7 main rules for offering securities and continuing obligations for direct listing

The draft included amendments to Article 15 under the title "Applying the provisions of registration and public offering"It stipulates that the purpose of the section is to regulate the registration of securities and their public offering in the Kingdom, and to regulate the registration of shares in the main market, while emphasizing that it is not permissible to offer securities publicly or register shares in the main market except in accordance with the provisions of this section.

The article permits the issuer to apply to register his shares for the purpose of direct listing in the main market if he is affiliated with another issuer whose shares are listed in the main market, provided that the registration of those shares is subject to the requirements stipulated in the same section, which reflects a clear direction. Towards opening the door to subsidiary companies, while subjecting them to the same regulatory controls.

The article clarifies that specific provisions apply to the foreign issuer who applies to list its shares on the main market in accordance with the listing rules, in addition to subjecting the registration and offering of Saudi deposit certificates to the provisions regulating the registration and offering of shares, and considering the foreign company whose shares correspond to the Saudi deposit certificates as the issuer of those certificates for the purposes of applying the system and its executive regulations.

Compliance with the listing rules. And regulatory approvals

Article Sixteen stressed that it is not permissible to offer securities in a public offering or register shares for the purpose of direct listing on the main market before making the necessary arrangements to list those securities in the market in accordance with the listing rules, in a way that enhances the integration between the offering rules and listing rules and prevents any regulatory gap.

In the same context, Article Seventeen stressed that the offeror or issuer may not proceed with the offering of securities or register the shares for the purpose of direct listing except after obtaining all the required approvals. In accordance with the bylaws of the issuer and the companies’ system and its executive regulations.

If the offering was through a special purpose facility, the rules required obtaining the approval of the board of directors of that facility and the board of directors of the sponsor, which reflects a strict governance of entities of a special nature.

The rules obligated the issuer who applied to register and offer his securities or to register his shares for the purpose of direct listing to pay a financial fee to the authority according to what it determines, within the framework of regulating procedures and ensuring seriousness in progress. With applications.

A pivotal role for financial and legal advisors

The project devoted detailed provisions regarding the requirements that must be met by the financial advisor and his obligations, as Article Twenty-One stipulates that the financial advisor shall be the main contact point with the Authority regarding the application, and that he must ensure himself – after exercising the necessary professional diligence and inquiring from the issuer and his advisors – that the issuer fulfills all the conditions required to register and offer his securities or to register his shares for the purpose of direct listing, in addition to All other relevant requirements have been met.

Article Twenty-Two obliges the issuer’s legal advisor to submit a letter to the Authority in the format stated in Appendix (23) of the rules when submitting an application for registration and offering of securities or an application for registration of shares for the purpose of direct listing, in a way that ensures an explicit legal acknowledgment of the soundness of the procedures and fulfillment of regulatory requirements.

Precise conditions for registration and direct listing

Article Twenty-Three includes a set of conditions that must be met for the offering of shares. A public offering or registration for the purpose of direct listing on the main market. It stipulated – in the case of the application to register and offer securities – that the application be accompanied by a prospectus, except in cases that do not require it, while in the case of direct listing it stipulated that the application be accompanied by a registration document.

It required that the issuer have carried out a major activity by itself or through one or more of its subsidiaries during at least the previous three financial years.

As for the direct listing of a company that is considered a business sector affiliated with another issuer whose shares are listed in The main market is sufficient for it to have carried out a major activity during the previous three years as a subsidiary sector.

The rules required the preparation of audited financial statements for the previous three financial years in accordance with the accounting standards approved by the Saudi Organization for Auditors and Accountants, with a special exception being granted in the case of direct listing of a subsidiary sector, so that the financial statements are prepared for three years, with at least the last year being audited.

Updatedness of the financial statements

The rules regulated the issue of up-to-date financial statements, requiring – if The period included in the most recently audited financial statements ended more than six months before the expected date of approval – submit examined preliminary financial statements or audited annual statements as applicable, provided that the period included in the most recently examined preliminary statements does not exceed six months from the date of approval.

