corporate law

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Capital Market Authority
Corporate Governance Regulations
English Translation of the Official Arabic Text
Issued by the Board of the Capital Market Authority
Pursuant to Resolution Number (8-16-2017)
Dated 16/5/1438H Corresponding to 13/2/2017G
Based on the Companies Law
Issued by Royal Decree No M/3 dated 28/1/1437H
Amended by Resolution of the Board
of the Capital Market Authority Number 1-35-2018
Dated 9/7/1439H Corresponding to 26/3/2018G
Arabic is the official language of the Capital Market Authority
Important Notice: the current version of these Regulations, as may be amended, can be found at
The Authority website:
Table of Contents
Part 1: Preliminary Provisions
Article 1: Definitions
Article 2: Preamble
Article 3: Objectives of the Regulations
Part 2: Rights of Shareholders
Chapter 1: General Rights
Article 4: Fair Treatment of Shareholders
Article 5: Rights related to shares
Article 6: Shareholder access to information
Article 7: Communicating with Shareholders
Article 8: Electing the Board Members
Article 9: Distribution of Dividends
Chapter 2: Rights Related to the Meeting of the General Assembly
Article 10: Preamble
Article 11: Competencies of the Extraordinary General Assembly
Article 12: Competencies of the Ordinary General Assembly
Article 13: Shareholders’ Assembly
Article 14: The Agenda of the General Assembly
Article 15: Management of the Shareholders’ Assembly
Part 3: The Board of Directors
Chapter 1: Formation of the Board
Article 16: Composition of the Board
Article 17: Appointment of the Board members
Article 18: Conditions for the membership of the Board
Article 19: Termination of a Board Membership
Article 20: Issues Affecting Independence
Chapter 2: Responsibilities and Competencies of the Board
Article 21: Responsibility of the Board
Article 22: Main Functions of the Board
Article 23: Distribution of Competencies and Duties
Article 24: Separation of Positions
Article 25: Oversight over the Executive Management
Article 26: Competencies and Duties of the Executive Management
Chapter 3: Competencies of the Chairman and the Board Members
Article 27: Competencies and Duties of the Chairman of the Board
Article 28: Appointing the Chief Executive Officer after the end of his/her services as
Chairman of the Board
Article 29: Principles of truthfulness, honesty and loyalty
Article 30: Tasks and Duties of the Board Members
Article 31: Duties of the Independent Director
Chapter 4: Procedures of the Board Activities
Article 32: The Board Meetings
Article 33: Remarks of the Board Members
Article 34: Organising the Attendance of the Board Meetings
Article 35: The Agenda of Board Meetings
Article 36: Exercising the Competencies of the Board
Article 37: The Secretary of the Board
Article 38: Qualifications of the Secretary
Chapter 5: Training, Support and Assessment
Article 39: Training
Article 40: Providing Members with Information
Article 41: The Assessment
Chapter 6: Conflicts of Interest
Article 42: Dealing with Conflicts of Interest and Related Parties Transactions
Article 43: Conflicts of Interest Policy
Article 44: Avoiding Conflicts of Interest
Article 45: Disclosure of Conflicts of Interest by the Nominee
Article 46: Competing with the Company
Article 47: Concept of the Competing Businesses
Article 48: Rejecting the Renewal of Authorisation
Article 49: Accepting Gifts
Part 4: Company Committees
Chapter 1: General Provisions
Article 50: Forming the Committees
Article 51: Committees Membership
Article 52: Studying Subjects
Article 53: Committees Meetings
Chapter 2: The Audit Committee
Article 54 Audit Committee Formation
Article 55: Competencies, powers and responsibilities of the Audit Committee
Article 56: Conflict between the Audit Committee and the Board
Article 57: Audit Committee Meetings
Article 58: Arrangements for Providing Remarks
Article 59: Powers of the Audit Committee
Chapter 3: Remuneration Committee
Article 60: Composition of the Remuneration Committee
Article 61: Competencies of the Remuneration Committee
Article 62: Remuneration Policy
Article 63: Meetings of the Remuneration Committee
Chapter 4: Nomination Committee
Article 64: Composition of the Nomination Committee
Article 65: competences of the Nomination Committee
Article 66: the Nomination Procedures
Article 67: Meetings of the Nomination Committee
Article 68: Publishing the Nomination Announcement
Article 69: Nomination Rights of Shareholders
Chapter 5: Risk Management Committee
Article 70: Composition of the Risk Management Committee
