[Last updated: 1 January 2025, unless otherwise noted]

2.1 Main legal framework

The legal framework for takeovers of public companies in Saudi Arabia is set out in the MARs. The MARs are one of several implementing regulations of the Capital Market Law ("CML"), which establish a broader framework designed to regulate and promote the development of Saudi Arabia's capital markets.

The MARs state that its provisions apply to any (i) purchase or sale of voting shares in a listed company resulting in ownership or control of 10% or more of the shares, and (ii) offer to purchase voting shares in such a company, if the shares sought to be acquired would increase ownership to 10% or more.

In addition to regulating public takeovers, the MARs also include provisions that apply to privately negotiated transactions between the bidder / offeror and selling shareholder(s) in a listed company which does not involve making a public offer to the shareholder(s) of the target. Such private transactions are not discussed further in this chapter. 

2.2 Other rules and principles

In addition to the MARs, there are a number of additional rules and principles in Saudi Arabia that will need to be taken into account by prospective bidders planning a takeover, such as:

1. The Companies’ Law, issued by Royal Decree No. M/132 on 30 June 2022, which is the main legislation governing the operations of companies, regulating a wide array of matters including the establishment, liquidation, merger, conversion and division of companies, capital alterations as well as the conduct of board of directors’ meetings and general assembly meetings and voting thresholds.
2. The Market Conduct Regulations, issued by the CMA on 4 October 2004 (as amended), which address issues such as insider trading and market manipulation.
3. The Rules on the Offer of Securities and Continuing Obligations ("OSCOs"), issued by the CMA on 27 December 2017 (as amended). The OSCOs impose disclosure obligations on listed companies and contain standards for prospectus disclosure, which the MARs require bidders to comply with where the offer consideration includes securities.
4. The Listing Rules, issued by the CMA on 27 December 2017 (as amended), which govern, among other things, the listing of securities and the continuing obligations and delisting of listed companies.
5. The Competition Law, issued by Royal Decree No. M/75 on 6 March 2019, which sets out Saudi Arabia's framework for competition law and merger control.
6. The Rules for Foreign Investment in Securities ("Foreign Investment Rules"), issued by the CMA on 27 March 2023 (as amended), which regulate foreign investments in listed securities, debt instruments and investment funds.

2.3 The role of the CMA

The CMA was formed pursuant to the CML and is responsible for applying the CML and issuing rules, regulations and instructions related to the capital markets, including the MARs.

In its capacity as the principal securities regulator in Saudi Arabia, the CMA has traditionally exercised a broad discretion in the supervision and enforcement of the CML and its implementing regulations.

The CMA is given broad powers under the MARs to intervene as necessary to ensure that the provisions and principles in the MARs are complied with. The MARs also explicitly provide that the CMA may waive any requirement, in whole or in part, either upon request of the person to whom the relevant requirement applies or on its own initiative.

2.4 Foreign investments

The Foreign Investment Rules limit direct foreign investment in Saudi listed companies to (i) qualified foreign investors; and (ii) foreign strategic investors (the criteria of each being set out in the Foreign Investment Rules). In addition, the Foreign Investment Rules impose limits on shareholding levels, which would prevent qualified foreign investors from acquiring a majority stake. Notably, foreign strategic investors are exempt from these shareholding restrictions in a Saudi listed company. It is not currently clear whether this will open the door for foreign companies to execute a takeover of Saudi publicly listed companies, and this has yet to be tested.

2.5 General principles

The MARs set out a number of general principles that apply to public takeovers, including the following:

1. Parties involved in takeovers must take care that information made available for the purpose of such transactions are not made in a way that may mislead shareholders or Tadawul.
2. All shareholders of the target holding the same class of shares must be treated equally by the bidder.
3. Any document or announcement relating to an offer or potential offer, addressed by the bidder, the board of the target or their respective advisors, to shareholders, must be true, fair and not misleading.
4. During the course of an offer, or when an offer is being contemplated by the target, neither the bidder, nor the target, nor any of their respective advisors, may furnish information to some shareholders which is not readily made available to all shareholders. This principle does not restrict the furnishing of information in confidence by the target to a bona fide potential bidder or vice versa in the context of an offer.
5. The bidder and the board of directors of the target must give sufficient information and advice to the shareholders of the target to enable them to reach a properly informed decision to accept or reject the offer.
6. The board of the target company must always act in the best interests of its shareholders.
7. The target's board may not commit any frustrating action(s) when a bona fide offer is imminent.
8. A shareholder who owns shares in both the bidder and the target may only vote on decisions related to the offer at either the general assembly of the bidder or the target.
9. Where there are "related parties" to a public takeover, there must be full disclosure of the interests of such parties in the transaction prior to the completion of that transaction.
10. A director shall not vote at a board meeting, committee meeting or a general assembly meeting on any resolution concerning the offer or any relevant matter where the director has a conflict of interest.
11. A false market must not be created where the value of the securities of the target, the bidder or of any other company concerned by the transaction fluctuate in such way that the rise or fall of the prices of the relevant securities becomes artificial and the normal functioning of the market is distorted.
12. The activities of the target must not be affected for longer than is reasonable as a consequence of an offer.