Saudi Arabia issues new rules to secure minority shareholder rights

Saudi Arabia's minister of commerce and investment Majid Al Qasabi has issued new directives to secure the rights of minority shareholders, the ministry said in a statement.

The board of directors of any joint-stock company must obtain the approval of the general assembly on the works and contracts that involve one of the board members directly or indirectly, according to the new regulations.

In such cases, the board member involved must identify the nature of involvement, its duration, any involvement of related parties and any financial or non-financial benefits that could result from such a contract. The board member, then, would be banned from voting on those contracts in assembly meetings.

Liabilities resulting from violating the companies’ law concerning any unfair agreements or contracts that involve a conflict of interest will be on those who had an interest in going through with such a contract or will be on the board members.

The ministerial decision said that the chairman of the board cannot fill any other executive position in the company.

Also, the board of directors of any joint-stock company must obtain the approval of the general assembly before issuing a decision to sell more than 50 percent of the assets, whether in one deal or more. The same rule applies on the general managers of limited liability companies (LLC).

Shareholders who own a 5 percent stake at least are allowed to add items to the general assembly’s agenda.

Joint-stock or LLC’s shareholders who acquire 50 percent or more of the company’s shares are obligated to offer to buy the remaining stake for the best price during 60 days of attaining that percentage, whether it was in a single stake acquisition or through more than one deal.

An LLC partner has the right to a dividend as per the partners’ decision on the issue, as the company must pay dividends within 30 days of approving them.

Joint-stock companies must not allow new partners to join the company without the approval of the current partners.