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Saudi Arabia's economy has witnessed growth in many sectors recently, which requires the contribution of regulators to review and develop all regulations in accordance with the 2030 vision. There is no doubt, that one of the most significant economic systems that reflects the interest of the Kingdom in the development of the economy is the amendments of laws governing business transactions, trading, and relative procedures associated with them, including the Corporate Law, where the new version of it had been issued by the Royal Decree No. (M/132) dated 1/12/1443H pursuant and ratified by Council of Ministers Resolution No. (678) dated  29/ 11/1443H.

The new corporate law and its implementing regulations included substantial amendments that contributed to the growth of the Kingdom’s economy in the corporate sector, starting from the establishment of the company until its termination and liquidation, by creating a new form for companies, developing provisions for transformation and merging between them, enacting new mechanisms for distributing profits, issuing negotiable debt instruments, and other means. Amendments that aim to grow the Saudi corporate sector and attract foreign companies. In view of the large number of Saudi family companies and their strength in the Kingdom of Saudi Arabia, the corporate Law and its Implementing Regulations took care of organizing and controlling family companies in order to achieve the highest stages of their sustainability, growth and governance, with the possibility of concluding a family charter in the company’s articles of incorporation or in its articles of association regulating family ownership in the company. So, what is this family charter? What are its main advantages in the new corporate law?

The definition of the Family Charter:

It is a family document with a commercial purpose that organizes family ownership in the corporation, and it seems like a log of the documents of the corporation, which demonstrates the value it represents.

It is also possible to describe it as a written agreement that governs how family members organize their ownership of the business in accordance with the controls agreed upon by the owners. This agreement is enforceable and binding in the event of future disagreements between the current partners or their heirs.

Purpose of revising the Family Charter:

As stated in article eleven of the new corporate law, paragraph one “the partners' agreement and the family charter: "The founders, partners or shareholders may whether during the period of incorporation of the company or thereafter, do the following: ... B- Concluding a  family charter that includes family ownership in the company, its governance and management, labor policy, engagement policy for family members, profits distribution, management of shares or stocks, procedures of disputes settlement, etc.

The most significant function of the family charter, according to the provisions of the article and what was stated in the definition of the family charter that we previously mentioned, is that it sets a preconception of all points that may be the subject of disagreement between partners or their heirs. The charter also contains important points related to the statement of the organization of family members' ownership of the company. The charter is concerned with establishing controls and resolutions to any disagreements that may occur between the partners after the transfer of the company's shares from the founding generation to their heirs. This prevents unintended jurisprudence or desires that may be divergent between the partners by setting clear, binding control

In order to write the family charter, it is essential to refer to the most important rules that should be considered in the family charter as described in the new corporate law and to Identify whether the law defined them or left them unspecified?

The Law did not specify a specific number or type of regulations that may be mentioned in the Family Charter, but left it up to the partners to organize the company at their convenience, meanwhile the Law specified some regulations, for example, but not limited to, according to what was mentioned in Article eleven mentioned above, so we find the regulations contained in the Law are:

1.    Establishing family control in the company.

2.    Corporate control and governance.

3.    Company’s labor policy and family members' hiring rules.

4.    Profits distribution and sale of shares or stocks.

5.    A mechanism for resolving conflicts.

And other regulations that the partners may implement and include in the family charter because the law did not limit the regulations that may be stated in the family charter.

Position of provisions of the family charter and its obligation thereof:

Paragraph2, Article 11 of the law allows the partners to draft the clause of the family charter independently, to include the clauses of the charter in the  articles of incorporation, or to include it within the company's Articles of Association, as follows: "The family agreement or charter shall be legally binding and may be included in the company's Memorandum of Association or Articles of Association with no contradiction with any of their provisions.