Article 71: Competencies of the Risk Management Committee
Article 72: Meetings of the Risk Management Committee
Part 5: Internal Control
Article 73: Internal Control System
Article 74: Establishing Independent Units or Departments within the Company
Article 75: Duties of the Internal Audit Unit or Department
Article 76: Composing An Internal Audit Unit or Department
Article 77: Internal Audit Plan
Article 78: Internal Audit Report
Article 79: Maintaining Internal Audit Reports
Part 6: The Company’s External Auditor
Article 80: Assigning the Audit Function
Article 81: Appointment of the External Auditor
Article 82: Duties of the External Auditor
Part 7: Shareholders
Article 83: Regulating the Relationship with Stakeholders
Article 84: Reporting Non-Compliant Practices
Article 85: Employee Incentives
Part 8: Professional and Ethical Standards
Article 86: Professional Conduct Policy
Article 87: Social Responsibility
Article 88: Social Initiatives
Part 9: Disclosure and Transparency
Article 89: Policies and Procedure of Disclosure
Article 90: The Board’s Report
Article 91: The Audit Committee’s Report
Article 92: Disclosure by the Board
Article 93: Disclosure of Remunerations
Part 10: Implementation of Corporate Governance
Article 94: Implementation of Effective Governance
Article 95: Formation of a Corporate Governance Committee
Part 11: Retaining of Documents
Article 96: Retaining of Documents
Part 12: Closing Provisions
Article 97: Providing the Additional data and Information
Article 98: Publication and Entry into Force
Appendix (1) Remuneration Schedule
Part 1: Preliminary Provisions
Article 1: Definitions
The following terms and expressions shall have the meaning they bear as follows unless the
contrary intention appears:
Companies Law: the Companies Law issued by Royal Decree No. (M/3) dated 28/1/1437
Capital Market Law: the Capital Market Law issued by Royal Decree No. (M/30) dated
2/6/1424 AH.
Listing Rules: The Listing Rules issued by the Board.
Authority: the Capital Market Authority.
The Exchange: The Saudi Stock Exchange.
Company: the listed joint stock company.
Board: the company’s Board of Directors.
Corporate Governance: rules to lead and guide the Company that includes mechanisms to
regulate the various relationships between the Board, Executive Directors, shareholders and
Stakeholders, by establishing rules and procedures to facilitate the decision making process
and add transparency and credibility to it with the objective of protecting the rights of
shareholders and Stakeholders and achieving fairness, competitiveness and transparency on
the Exchange and the business environment.
Shareholders Assembly: an assembly consisting of the shareholders in the Company formed
in accordance with the provisions of the Companies Law and the Company’s bylaws.
Executive Director: a member of the Board who is a full time member of the executive
management team of the Company and participates in its daily activities.
Non-Executive Director: a member of the Board who is not a full-time member of the
management team of the Company and does not participate in its daily activities.
Independent Director: a non-executive member of the Board who enjoys complete
independence in his/her position and decisions and none of the independence affecting issues
stipulated in Article 20 of these Regulations apply to him/her.
Executive Management or Senior Executive: persons responsible for managing the daily
operations of the Company, and proposing and executing strategic decisions, such as the
Chief Executive Officer (CEO) and his/her delegates and the Chief Financial Officer (CFO).

Fathers, mothers, grandfathers and grandmothers (and their ancestors).
children and grandchildren and their descendants.
siblings, maternal and paternal half-siblings.
Husbands and wives.
Holding Company: a Joint Stock Company or Limited Liability Company aims to control
other Joint Stock Companies or Limited Liability Companies called affiliates by owning more
than half of those companies’ share capitals or by controlling the composition of their
Person: any natural or legal person that is recognised as such under the laws of the Kingdom.
Related Parties:
A. Substantial Shareholders of the company.
B. Board members of the Company or any of its affiliates and their relatives.
C. Senior Executives of the Company or any of its affiliates and their relatives.
D. Board members and Senior Executives of Substantial Shareholders of the company.
E. Entities, other than companies, owned by a Board member or any Senior Executive or
their relatives.
