Alnowaiser Law Legal Update - issue 52


Fair Treatment and Protection of the Rights of Shareholders under Saudi Law

Article (1) of the Corporate Governance Regulations ("the Regulations"), issued by the Board of the Saudi Capital Market Authority, pursuant to Resolution Number (8/16/2017), dated 16/5/1438H, corresponding to 13/2/2017, defines corporate governance as the rules to guide a Company in regulating the relationship among  its Board, Executive Directors, and Shareholders. 
Article (3) of the Regulations requires transparency, fairness and competitiveness in the business environment. The necessary tools to realize these objectives include concepts relevant to corporate stock; e.g., obtaining the shareholder’s portion of the net distributable profits; obtaining the shareholder’s share of the Company’s assets upon liquidation; attending the General or Special Shareholders Assemblies, taking part in their deliberations and voting on their decisions; and disposing of the shareholder's shares in accordance with Saudi law. 

Article (5) of the Regulations determine many rights granted to the shareholders that contribute to securing perfect governance, such as: to inquire and request access to the books and documents of the Company, including the data and information related to the activities of the Company,  its operational and investment strategy without prejudice to the interests of the Company; to monitor the performance of the Company and the activities of the Board; to hold Board members accountable; to file liability lawsuits against them and appeal for nullification of the resolutions of the General and Special Shareholders Assemblies in accordance with the conditions and restrictions provided in the Companies Law and the Bylaws of the Company. 

In short, Article (3) of the Regulations improves the role of the Company’s shareholders and facilitates the exercise of their rights through stating the competencies and responsibilities of the Board and Executive Management; enhancing accountability and control mechanisms for the Company’s employees; establishing the general framework for dealing with shareholders and protecting their rights; supporting the effectiveness of the system for overseeing Companies; and raising the awareness of Companies to encourage them to adopt and develop professional and ethical concepts.