About the extent to which the family charter is binding on the partners, the organizer ended the dispute with a categorical text stating that the charter is binding and that it is binding on the partners, the text of the second paragraph of Article eleven, which states: "The family agreement or pact shall be binding..." However, the organizer imposed two requirements on the activity under the Family Charter: 1/ The Family Charter rules must not conflict with the Corporate Law. 2/ Not to conflict  the company's articles of incorporation or Articles of association. This is stated in the second paragraph of Article eleven of the Law: "... Provided that it does not constitute a violation of the company's articles of incorporation or Articles of association”

Amendment of the Family Charter:

The organizer allows amending the family charter if it is part of the company's articles of incorporation or part of its articles of association subject to the amendment of the quorum of the articles of incorporation or the articles of association of each company individually. So, the quorum amendment in the family charter of the limited liability company, for example, is due to the quorum of its amendment in the system, and this applies to the family charter and so on in a type of company, and this is what is stipulated in Article four of the Implementing Regulations of the Corporate Law in Chapter One:

"In the implementation of the provisions of paragraph (2) of Article (Eleven) of the Law, the quorum for amending the agreement of partners or shareholders or the family charter if it is part of the articles of incorporation or its Articles of Association shall be in accordance with the conditions prescribed for amending the Company's articles of incorporation or Articles of Association according to the form of the company."

Written by:

Muhannad Abdullah Al-Muzini 

Senior Lawyer & Legal advisor 

Dr. Mohammed Al Muhanna & Partners Lawyers and Consultants team will receive all of your inquiries related to the above in particular and provide all practical and clear legal advice according to professional standards. 

By virtue of Royal Decree No. (M/132) dated 01/12/1443 A.H, Kingdom of Saudi Arabia has recently issued the new law of companies and Regulations thereunder, which came into force on 26/6/1444 AH. The new Law is intended to promote KSA’s economic growth in interaction with other countries worldwide and maintain adaptation with global economic changes, and to add new regulations keeping pace with regional and international experiences and practices. The Law defined the types of companies authorized to exercise business in Saudi Arabia and the changes may arise after the establishment, such as the change of the company’s legal form, conversion, merging, or division.

This article highlights the new variables enabled by the new law of companies in relation to the division of a company into two or more companies, as well as the requirements and controls thereunder.

First: Procedures of division.  

The new Law vested partners and shareholders with the authority to divide their company into two or more companies, and the company resulting from the division to may take any legal form stipulated in Article (4) of the Companies Law, in accordance with the provision of Article (231) which states that “a company may be divided into two or more companies even if in the phase of liquidation, the company or companies resulting from the division may take any legal forms specified in Article (4) of the Law. According to the provisions of this article, the company results from the division may be incorporated in a form differs from the original company, either in the form of a general partnership company, limited partnership company, joint stock company, Simplified Stock Company, or limited liability company, and shall subject to the said Law. If the partners and shareholders decided, for example, that the company resulting from the division takes the form of a partnership company, then it shall be subject to the same incorporation, management, and dissolution regulations governing the General Partnership Company. In addition, the aforementioned Article (231) also authorizes to divide of the company, even if it was in liquidation, in order to preserve the existence and continuity of the company and to protect the rights of its partners, shareholders, and other stakeholders.

Second: company’s division Controls  

The new Companies Law specified controls  to divide companies that shall be met in accordance with the provision of Article (89) of the Implementing Regulations of the said Law: “The company may be divided  into two or more companies, provided that the following controls shall be taken into consideration:

A: That the decision to divide the company is made by the partners, general assembly, or shareholders of the company, subject to the division, in accordance with the equity stakes set out in the memorandum or articles of Association.

B: Partners or shareholders of the company subject to the division, shall be granted shares or stocks in the company resulting from it in proportion to their ownerships in of the capital of the original company unless they agree to redistribute the stakes or shares among themselves or with others.” We can conclude from this article that vests partners and shareholders with additional powers by having an agreement to distribute shares and stocks among themselves or with new partners and shareholders based on the division. 

Third: Issuance of the division Decision  

The decision to divide the company into two or more companies is issued according to the conditions prescribed for amending the company’s memorandum or articles of association in determining the equity of shares for the issuance of the amendment decision on a regular basis, and the division decision shall include a statement of the number of partners and shareholders, and their individual shares in the company or companies resulting from the division, the company, subject of the division, the rights and obligations of these companies, and the method of distributing the assets, rights, and obligations between them.

In accordance with the provisions of Article (90) of the Implementing Regulations of the Companies Law, the director of the company, subject matter of the division, or its board of directors shall prepare a “division decision proposal” containing a statement of the reasons for the division of the company, specifying the assets and liabilities, subject matter of the division, and how to divide them, and a report prepared by an accredited appraiser indicating the value fairness of the assets and liabilities subject matter of the division, and this requirement does not apply if the shares or stocks in the company resulting from the  division distribute to the partners or shareholders in proportion to the ownership of each of them in the capital of the company, subject matter of the division, and an indication of the date that was taken as the basis for estimation, and the number of shares or stokes that obtained partners or shareholders in the company or companies resulting from the division, and mentioning any agreements, if any, with the creditors of the company subject matter to the division to transfer their claim rights to the company resulting from the division to which the debts and obligations devolved.

