The Capital Market Authority has unveiled regulations governing employee stock programs in joint-stock companies or those planning to go public. This comes in accordance with the regulations and rules governing the offering of securities and ongoing obligations in the capital market. The Authority confirmed that the total number of shares to be issued under an employee stock program at a company shall not exceed, at any time, 15% of the issuer’s paid-in capital, and that subscription to these shares is limited to members of the board of directors and employees of the issuer and its subsidiaries.
Regarding the conditions for a public offering of shares, the Authority clarified that for shares to be offered publicly, the issuer must be a joint-stock company, and the application for registration and offering of the securities must be accompanied by a prospectus, except in cases where a prospectus is not required under these rules. The Authority further stipulated that, when submitting an application for the registration and offering of securities, the issuer must have engaged in a principal business activity either directly or through one or more of its subsidiaries during at least the three fiscal years preceding the application.
The Authority added to the requirements that the issuer must have prepared audited financial statements for at least the three preceding fiscal years, and that these be prepared in accordance with the accounting standards adopted by the Saudi Organization for Certified Public Accountants.
If the period covered by the most recent audited financial statements ended more than six (6) months prior to the expected date of approval of the application for registration and offering of the securities, the Authority may request audited financial statements for any period it deems appropriate, from the end of the period covered by the most recent audited financial statements to the expected date of approval of the application for registration and offering of the securities.
If the issuer makes any material structural changes, it may not file an application to register and offer its securities until at least one fiscal year has elapsed from the date of completion of the relevant change.
Substantial structural changes include the disposal of any of the issuer’s assets that contributed 30% or more of the issuer’s revenue or net income based on the most recent annual financial statements, or the acquisition of assets with a value of 30% or more of the issuer’s net assets based on the most recent annual financial statements, as well as the acquisition of a company in which the owners" equity represents 30% or more of the issuer’s owners" equity based on the most recent annual financial statements.
According to the Authority’s requirements for a public offering of shares, the issuer’s senior management must be qualified in terms of the necessary knowledge and appropriate experience to manage its business. Furthermore, the issuer—either alone or in conjunction with its subsidiaries (if any)—sufficient working capital to cover at least a 12-month period immediately following the date of publication of the prospectus. If preliminary audited financial statements are issued during the subscription period, the issuer must submit them to the Authority as soon as possible.
The Authority may accept an application to register and offer securities that does not meet the requirements of this Article if it deems that the offering is in the best interests of investors, and that the issuer has provided all necessary information to investors to enable them to make an informed decision regarding the issuer and the securities that are the subject of the application.
