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Share Lending Agreement Template for Saudi Arabia

A comprehensive legal agreement governed by Saudi Arabian law that establishes the terms and conditions for the temporary transfer of securities from a lender to a borrower. The document incorporates requirements from the Capital Market Authority (CMA) regulations, Saudi Arabian securities laws, and Shariah principles. It details the obligations of both parties, collateral requirements, fee structures, corporate action treatments, and risk management provisions while ensuring compliance with local regulatory requirements and Islamic finance principles.

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What is a Share Lending Agreement?

The Share Lending Agreement is essential for financial institutions operating in the Saudi Arabian market who engage in securities lending transactions. This document is used when one party (the lender) agrees to temporarily transfer securities to another party (the borrower) in exchange for collateral and fees. The agreement must comply with the Capital Market Authority's regulations, the Securities Borrowing and Lending Regulations, and Shariah principles. It includes detailed provisions for the transfer mechanism, collateral management, corporate actions, fees, and default scenarios. The document is particularly relevant for activities such as market making, settlement coverage, and Shariah-compliant short selling (where permitted). It incorporates specific requirements of the Saudi market while following international best practices in securities lending.

What sections should be included in a Share Lending Agreement?

1. Parties: Identification of the lender and borrower, including their legal status and regulatory authorizations

2. Background: Context of the agreement and brief description of the share lending arrangement

3. Definitions: Detailed definitions of terms used throughout the agreement, including specific Saudi market terminology

4. Loan of Securities: Core provisions regarding the lending and borrowing of securities, including transfer mechanisms

5. Delivery of Securities: Procedures and timing for the delivery of securities between parties

6. Collateral Requirements: Details of required collateral, including type, value, and maintenance requirements

7. Fees and Payments: Lending fees, payment mechanisms, and payment schedules

8. Rights and Obligations: Detailed responsibilities of each party during the lending period

9. Corporate Actions: Handling of dividends, rights issues, and other corporate actions

10. Representations and Warranties: Standard and specific representations including Shariah compliance

11. Events of Default: Definition of default events and consequences

12. Termination: Provisions for termination and return of securities

13. Governing Law and Jurisdiction: Application of Saudi law and dispute resolution mechanisms

What sections are optional to include in a Share Lending Agreement?

1. Islamic Finance Provisions: Additional provisions ensuring Shariah compliance, required when parties specifically need Islamic finance structure

2. Foreign Investment Provisions: Additional provisions required when one party is a foreign entity subject to QFI rules

3. Voting Rights: Provisions dealing with the exercise of voting rights, if applicable to the specific arrangement

4. Tax Provisions: Specific tax-related provisions, required when dealing with international parties or specific tax circumstances

5. Agent Provisions: Required when a lending or borrowing agent is involved in the transaction

6. Substitution Rights: Provisions allowing for substitution of loaned securities, if desired by parties

What schedules should be included in a Share Lending Agreement?

1. Schedule 1 - Form of Loan Notice: Standard form for requesting and confirming securities loans

2. Schedule 2 - Eligible Securities: List of securities eligible for lending under the agreement

3. Schedule 3 - Eligible Collateral: Types and specifications of acceptable collateral

4. Schedule 4 - Fee Schedule: Detailed breakdown of fees and calculation methodologies

5. Schedule 5 - Contact Details: Administrative and operational contact information for both parties

6. Appendix A - Required Regulatory Notifications: Forms and procedures for required notifications to Saudi regulators

7. Appendix B - Operating Procedures: Detailed operational procedures for implementing the agreement

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Saudi Arabia

Cost

Free to use

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