The article addressed the issue of fundamental structural changes, stipulating that if the issuer makes fundamental structural changes, he may not submit an application to register and offer his securities or register his shares for direct listing until at least one full fiscal year has passed from The completion of the implementation of the change, which reflects a concern for the stability of the entity before offering it to investors.

The rules obligated the issuer to provide working capital sufficient for a period of at least twelve months immediately following the date of publication of the prospectus or registration document, in a way that reassures investors of the company’s ability to continue and fulfill its obligations.

The article gave the Authority discretionary power to accept an application that does not meet some requirements if it deems that the offering or registration is in the interest of investors, and that the issuer has provided all the necessary information to enable them to make a decision. An investment based on awareness and knowledge, which is a text that gives the Authority regulatory flexibility restricted to the interest of investors.

A detailed package of documents and controls for their preservation

Article Twenty-Six regulated the supporting documents that must be attached to the application for registration or direct listing, as it obligated the issuer to attach electronic copies of specific documents, while retaining the originals and submitting them upon request.

These documents included letters of authorization to the issuer’s representatives, and a letter of approval request. Signed by an authorized representative that includes the information required in Appendix (8), the draft prospectus or registration document in Arabic, the articles of association and articles of incorporation and all their amendments, in addition to the audited annual financial statements for the previous three years, taking into account the exception for the subsidiary sector in direct listing.

It required the submission of letters of approval from all of the issuer’s advisors to use their names, logos and statements in the prospectus or registration document, in a way that enhances transparency and professional responsibility.

The rules required the submission of letters of approval from all of the issuer’s advisors to use their names, logos and statements in the prospectus or registration document, in a way that enhances transparency and professional responsibility. The issuer – after approving the application and before listing – submits the final copy of the prospectus or registration document in Arabic, signed on each page by the issuer’s authorized representatives.

It stressed the necessity of keeping original or certified copies of all documents for a period of not less than ten years from the date of completion of the offering or direct listing, with this period extended in the event of a lawsuit, claim, or ongoing investigation procedures related to those documents, until the end of the dispute or investigation.

On the other hand, the rules excluded some Paragraphs of document requirements when submitting an application to register shares for the purpose of direct listing, reflecting consideration of the nature of this type of listing compared to a traditional public offering.

Pending Applications and the Authority to Cancel

Article Thirty-Four dealt with the issue of pending applications, as it granted the Authority – based on its sole discretion – the authority to cancel an application for registration and offering of securities or a request to register shares for the purpose of direct listing whenever it deemed that the application had remained pending for an unjustified period. Cancellation entails submitting a new application in accordance with the stipulated procedures if the issuer wishes to move forward.

The Authority stated the details of the registration document required to register and offer securities or to register shares for the purpose of direct listing on the main market, as part of its efforts to develop the market, enhance transparency and protect investors.

The document includes a set of basic sections, starting with the cover page, which includes the name of the issuer, the capital, the number of shares, their categories and rights, and major shareholders, with an acknowledgment from the Board of Directors to bear Responsibility for the accuracy of the information, through an important notice and company guide that specifies the contact information for the issuer, the financial and legal advisors, and the chartered accountant, and a summary of basic and financial information about the issuer’s activity, its financial performance, and its operational status, with the most prominent financial indicators.

Providing all legal information

The document also includes a background on the issuer and the nature of its business, the number and distribution of employees, the ownership and management structure, a summary of assets and properties, an analysis of debts, and working capital, in addition to the policy. Distribution of profits and estimation of direct listing costs.

It covers legal information and rights related to shares, substantive contracts, and any intangible assets, clarifying the conditions for direct listing, the mechanism for determining the indicative price, and documents available for inspection.

The document required attaching the chartered accountant’s report to the audited financial statements for the previous three years or the last year, in addition to the most recent preliminary statements, to ensure an accurate picture of the financial position of the issuer before listing. This detailed guidance comes within the Authority’s efforts to enhance governance and transparency, raise the efficiency of the Saudi financial market, and enable subsidiaries to enter directly into the main market.