The Legal Status of Financing Instruments Convertible into Shares in Saudi Systems: An Analytical Study
Dr. Abdul Salam Rajoub
(Principal Researcher)
Associate Professor of Commercial Law
College of Law, King Faisal University, Eastern Province, Al-Ahsa, KSA
Dr. Fares Al Osaimi
(Associate Researcher)
Assistant Professor of Commercial Law
College of Law, King Faisal University, Eastern Province, Al-Ahsa, KSA
Dr. Adnan Al Omar
(Associate Researcher)
Associate Professor of Commercial Law
College of Law, Yarmouk University, The Hashemite Kingdom of Jordan
Abstract:
This study was conducted in order to clarify the Saudi regulator’s position on financing instruments convertible into shares in the Saudi system. The study concluded some basic aspects, including: the regulatory position of the instrument holder before and after conversion; The Saudi system is unique from other statutory systems, as the instrument holder is considered a shareholder in the company, and bears the consequences of the company. However, before the date specified in the prospectus for announcing the holder’s desire to request transfer or withdrawal, he is a shareholder in the results without the other rights granted to the shareholder. In the system, he is a shareholder without administrative rights until the moment of conversion, then he becomes a shareholder enjoying all the rights of shareholders in the company.
The study also found that the regulator did not stipulate the possibility of subscribing to such sukuks through in-kind shares that could be provided by the subscriber. However, the study concluded that it was possible to subscribe to in-kind shares for benefit, and not necessarily cash shares, on the basis that offering sukuk is subject to Convertible is a type of capital increase.
The study also called for the Saudi regulator to adopt, with special provisions, convertible instruments. In order to clarify the rights of sukuk holders, recommendations were made that it is hoped the regulator will take into account. It has also become possible to abandon the usury system in force in statutory legislation and adopt what is in effect in the Saudi system in order to be a model for legislation.
Keywords: securities, bonds, capital increase, shares, subscription.