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An Advisory Agreement creates a formal relationship when you hire a professional advisor to provide expert guidance, often in areas like business strategy, investments, or technical matters. In Saudi Arabia, these agreements must follow Shariah principles and typically outline the advisor's scope of work, compensation structure, and compliance with Capital Market Authority regulations.

The agreement protects both parties by clearly defining confidentiality obligations, service standards, and dispute resolution methods under Saudi commercial law. It's particularly important for companies seeking specialized expertise while maintaining compliance with local regulatory requirements, including the new rules under Vision 2030 initiatives for business consulting services.

Companies need an Advisory Agreement when seeking specialized expertise for strategic decisions, particularly during major business transformations or investment activities in Saudi Arabia. This agreement becomes essential when engaging financial advisors for IPO preparation, management consultants for Vision 2030 alignment, or technical experts for large-scale project implementation.

The timing is critical when entering new markets, launching complex projects, or navigating regulatory changes under Saudi law. For example, businesses expanding operations, restructuring their organization, or seeking Shariah-compliant investment guidance benefit from having clear terms of engagement, defined deliverables, and protection mechanisms in place through a formal Advisory Agreement.

• Advisory Services Agreement: The standard format used in Saudi Arabia, adaptable for different advisory relationships. Can be customized for financial advisory services (following CMA regulations), management consulting (aligned with Vision 2030 requirements), technical consulting (incorporating industry-specific standards), or strategic advisory (with Shariah-compliant terms). Key differences appear in scope definition, performance metrics, compensation structures, and regulatory compliance sections based on the specific advisory service type.

• Advisory Firms: Professional service providers who offer expertise in areas like finance, management, or technical fields, bound by the Advisory Agreement to deliver specific services under Saudi regulations.
• Client Organizations: Saudi companies, government entities, or investment firms seeking specialized guidance, responsible for defining requirements and compensation terms.
• Legal Counsel: In-house or external lawyers who draft and review agreements to ensure compliance with Saudi law and CMA regulations.
• Compliance Officers: Internal staff who monitor adherence to agreement terms and maintain alignment with Shariah principles and regulatory requirements.

• Core Services: Define the exact scope of advisory services, deliverables, and performance metrics aligned with Saudi business practices.
• Compliance Details: Gather relevant licenses, CMA approvals, and Shariah compliance requirements for the specific advisory service.
• Party Information: Collect complete legal names, registration numbers, and authorized signatories of both advisor and client.
• Terms Structure: Outline fee arrangements, payment schedules, and service duration in accordance with Saudi commercial law.
• Protection Clauses: Include confidentiality terms, intellectual property rights, and dispute resolution mechanisms that align with local regulations.

• Parties & Services: Full legal names, registration details, and precise scope of advisory services in both Arabic and English.
• Compensation Terms: Clear fee structure, payment schedule, and currency specifications following Saudi monetary regulations.
• Shariah Compliance: Explicit statement of adherence to Islamic principles and relevant CMA regulations.
• Confidentiality: Detailed provisions for information protection and data handling under Saudi law.
• Term & Termination: Agreement duration, renewal conditions, and termination procedures.
• Dispute Resolution: Saudi jurisdiction clause and specific dispute resolution mechanisms.

An Advisory Agreement differs significantly from an Agency Agreement in several key aspects under Saudi law. While both involve professional services, their scope, obligations, and regulatory requirements are distinct, particularly in the context of Saudi Arabia's commercial regulations and Vision 2030 framework.

• Scope of Authority: Advisory Agreements focus on providing guidance and recommendations without decision-making power, while Agency Agreements grant authority to act on behalf of the principal.
• Regulatory Framework: Advisory Agreements primarily follow CMA regulations and Shariah compliance guidelines for consulting services, whereas Agency Agreements fall under the Commercial Agencies Law.
• Liability Structure: Advisors typically bear limited liability for recommendations, while agents can be directly liable for actions taken on behalf of the principal.
• Agency Agreement: Creates a formal representative relationship with power to bind the principal, unlike Advisory Agreements which maintain independence between parties.