Banking & Finance Lawyers
We advise on financing, security and compliance, acting for both lenders and borrowers.
Overview
Finance in Saudi Arabia is a tightly licensed environment: the central bank supervises banks, finance companies, insurance and payments, and each financing activity has its own framework and requirements. Offering a financing product without the right licence is a regulatory breach even where the contract between the parties looks sound.
We work with companies and lenders on finance documentation: facility agreements, security and mortgages, guarantees, and Shariah-compliant structures in their established forms. We also handle rescheduling and workout negotiations, addressing default before it becomes enforcement.
The point we press hardest is security: its real value lies not in market value but in enforceability. An unregistered mortgage or a defective guarantee becomes paper without effect at the precise moment you need it.
The legal framework
Financing activities are supervised by the central bank under specialised regimes:
- The Saudi Central Bank: licensing and supervision of banks and finance companies
- The Banking Control Law and the Finance Companies Control Law
- The registered real estate mortgage regime and the commercial pledge regime
- The debt crowdfunding and payments rules and their regulations
- The Bankruptcy Law on debtor distress and creditor ranking
- The Enforcement Law for enforcing security and instruments
Situations we handle
A credit facility agreement
Financial covenants, events of default and acceleration are the clauses that actually set the risk — not the margin.
Registering security and mortgages
Security that has not completed registration may not carry priority. The formality here is the substance of the protection.
Rescheduling on default
An amended agreement must preserve existing security and not inadvertently discharge it in the redrafting.
A new financing product
Before launch: does it require a licence, and in which category? The answer determines the product's viability before any platform is built.
A guarantee or bank guarantee
Drafting defines scope, duration and recourse. An open-ended guarantee is dangerous for the guarantor and often impractical for the beneficiary.
Costly mistakes we see
- 1
Focusing on pricing and ignoring covenants
Financial covenants are what trigger early default. An unrealistic ratio makes a borrower in breach while it is still paying on time.
- 2
Security that was never registered
Agreeing to a pledge is not enough; registration is what confers priority against competing creditors.
- 3
Ignoring licensing requirements
Carrying on a financing activity without a licence is a breach in itself and is not cured by careful contract drafting.
- 4
Rescheduling without reviewing security
An undisciplined amendment can discharge existing security or change its ranking without the lender noticing.
How the procedure runs, step by step
Financing in Saudi Arabia is supervised by the Saudi Central Bank, and what is later disputed is rarely the price of the facility: it is the security and the early default terms.
- 1
Analyse the required financing structure
We examine purpose, tenor and projected cash flow and match them to the financing form: murabaha, ijara, tawarruq or project finance. The wrong structure creates a cash obligation the project cannot carry in its first year.
- 2
Negotiate the terms and conditions
We review the term sheet before signature: returns, drawdown conditions, restrictions on dealing, and leverage caps. Signing a binding term sheet before review removes your negotiating position entirely.
- 3
Structure the security
Real estate mortgage, share pledge, assignment of receivables, personal guarantees from shareholders. We work to cap security at the facility amount and tenor, because open-ended security ties up company assets for years after repayment.
- 4
Perfection and registration
Security is registered in the competent registers and the conditions precedent are satisfied. An unperfected pledge cannot be asserted against third parties on enforcement, and that error surfaces at the worst possible moment.
- 5
Monitor covenants and default
We build a schedule of financial covenants and reporting dates. A technical breach of a ratio covenant gives the lender the right to accelerate, and curing it before it happens is far easier than negotiating afterwards.
Documents we will ask you for
- The term sheet or financing offer
- Financial statements for the last three years
- The feasibility study or cash flow projections
- Title deeds for assets offered as security
- Commercial registration and the constitution
- Other existing financing obligations
Fees and timelines
Finance documentation is priced per document set: the facility agreement and its annexes, the security package, or a review of lender-supplied documents. Regulatory licensing files are split into an assessment phase and a filing and follow-up phase.
On timing: reviewing existing finance documents takes three to seven working days. Drafting from scratch runs one to three weeks. Licensing files move at the regulator's pace and typically take months.
Common questions
Do we need a licence to provide financing?
Carrying on a financing activity requires a licence from the central bank according to the activity type. Incidental lending between related companies is different from offering a financing product to the public, and what matters is the actual activity rather than the label on the contract.
What are the key clauses in a facility agreement?
Financial covenants, events of default, acceleration and security. They determine when the lender can demand the whole amount immediately, and they carry more risk than the rate itself.
How do we make security enforceable?
By meeting the formalities and registering with the competent authority for the asset type. Unregistered security may lose priority when other creditors claim against the same asset.
What do we do when a borrower defaults?
Start with a realistic assessment: is the distress temporary or structural? A documented rescheduling often recovers more than immediate enforcement, provided it preserves rather than discharges the security.
What is the difference between a guarantee and a bank guarantee?
A guarantee is a personal undertaking to pay if the debtor fails; a bank guarantee is an independent banking obligation payable on demand under its terms. The practical effect on beneficiary and debtor is entirely different.
Do you draft Shariah-compliant finance?
Yes, in the established forms such as murabaha, ijara and tawarruq, with attention to the structure rather than the label, coordinating with the financier's Shariah board where needed.
How are creditors ranked in bankruptcy?
The Bankruptcy Law sets the ranking of debts and the treatment of secured creditors. Registered security gives a materially better position than an ordinary claim — which shows up at distress, not before.
Will you review documents provided by the bank?
Yes, with a report on the high-risk clauses and the amendments that are realistically negotiable. Banks amend more than clients assume, particularly on covenants and events of default.