F. Companies in which a Board member or a Senior Executive or any of their relatives is a
G. Companies in which a Board member or a Senior Executive or any of their relatives is a
member of its Board of directors or is one of its Senior Executives.
H. Joint stock companies in which a member of the Board or a Senior Executive or any of
their relatives owns (5%) or more, subject to the provisions of paragraph (D) of this
I. Companies in which a Board member or a Senior Executive or any of their relatives has
influence on their decisions even if only by giving advice or guidance.
J. Any person whose advice or guidance influence the decisions of the Company, the
Board and the Senior Executives.
K. Holding companies or affiliates.
Advice or guidance that is provided on a professional basis by a person licensed to provide
such advice shall be excluded from the provisions of paragraphs (I) and (J) of this definition.
The Group: When referring to a person, means the person and his affiliates.
Affiliate: a person who controls another person or is controlled by that other person, or who
is under common control with that person by a third person. In any of the preceding, control
could be direct or indirect.
Stakeholder: any person who has an interest in the Company, including employees, creditors,
customers, suppliers and the community.
Substantial Shareholders: any person who owns (5%) or more of the shares of the Company
or voting rights therein.
Cumulative voting: a method of voting for electing Board members that gives each
shareholder a voting capacity equivalent to the number of shares he/she owns , and by which
the shareholder is entitled to either exercise all of his/her votes towards one nominee or to
divide his/her votes towards several nominees without any duplication of such votes.
Controlling Interest: The ability to influence actions or decisions of another person directly,
indirectly, individually or collectively with a relative or an affiliate through: (A) owning %30
or more of the voting rights in a company, (B) having the right to appoint %30 or more of the
administrative team members.
Administrative Team: A group of individuals who make strategic decisions of the person.
The Board is the Company’s Administrative Team.
Remunerations: amounts, allowances, dividends and the like, periodic or annual bonuses
linked to performance, long or short term incentive plans and any other in-kind benefits
except the actual reasonable expenses and fees incurred by the company to enable the Board
member to perform his duties.
Day: Calendar day whether a business day or not.
Article 2: Preamble
a) These Regulations state the rules and standards that regulate the management of the
companies to ensure its compliance with the best governance practices that ensure the
protection of shareholder’s rights as well as the rights of Stakeholders.
b) These Regulations are mandatory to companies except the provisions that contain a
reference of being guiding.
c) Without prejudice to the provisions of these Regulations, laws and instructions of other
supervisory authorities apply to companies that subject to them.
Article 3: Objectives of the Regulations
These Regulations aim at establishing an effective legal framework to govern the Company,
and particularly aim at the following:
1) enhancing the role of the Company’s shareholders and facilitating the exercise of
their rights;
2) Stating the competencies and responsibilities of the Board and the Executive
3) enhancing the role of the Board and the committees and developing their capabilities
to enhance the Company’s decision making mechanisms;
4) achieving transparency, impartiality and equity in the Exchange, its transactions, and
the business environment and enhance disclosure therein;
5) providing effective and balanced tools to deal with conflicts of interest;
6) enhancing accountability and control mechanisms for the Company’s employees;
7) establishing the general framework for dealing with Stakeholders and protecting their
8) supporting the effectiveness of the system for overseeing Companies and the tools
thereof; and
9) raising the awareness of Companies in respect of the concept of professional conduct
and encouraging them to adopt and develop such concept in accordance with their
Part 2:Rights of Shareholders
Chapter 1: General Rights
Article 4: Fair Treatment of Shareholders
a) The Board is obliged to seek shareholders’ rights protection to ensure fairness and
equality among them.
b) The Board and the Executive Management of the Company is obliged not to discriminate
among shareholders who own the same class of shares nor prevent them from accessing
any of their rights.
c) The Company shall specify in its internal policies the procedures that are necessary to
guarantee that all shareholders exercise their rights.
