Facilities Agreement Template for Saudi Arabia

A Facilities Agreement is your essential legal framework for establishing credit arrangements with financial institutions in Saudi Arabia. This comprehensive document governs the relationship between lenders and borrowers while ensuring strict compliance with both Saudi Arabian banking regulations and Islamic Shariah principles, making it fundamentally different from conventional Western financing agreements.

When do you need this document?

You'll require a Facilities Agreement when securing corporate financing for business expansion, working capital, or major capital expenditures. Project developers use this agreement to establish funding arrangements for infrastructure, energy, or real estate projects. Manufacturing companies rely on these agreements for equipment financing and inventory funding. Import-export businesses utilize facilities agreements to secure trade finance and letters of credit. Additionally, any entity seeking refinancing of existing debt or establishing revolving credit facilities will need this comprehensive legal document.

Key legal considerations

Your Facilities Agreement must incorporate Islamic financing structures such as Murabaha (cost-plus financing), Ijara (lease-based financing), or Wakala (agency arrangements) to ensure Shariah compliance. The profit rate mechanism replaces traditional interest calculations and must be structured to avoid riba (prohibited interest). Security arrangements require careful structuring under the Commercial Pledge Law, with clear provisions for enforcement and realization. Conditions precedent must address corporate authorizations, regulatory approvals, and documentation requirements specific to Saudi entities. The agreement should include robust representations and warranties covering financial standing, legal capacity, and ongoing compliance with Saudi regulations. Default provisions must align with local enforcement mechanisms while respecting Islamic principles of fairness and proportionality.

Legal requirements in Saudi Arabia

Your agreement must comply with the Banking Control Law (Royal Decree No. M/5), which governs all banking activities and lending operations in the Kingdom. Shariah compliance is mandatory, requiring oversight by qualified Shariah advisors and adherence to Islamic jurisprudence principles. All parties must maintain valid commercial registration under the Commercial Registration Law and demonstrate legal capacity to enter financing arrangements. The agreement should incorporate dispute resolution mechanisms that align with the Commercial Courts Law, whether through Saudi courts or Shariah-compliant arbitration. Security interests must be properly created and perfected under Saudi law, with particular attention to the Commercial Pledge Law for movable assets. The document must also address SAMA regulatory requirements, including any licensing or approval obligations for the participating financial institutions.