SAUDI ARABIA Law and Practice Contributed by: Alex Saleh, Asad Ahmad, Omar Halbouni and Shahad Al-Humaidani, GLA & Company
bility for notification before the GAC, making Saudi Arabia a minimum-threshold jurisdiction. In addition to the financial threshold established by the Implementing Regulations, the parties must meet the following requirements. • Target entity sales threshold: the annual sales of the target entity (in and outside Saudi Arabia) in an economic concentration must exceed SAR40 million. • Local sales threshold: the combined total sales realised locally (within the territory of the Kingdom of Saudi Arabia) by the parties to the economic concentration must exceed SAR40 million. The Guidelines have clarified that the target entity must contribute to the local sales threshold. This requirement was absent from previous versions of the Guidelines. Based on discussions with the GAC, it has been determined that even minimal revenue of SAR1 from the target will be considered a contribution toward meeting the local sales threshold. The Guidelines clarify the application of all three finan - cial thresholds to mergers and joint ventures as fol - lows: • the total worldwide annual sales value of the economic concentration parties exceeds SAR200 million; • the total worldwide annual sales value of at least two of the parties (in a merger or a joint venture) exceeds SAR40 million; and • the total annual sales value in Saudi Arabia of all parties exceeds SAR40 million. Article 12 (2) of the Implementing Regulations also provides that where it is impossible to estimate the annual sales value of the entities or where the enti- ties’ business activities do not extend for a full fiscal year, then the annual sales value for the whole year will be estimated based on the firms’ activity, as the case may be. 2.6 Calculations of Jurisdictional Thresholds The KSA Competition Law bases the notification threshold on “the total annual sales value of the enti-
ties seeking to participate in the economic concentra - tion”. “Total Annual Sales Value” In most cases, the “total annual sales value” will be the total gross revenues of the relevant entity. These are the amounts obtained by the entity from the sale of products and services falling within the entity’s ordi - nary business and related activities. For most enti - ties that have financial statements prepared under the standards of the Saudi Organisation for Certified Public Accountants (the “SOCPA”) or the equivalent prevailing accounting standards in the relevant entity’s place of incorporation, the annual sales will be the entity’s revenue appearing in the entity’s income state - ment, as reflected in the entity’s most recent audited financial statement. Where the entity is not required to produce audited financial statements, the annual sales will be the enti - ty’s revenue as it appears in its most recent annual statement of income and expenses, regularly pre - pared in accordance with the SOCPA standards or the equivalent accounting principles adopted by the entity, as the case may be. If the relevant undertaking is an individual, the GAC will generally apply the same principles to determine that individual’s relevant annual sales. The individual’s annual sales will generally be their annual revenue amounts obtained from their ordinary business activi - ties. The GAC will determine this on a case-by-case basis in light of these general principles. However, where the entity’s total sales include sales rebates subsequently provided to its customers, the value of those rebates may be deducted from gross sales when calculating the entity’s total sales for the purposes of the notification threshold. In addition, where the entity’s total sales revenues incorporate the amount of value-added taxes and other taxes directly related to sales, the value of the taxes may be deducted from the gross sales figures to calculate the entity’s total sales for the purposes of the notification threshold.
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