In accordance with Article (91) of the Regulations of companies law, the Director of the company subject of the division, or company’s board of directors shall provide the partners or shareholders with a copy of the proposal for the division using modern technology or any other means stated in the memorandum of association or its articles of association at least twenty-one days prior to the date of the meeting of the partners, the General Assembly or the shareholders on the division decision.

Therefore, the decision to divide the company shall become effective from the date of registering the amendment to the article of association of the company subject of the division or its articles of association with the commercial registration and the registration of the company resulting from division.

Fourth: the divided company’s Debts and obligations

The new Companies Law preserves the rights of the creditors of the company subject of the division, as all debts and obligations transferred to, after the issuance of the division decision, the newly formed company or companies resulting from the division.

Furthermore, the Law enabled the creditors to jointly claim their rights directly from the company subject of the division, or from the company and the companies resulting from the division, unless otherwise agreed upon with the creditors in connection with transfer their rights and obligations to the company or companies resulting from the division.

Written by:

Muhammed Abdul Rahim Al-Zahrani

Senior legal advisor

Dr. Mohammed Al Muhanna & Partners Lawyers and Consultants team will receive all of your inquiries related to the above in particular and provide all practical and clear legal advice according to professional standards. 

Financial markets play a crucial role in the economy of modern countries and used to be an indicator to the economic strength of these countries as it considered as the broad investment field and privileged with attractive factor to foreign investment. Therefore, all countries pay special attention to these markets and form supervisory authorities and centers to manage and control.

KSA legislator has assigned the Committee for Resolution of Securities Disputes affiliating to capital market authority to made available evidence validating the considerations of securities authenticity and its acceptance for disputes may arise or as evidence to claimants before.     

First- Evidence in Securities Disputes:

Electronic evidence is a modern term for electronic document generated by electronic devices such as telex, fax, e-mail, and the Internet.

It also refers to an unconventional writing of information extracted from storage media and reproduce it with ability to send broadly in few seconds without any limitation to the boarders.

Recently, such of documents considered as basic mean of communications between people, but the proof of evidence seems untraditional especially in terms of availability written confirmation, concept of copied document authenticity, storage, and backup of data.  

The Article 30/k of the Capital Market Law states that: “) Evidence in Securities cases shall be admissible in all forms including electronic or computer data, telephone recordings, facsimile messages and electronic mail”

Here are the methods as follows:

A- Electronic data:

In worldwide, E-mail is a most common corresponding way and broadly used service on daily basis, through which millions of messages are corresponded daily, which is expected to be classified soon as one of the practical means for correspondences and most common method in the world.

 E-mail has replaced regular mail in many companies and countries, and even in the daily dealings of individuals; This is because e-mail messages are faster and more economical than paper messages, and they are a more confidential way compared to phone calls, and through which all kinds of media can be such as documents, images, and audio.

Article No. (9) of the Electronic Transactions law issued by Royal Decree No. M/18 dated 8/3/1428 AH stipulates that:

1.   Electronic transactions or signatures shall be admissible as evidence if the electronic records satisfy the requirements set forth in Article 8 of this Law.

2.   Electronic transactions or signatures may be admissible as presumptive evidence even if their electronic records do not satisfy the requirements set forth in Article 8 of this Law.

3.   Electronic transactions, signatures, and records shall be deemed reliable evidence in transactions, and shall be deemed intact unless proven otherwise.

4.   When assessing the reliability of an electronic transaction the following shall be considered:

-               The method of creating, storing, or communicating an electronic record

-               and the possibility of amending the same.

-               The method of maintaining the integrity of information.

-               The method of identifying the originator.

  Accordingly, all actions filed before the Committee for Resolution of Securities Disputes may be evidenced by any mean, including electronic writing, that fulfill the following conditions:

1.   The content of the written editor should be meaningful.

2.   The existence of electronic writing for a reasonable period.

3.   Inability of the electronic editor to scratch, erase, and add text to the written electronic document.

Therefore, e-mail messages are equal in their authenticity in proof of traditional documents, if their owner acknowledges them, but if he denies them and proves that he did not send them and did not do so or did not assign anyone to send them, then these messages lose their value in proof.

