Joint-stock companies willing to engage in debt-based crowdfunding activity are required to have minimum paid-up capital of SAR 5 million ($1.3 million). According to the regulations, SAMA is authorised to amend this minimum capital in accordance with market conditions, and therefore attract new types of investors including SMEs to enter the crowdfunding market in Kingdom. 

Other Requirements

Internal Policies and Procedures – In addition to the implementation of organizational policies addressing internal organization, governance, credit, risk management, compliance, conflict of interest, confidentiality and security of information, outsourcing, and human resources approved by its board, the company licensed to carry out crowdfunding activities is required to have information technology systems to ensure the availability, integration, safety and confidentiality of information and the security of its IT systems. 

Information Security and Financial Crimes
– Pursuant to article 18 of the Rules, crowdfunding companies are required to comply with Saudi information security, AML and financial crimes and fraud related laws and regulations, as well as SAMA's guidelines on these subject matters.  

Risk Management
– A risk management policy covering the analysis of the risks listed in article 20 of the Rules (including, among others, credit risk, market risk, fraud risk, information security risk, etc.) must be established by the crowdfunding company and be approved and annually updated by its board of directors, and appropriate procedures to identify, assess, manage, monitor, communicate, and report risks must be put in place. 

Auditors – The crowdfunding company is required to appoint one or more certified external auditors, which appointment is subject to a non-objection letter from SAMA and depending on the size and nature of the crowdfunding company's business SAMA may appoint another auditor at the expense its expense. 

Saudization – At least 50% of all employees of the Debt-Based Crowdfunding Company must be Saudi nationals when the Company starts its operations.

Additional Requirements

Code of Conduct and Work Ethics – The crowdfunding company is required to adhere to the Code of Conduct and Work Ethics in Financial Institutions issued by SAMA.

Consumer Protection – The crowdfunding company will set up functions for handling complaints and set clear procedures for receiving, documenting, reviewing, and responding to consumer complaints. 

If you require further information about setting up a crowd funding entity, please do not hesitate to contact our team.

Authors: Umera Ali, Martin Pugsley, Aisha Gondal and Bouchra Haji.

Further Reading