The Saudi Arabian Ministry of Commerce and the Capital Market Authority announced the publication of the draft executive regulations of the new company system for public consultation for a period of 15 calendar days, which follows the release of the new company system and is based on the powers given by the system to both the body and the Ministry of Commerce in organizing some questions and topics provided in the system.
In a statement Tuesday, the authorities said the project aims to simplify procedures and regulatory requirements to stimulate the business environment and support investment, provide an efficient and fair framework for corporate governance, help attract domestic and foreign investment, and ensure sustainable development. sources of financing.
The most important elements included in the draft are the clarification of the mechanism for depositing the company’s financial statements, the report of the board of directors and the auditor’s report, as well as setting out detailed provisions on the duties of care and loyalty of members. board of directors of the company.
Elements also include determining the method of voting for the election of members of the Board of Directors, clarifying the control mechanisms associated with the reservation of seats by the shareholder for membership in the Board of Directors in accordance with the company’s basic system, and clarifying the mechanism for handling cases. on the dismissal of a member of the Board of Directors by the Ordinary General Meeting, and the draft included an update titled (Controls and Regulatory Procedures Issued pursuant to the Companies Act for Listed Joint Stock Companies), so that the title became (Executive Regulations Companies Act for Listed Joint Stock Companies) companies).
The draft also included regulation of the term of office of members of the Board of Directors after the expiration of the term of office of the Board or retirement of its members before the election of a new Board of Directors, regulation of control over the distribution of profits between partners and shareholders and the definition of what is recognized as subject to distribution, and indicates the inadmissibility of using the article difference in nominal value (share premium) in the distribution of profits Cash to shareholders, establishing control to authorize the general meeting of the Board of Directors to authorize a member of the Board of Directors to participate in the company’s competing enterprises or in one of its lines of business, as well as determining the maximum term of the auditor companies.
It also clarified the provisions regarding the division of a company, as well as clarified what is not applicable from the provisions of the tenth chapter of the Companies Act in the event of a merger of one or more companies into a company wholly owned by it. In view of the nature of this type of merger, as well as the provisions for the issue and transfer of its shares by the company and the provisions for the control of their issue and acquisition, including the provisions for the issuance of redeemable shares and the provisions and conditions for their redemption, as well as the regulation of the division and merger of shares, as well as the maximum the period between the issuance of an approved appraiser’s report measuring the fair value of shares in kind and the issuance of shares in exchange for those shares.
The cases of the obligation to buy or sell shares referred to in Article 230 of the system have also been settled, including the conditions and requirements related to the disclosure of information to shareholders and the purchase price.
In the draft by-laws of the new corporate law, the Capital Markets Authority took into account the alignment of the scope of the definition of the term “related parties” used for the purposes of the corporate governance provisions with the scope of the definition of the term “related party” used for the purposes of the rules for placement of securities and continuing obligations, and the amount of relationship for the categories considered to be a related person in each of them.
It is worth noting that the draft is divided into the executive regulation of the Ministry of Commerce, which includes the regulation of the forms of companies, except for the joint-stock company registered on the financial market, and the executive regulation of the Capital Market Authority, which includes the regulation on the joint-stock company listed on the financial market. In preparing the draft, the Commission took into account the inclusion of the necessary amendments to the Regulations issued by it in accordance with the system.