B- Phone records

The burden of proof of registration licensed to the authorized person, and he has to keep the recordings for three years, and in the event of a dispute, must keep the recordings until the dispute ends, and the excuse of the authorized person of not maintain recordings is not accepted, and shall be considered an abuse.

 C- Fax correspondence

 The correspondence between the customer and the authorized person.

Second – Traditional proof of Evidence in Securities Disputes:

  The Article 30/k of the Capital Market Law in the Kingdom has previously stated  that: “It is permissible to prove in securities proceedings by all means of evidence in accordance with resolution number (1-4-2011) and dated 19/2/1432H by the Board of the CMA to adopt the Resolution of Securities Disputes Proceedings Regulations,  Chapter Six, entitled (Evidence), Article (18) of the Regulations states: “It is permissible to prove before the Committee by all means of evidence, including electronic or computer-generated data, telephone records, fax correspondence, and email.

In this context, we list the traditional evidence as follows:

1.    Inspection and Hearing

1.  Article 31 of the Securities Dispute Resolution Procedures Regulations stipulates that: “If the committee believes, during litigation, that it is necessary to conduct inspection or supplementary investigation, it may conduct such an action by itself or assign a third party to conduct such an action. The committee may assign anyone it chooses to hear a testimony of any other party who the committee deems his testimony necessary.

2.    Utilization of Expertise

  The expert’s evidence is one of the means of evidence in securities disputes, as the regulations for the procedures for settling securities disputes are stated chapter (7) entitled (Utilization of Experience). Article 27 of the regulations stipulates that: The committee may, during litigation, decide to ask for one expert or more whenever it deems the assistance of expertise necessary. Within its decision, the committee shall define his/their tasks, and sets a time limit for the submission of his/their report and a date for the litigation session which shall be based on such a report. Furthermore, the committee shall indicate, if necessary, the amounts to be deposited in the account of expert expenses and fees, the party who shall be responsible for depositing such amounts, and the time limit for such deposition. The committee may appoint an expert to give his verbal opinion in the session. In such a case, his opinion shall be reflected in the minutes of the session.

3.    Acknowledgment

In the event of acknowledgment of an opponent in financial disputes of a financial incident that he has claimed before the Committee for the Resolution of Securities Disputes during the proceedings related to this incident.

4.    Taking Testimony of witnesses

        Article 31 of the regulation of procedures for settling securities disputes referred (inspection and hearing) mentioned above. The article states that: Where the Circuit deems, during the proceedings, the necessity of conducting an inspecting action or a supplementary investigation, it shall do it itself or assign someone to do it. The Circuit may delegate anyone of its choice to hear a testimony of whomever it deems necessary to.

5.    Taking oath

The scope  of the Appeals Committee in Securities Disputes has identified taking the oath, whether it is an affirmative oath or a complementary oath, and in this the Appeals Committee Resolution No. 757 of 1434 AH  stated as follows: “And since the burden of proof falls on the defendant, and since the defendant did not Evidence is provided that these transactions took place based on orders issued by the plaintiff, and since the plaintiff took the oath that he was not aware of all the transactions and deals that executed on his portfolio until the date of filing the lawsuit, and did not authorize any person to dispose of the transactions on his portfolio in dispute, and did not accept them, the plaintiff By doing so, he would have breached his statutory responsibilities and obligations towards his clients, which the committee considers to be the plaintiff’s entitlement to compensation for the damage he sustained.

6.    Writing

 Evidence in writing is one of the best means of proof, as it has been stipulated in all means of evidence civil legislations, and no jurists and judicial rulings are agree on the contrary, due to its practical importance in ensuring the rights of individuals in their various civil and commercial dealings, and as a guide that can be prepared in advance, i.e. when the legal act is issued and before the dispute arose; Which can accurately determine the center of the person. The written evidence is also characterized by stability, as it preserves over the passage of time the information it contains because it occurs at a time in which there is no dispute. Other methods of proof, such as testimony, are disturbed. It reduces its strength in proving the possibility of missing the opportunity to cite the witness because of his death, lying or inaccuracy if he was truthful because of the error or forgetfulness he is exposed to.