Article 5: Rights related to shares
All rights related to shares shall be guaranteed to the shareholder, and particularly the
1) to obtain his/her portion of the net profits which are to be distributed in cash or
through the issuance of shares;
2) to obtain his/her share of the Company’s assets upon liquidation;
3) to attend the General or Special Shareholders Assemblies, take part in their
deliberations and vote on their decisions;
4) to dispose of his/her shares in accordance with the provisions of the Companies Law,
The Capital Market Law and their implementing regulations ;
5) to enquire and request viewing the books and documents of the Company, including
the data and information related to the activities of the Company and its operational
and investment strategy without prejudice to the interests of the Company or breach
of the Companies Law and the Capital Market Law and their implementing
6) to monitor the performance of the Company and the activities of the Board;
7) 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;
8) preemptive rights to subscribe for new shares issued in exchange for cash unless
otherwise specified in the Company’s bylaws or when the Extraordinary General
Assembly suspends the pre-emptive rights are per Article (140) of the Company’s
9) to record his/her name in the Company’s shareholders register;
10) to request to view a copy of the Company’s articles of association and bylaws unless
the Company publishes them on its website; and
11) to nominate and elect the Board members.
Article 6: Shareholder access to information
a) The Board shall make available to the shareholder complete, clear, accurate and nonmisleading information to enable him/her to properly exercise his/her rights. Such
information shall be provided at the proper times and shall be updated regularly.
b) The method used to provide information to the shareholders shall be clear and detailed
and shall include a list of the Company’s information that the shareholders may obtain.
This information shall be made available to all shareholders of the same class.
c) The Company shall use the most effective methods in communicating with shareholders
and shall not discriminate among shareholders in respect of providing information.
Article 7: Communicating with Shareholders
a) The Board shall ensure communication between the Company and the shareholders based
on the common understanding of the strategic objectives and interests of the Company.
b) The chairman of the Board and the Chief Executive Officer shall inform the remaining
Board members of the opinions of the shareholders and discuss these opinions with them.
c) No shareholder may intervene in the operations of the Board or the work of the Executive
Management of the Company unless he/she is a member of its Board or its management
team; or unless his/her intervention is through the Ordinary General Assembly according
to its powers or within the limits and situations permitted by the Board.
Article 8: Electing the Board Members
a) Upon calling for the General Assembly, the Company shall announce on the Exchange’s
website information about the nominees for the membership of the Board which shall
include the nominees’ experience, qualifications, skills and their previous and current jobs
and memberships. The Company shall make a copy of the mentioned information
available in the Company’s head office and its website.
b) Cumulative voting shall be used in electing the Board, in which it is not allowed to use
the voting right of a single share more than once.
c) Voting in the General Assembly shall be confined to the Board nominees whose
information has been announced as per paragraph (a) of this Article.
Article 9: Distribution of Dividends
a) The Company’s bylaws shall prescribe the percentage of the net profits to be distributed
to the shareholders after setting aside the statutory reserve and the other reserves.
b) The Board shall establish a clear policy for the distribution of dividends to achieve the
interests of the shareholders and the Company as per the Company’s bylaw.
c) The shareholder is entitled to receive his/her share of dividends as per the decision of the
General Assembly in respect of the distribution of dividends to shareholders or the Board
resolution on distributing interim dividends. The resolution shall specify the record date
and the distribution date provided that the resolution shall be executed as per the
Regulatory Rules and Procedures issued pursuant to the Companies Law related to Listed
Joint Stock Companies.
Chapter 2: Rights Related to the Meeting of the General Assembly
Article 10: Preamble
General Shareholders Assemblies of the Company are competent in all of its affairs. A dulyconstituted General Assembly represents all shareholders in exercising their powers in respect
of the Company. The General Assembly shall exercise its role in accordance with the
provisions of the Companies Law and Its Implementing Regulations and the Company’s
Article 11: Competencies of the Extraordinary General Assembly
The Extraordinary General Assembly shall have the following Competencies:
1) amending the Company’s bylaws, except for amendments which are deemed null and
void pursuant to the provisions of the Companies Law;
2) increasing the Company’s share capital in accordance with the situations provided by
the Companies Law and Its Implementing Regulations;
3) decreasing the Company’s share capital if it exceeds the Company’s needs or in the
event the Company incurs financial losses, in accordance with the situa …
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