Written evidence means: every writing on which one of the parties can rely in proving his right or denying it, and takes it in proof as a complete evidence, but its absence has no effect on the existence of the contract, but the contract exists and produces its effects, and if it is recognized by the litigants, it is It does not need to be proven by written evidence, in addition to the fact that the acknowledgment replaces the written evidence in this proof, and it can also be proven by the decisive oath.

7.    Official Paper

The official paper or official paper in the Law of Sharia Proceedings is defined in Article (139) as: " official paper is a paper on which a public officer or a person assigned to public service records what he has done or what he has received from those concerned, in conformity with legal conditions and within his authority and jurisdiction. “, as well as in the newly issued Evidence Law by Royal Decree No. (M/43) dated 26/05/1443 AH in Article (25) as:  "In which a public officer or a person entrusted with a public service proves what has been done at his presence or received from the concerned persons in accordance with the statutory conditions and within the limits of his authority and competence that will be treated as royal orders, deeds issued by the courts and notary public, the letter of the judge to the judge, and papers issued by government departments and competent authorities.

The conditions for considering the official writings are derived from these articles:

1.            Issued or certified by a public official.

2.            Be within the limits of the public officer competence and authority.

3.            Commitment to the statutory conditions in the issuance of the official attribution.

4.            Complied with all data and formats approved by the system.

It is considered an argument in the proof unless it is forfeited, and this   authenticity proves to the official document in terms of its source, content and in the encountering others.

Conclusion

In view of the above means of evidence, It become clear to us that the means of evidence in  securities disputes have been highlighted, clarified and classified, which made it easier for specialists to use these evidences (means)  in order to  achieve justice and maintain the rights, due to the fact that securities represent the evidentiary consideration of ordinary documents in terms of the authenticity of the signature of the  person to whom they are attributed,  As long as it is issued by him and he does not explicitly deny the handwriting, signature or thumbprint attributed to him therein, this probative force shall be considered in all of  securities disputes.

In addition, the basis for the authenticity consideration in securities disputes is based on the validity of information and data contained therein, and in the even of the owner acknowledged, it will have the official probative force to prove.:

Furthermore, the means of proof have evolved from the form of a traditional means to an automated one, and the latter has even become the most widely used in world laws and regulations and under conditions and controls.

Recommendations,

We propose to consider the following recommendation, which may assist to develop: 

1.   The need to establish specialized centers to follow up on modern development to serve the strengthening and continuity of the power of means of evidence in the event of arising disputes.

2.   Conduct courses and seminars for judges and lawyers and provide them with latest updates in this regard, and to put forward everything new in this world regarding electronic transactions in the judicial system.

3.   Enforcing a strict warranty to preserve the proof of evidence, especially modern evidence, which strengthens its authenticity and reliance on it in the event of a dispute.

4.   Enforcement of security protection on which to rely in maintaining modern evidence down to its introduction more than other traditional evidence.

Written by:

Abdulrazzaq Mohammed Al-Muhaidhif 

Master of Commercial Law 

Dr. Mohammed Al Muhanna & Partners Lawyers and Consultants team will receive all of your inquiries related to the above in particular and provide all practical and clear legal advice according to professional standards.

Although it is not mandatory to register a trademark, upon registration, a set of civil or criminal protection packages shall govern its use and the rights or advantages will rise thereunder. The trademark registerer is privileged with full authority to use it in returns or for free.   

After fulfilling the registration prerequisites, the registration process shall follow the below basic steps:  

Stage 1: Once you apply for the trademark registration at the Saudi Authority for Intellectual Property, the application will be reviewed and verified according to different verification methods applicable all over the world. However, the Kingdom relies on the feedforward control system to conduct formal and substantive examination of trademarks before filing the request.

Stage 2: After examining the application, a competent authority may refuse the submission, grant protection fully, or limit the grant after fulfilling specified conditions.  If the conditions fail to be met, the authority will send an “irregularity notice.” The registerer shall then maintain the rights to oppose the refusal decision issued by the authority. In the event of a failed trademark registration due to not meeting the conditions, or if the window to appeal has passed, the request shall be automatically canceled. If the conditions are met, then the authority will provide an initial registration approval until finally published in the intellectual property newspaper (IPN) issued on April 11th, 2021.

The purpose of publishing a trademark is to provide an opportunity to object to or cancel the trademark registration. Although the Gulf Trademark law did not specify a list of persons entitled to object, it addresses conflicts of interest. Everyone who conflicts has the right to oppose the trademark and request the cancellation of its registration.

Post-examination approval issued by the competent authority is not the final step as any concerned person may, within sixty days from the date of publication in the Aamaly newspaper, object to the registration of a mark. Such objection shall be submitted to the competent authority in writing. The competent authority shall notify the registration applicant with a copy of the objection to his application within thirty days from receipt of such application. The registration applicant shall reply to the objection in writing within sixty days of notification of objection. If the registerer’s protestation to the objecting party is not submitted within the appropriate time window, the applicant is deemed to have forfeited their trademark submission request. The competent authority shall decide on the registration application within ninety days and notify the disputed parties with its decision supported by justifications or restrictions. 

The applicant may challenge the competent authority’s verdict before the court of jurisdiction within (30) days from the date of the notice. The objection to the decision shall not result in the suspension of the registration procedures unless otherwise decided by the court of jurisdiction.

After the publication of trademark registration in the INP, no appeal during the window, and without rejection of objection to the trademark, the final stage of the trademark registration procedure is finalized. It will be officially registered in the Trademark Registry.

If there is sufficient evidence, as apparent, proving that the new mark is imitated or improperly bearing a mark similar to a registered trademark in a manner that could cause confusion to the public, then the owner of the registered mark has the right to request the cancellation of the registration of the new trademark that has been registered improperly. The Gulf Trademark System permits the individual who registered the mark to request from the Commercial Court to cancel this registration within five years of the registration date. If it is established that the use of such mark is approved, either explicitly or implicitly, by the owner of the mark, the mark shall remain without judgment as per Article No. (16/6) of the Law of Commercial Courts issued by the council of ministers’ decision No. (511) dated 8/14/1441 A.H. and ratified by Royal Decree No. (M/93) on 15/08/1441 A.H.

The difference between objection and cancellation of trademarks remains in that the cancellation takes place after the trademark is registered and aims to request cancellation of the mark from the register. Meanwhile, the objection aims to prevent the final registration of the trademark; that is, it occurs before the final registration of the trademark and after its publication.

Razan Saleh Al-Dossary

Legal Counsel

Dr. Mohammed Al Muhanna & Partners Lawyers and Consultants team will receive your inquiries related to the above in particular and provide all practical and clear legal advice according to professional standards.

Should the client ever reimburse a sub-contractor directly?

Generally, the client is neither obliged nor entitled to remedy the failure of payments between the main contractor and sub-contractors unless the contract expressly permits, but as the exception always proves the rule, the subcontractor shall be entitled to the direct payment of client by the following:

1. Having a written approval of the client on the assignment of said sub-contractor and the contract executed between the sub and main contractor.
2. The sub-contract shall be a part of the scope of work listed in the bill of quantities and price categories of the main contract between main contractor and the client.
3. The main contractor fails to pay the subcontractor's payables against to the progress of the executed work.
4. No bank agreement made by the main contractor on the assignment of the project's reimbursements in full between to any local bank licensed to work the Kingdom of Saudi Arabia with securing all legal warranties affirming that and keep the main contractor liable for all legal effects resulting from the breach of this item.

Therefore, all corporates and companies should not enter any subcontracts without evaluation to the main contractor in terms of 

1. Financial capacity.

1. No bank agreement made by the main contractor on the assignment of the project's reimbursements in full between to any local bank licensed to work the Kingdom of Saudi Arabia.

1. The contract between the subcontractor and the main contractor must be approved by the owner of the project and ensuring that the sub-contract shall be a part of the scope of work listed in the bill of quantities and price categories of the main contract between main contractor and the client.

To put this rule in effect and to avoid misinterpretation of the verbal agreements that may change the core of the agreement or arise dispute between the parties, Dr. Mohammed Al-Muhanna & Partners – Lawyers and Consultants – as professional and legal consultancy service providers is delighted to reply to all of your inquiries on the same subject, assuring you all best legal, practical consultancies that meet your requirements according to best professional standards.

The majority of government contractors or other contractors in agreement with the private sector unfamiliar with the privileges of the insurance policy covers the project; this policy entitles the contractor to claim the insurance company against any losses arise during the implementation of the project.

Moreover, most of those contractors may not know the contents of the insurance policy or what should be included or excluded thereof?

Therefore, the contractor used to be a victim of an insurance company representative where the contractor allow a licensed insurance company by the Saudi Arabian Monetary Authority (SAMA) to solely and without any limitation draft the terms and conditions of the policy, especially for the government contracts as believed that the insurance is just only a matter of formalities not reflecting the actual coverage. 

Accordingly, the legal dispute arises when the contractor default or encounters any damages subject to the implementation of his project.

In the event that the contractor claims the insurance company to cover or reimburse incurred losses been, the Contractor is shocked with their reply that such losses are not covered.

To avoid such discrepancies, we recommend the following:

• Insurance to be made with a reputable insurance company licensed to exercise business by the Saudi Arabian Monetary Authority (SAMA) and not banned by supervisory agencies.

• The Contractor shall list all permanent or temporary works and materials to be supplied, machinery and construction Equipment and the terms of civil liability coverage against third parties (body injuries, material damage to property, general civil liability) and draft these provisions professionally to avoid in future discrepancies related to the insurance policy.

The Saudi courts witnessed an unprecedented number of filed cases in 1442 A.H. According to the Ministry of Justice’s website, the number of cases filed before circuits of first instance of non-commercial courts reached 766,794 cases. As for commercial courts, the number of cases received for first instance circuits reached 20,637 cases. This huge number includes many fictitious and malicious lawsuits which negatively impact the efficiency of the judicial system and slows the workflow. The legislature has issued a law of judicial costs which aims to reduce fictitious and malicious lawsuits, raise the judicial efficiency and expedite issuing orders, in addition to pushing the litigants to fulfill their obligations and achieve prompt judicial determination.

Law on Judicial Costs                                                                             

The law on judicial costs issued by a Royal Decree No. (M/16) on 30/1/1443 AH outlines the judicial costs as sums of money that the charged person is obligated to pay to the competent department in accordance with the provisions of the law and regulations thereunder. The said costs exclude the costs required during the case hearings to be decided upon.

Scope of Enforcement

According to Article 2, the provisions of the law shall apply to all cases and requests filed to the courts, except For the following:

1. General criminal lawsuits and disciplinary cases and requests related thereto.
2. Cases and requests that are within the jurisdiction of the Personal Status Courts, apart from the cassation request, petition, and the request for re-examination.
3. Cases and requests that fall within the jurisdiction of the Board of Grievances.
4. Cases and requests related for distribution of estates, except for a request for cassation, petition, and a request for re-examination.
5. Cases and requests arising from the application of the provisions of the bankruptcy system.
6. Documentation requests and application thereunder.

 Who Pays the Costs       

The convicted party shall pay the judicial costs prescribed for the lawsuit and requests thereunder, or a part thereof. If the lawsuit is concluded by conciliation, the parties to the lawsuit shall bear the judicial costs equally, unless they agree otherwise. The judicial costs shall be reduced to a quarter in the event of conciliation made before the court in the first hearing and prior to issuing the court order (Articles 13,15).

     Exclusions from Payment of the Costs

1. Imprisoned and detained persons at the time of the judicial costs become due in non-criminal financial cases, in lawsuits filed by or against them.
2. Labourers who are covered, excluded from the labour law, and their successors who file a claim for their entitlements arising from employment contracts.
3. Ministries and government agencies (Article 17). Ministries and government agencies are normally exempted from paying fees, but in the event that the ruling was in their favour, the convicted person is obligated to pay the value of the judicial costs (Article 18).

  Cases of Cost Refund or Exemption  

1.  If the judgment is made in favour of the payer of the judicial costs.
2.  The judge or judges’ order of lack of jurisdiction, if the request for the adversary is accepted.
3.  Requesting correction of the judgment or its interpretation if it is decided to re-examine the    request.
4.  A request for quashing the contested judgment completely reversed, and if the judgment is partially reversed, it is exempted in proportion to that part, and a request for cassation decided to be returned to the court originally issued the judgment.
5. If the plaintiff waived off his case before the first hearing in accordance with the statutory procedures.
6. Cases that end in conciliation before the first hearing.
7. Cases related to personal rights that are filed by subordination to criminal cases; if they end in conciliation, in any case in which the case was involved (Article 17).

 When the Costs Become Due

The competent department shall determine the amount of the judicial costs of the lawsuit, or the request submitted to the court, and shall inform the plaintiff or the applicant when registering the lawsuit or request. Failure to pay the judicial costs shall not prevent the court from registering the case or the application and deciding on it. In the event that the case ends with a court order, with unpaid judicial costs, the final estimate issued by the competent department shall be considered an executive document. Except for the request for cassation, petition, or the request for re-examination that privileged with a grace period of (thirty) days from the date of the request’s registration at the competent court, to pay the judicial costs payable in return for the request. If the charged party or the applicant fails to pay the due costs within this period, the court shall rule for the forfeiture of his right to the claim, and the judgment shall be considered final. (Article 14, 11, 12)

Law Enforcement

The law shall be enforceable at one hundred and eighty days from the date of its publication in the Official Gazette as of the publication date on February 10th, 1443, in Umm Al-Qura newspaper.




 

Dr. Mohammed Al Muhanna & Partners Lawyers and Consultants team will receive all of your inquiries related to the above in particular and provide all practical and clear legal advice according to professional standards.

By March eleventh of this year, the World Health Organization (WHO) announced that the new Corona virus (COVID-19) is a pandemic. Globally most of countries initiated many procedural packages to encounter the effects of this virus on all fields; the economic situation was not immune of such impacts. Five days later of the same month, the American Congress approved a bill worth nearly $2-trillion stimulus package to combat the economic fallout of the coronavirus outbreak, including direct payments to most Americans and a half-trillion-dollar fund to shore up struggling companies. 

On the second of March, the first case of the virus was recorded, followed by many precautionary government measures to combat the spread out of the epidemic that directly affected the continuity of Economic facilities and activities, and only a few of them were away from this, due to the nature of the business, whether related to agricultural or health companies or wholesale and retail merchants from the catering sector, etc.  To confront the virus, The KSA government had allocated an amount of 170 billion riyals, of which 70 billion riyals in form of exemptions and deferments of dues for the affected facilities. In view of epidemiology experts, this crisis will continue for months and could reach out to the end of 2020.

As for the government stimulus packages will not be sufficient to cover all expected losses of economic facilities, so benefiting the protective settlement option under the Bankruptcy law issued by Royal Decree No. (M / 50) dated 05/28/1439 A.H. from economic facilities could be a valuable option as a readiness for the next with the low revenues and the accumulation of financial obligations on its burden, and its not necessarily that the facility should start its legal procedures, but rather being prepared if looks fit.

In brief, A protective debt’s settlement, according to the article one of the bankruptcy law: It is a measure aimed at facilitating the debtor reaching an agreement with its creditors to settle its debts, and the debtor maintains the rights of management of its activity. So that the subject of this action have three advantages:

• First: the ability to stop all execution order issued against the facility.
• Second: Terminating any contract that overburdens the enterprise, except government contracts and bank financing agreement.
• Third: financial restructuring d reducing the debt of the facility according to a plan binding to all creditors, with the non-approval of all creditors.

The application for  the protective settlement / the protective settlement for the small debtors through the commercial court, with the necessity to enclose with application all perquisites determined by   information and documents regulations, including:

• First: the financial position of the establishment through its financial statements, with an indication of the expected financial flows during the litigation period.
• Second: Classifying the creditors into “fair values” categories. In the event of disputed debts, the preparation of the categories should be through an expert accredited to the bankruptcy committee.
• Third: A proposal or plan that includes the time table to meet the establishment's debts.

One of the key reasons for debt settlement application rejection by the court is the incompleteness of the information of the file submitted to the court,  as  the classification of  a creditor  may affect the rights of other creditors, such classification subjects to the creditors voting  on the proposal or payment plan which is deemed approved  by the approval of two thirds of all creditor’s categories.

While, the facility enjoyed such privilege in  a previous year is necessarily is not allowed for similar application, but on the other hand, this facility is eligible to file a settlement procedure under any of  seven settlement categories  permitted  bankruptcy law that ensures the same previous advantages in atoner details, with the necessity of studying the risks of each procedure that may  arise such as the option to dismiss the director of the facility and place it under the receivership of a bankruptcy commission.

Accordingly, the enterprise should assigns a competent person the field of bankruptcy, as failure in one of the aspects of preparing or executing the settlement file may incur the enterprise a financial burdens that may the award of compensation to those affected by the facility's creditors.

Dr. Mohammed Al-Muhanna & Partners, Lawyers and Consultants , with its competent staff and consultants Specialized in this field  bankruptcy are pleased to receive all your inquiries related to the above mentioned services in particular, and ready to provide all practical and transparent legal advice and consultations in accordance with professional standards