Civil and Criminal Liability of Board of Directors Members under the Saudi Companies Law: The Complete Legal Guide | Nova Legal

The Statutory Framework of the Liability of the Board of Directors Members: Two Pillars, Civil and Criminal

The liability of the board of directors members is organized in the Companies Law issued by Royal Decree No. (M/132) dated 1/12/1443H corresponding to 4/7/2022AD in two integrated pillars: the civil pillar which is started by Article Twenty-Six (The Duties of Care and Loyalty) which obliges the manager or the member of the board of directors with seven duties, and passes by Article Twenty-Seven (The Conflict of Interest, the Competition and the Exploitation of the Assets), then Article Twenty-Eight (The Liability of the Management) which decides the rule of the joint and several liability, and Article Twenty-Nine (The Company's Suit and the Partner's or Shareholder's Suit) which organizes the means of the claim, and Article Thirty (The Non-Hearing of the Suit) which determines the impediments of the prescription and the effect of the discharge of the liability; and the criminal pillar for which the Law devotes Chapter Thirteen (Penalties) in the articles from (Two Hundred and Sixty) to (Two Hundred and Sixty-Nine), which arrange the penalties on three levels of gravity: the grave offenses, the less grave offenses and the violations, with the organization of the recidivism, the alternative penalties and the competence over the investigation, the prosecution and the adjudication.

And added to the statutory origin are three regulatory levels: the Implementing Regulations of the Companies Law issued dated 25/6/1444H corresponding to 18/1/2023AD which detail the duties of care and loyalty in their Article Eleven, and the controls of the exploitation of the investment opportunities of the company in their Article Twelve, and the definition of the indirect interest in their Article Seventeen; and the Implementing Regulations of the Companies Law for Listed Joint Stock Companies which enshrine the duties of care and loyalty in their Article Four and organize the licensing of the businesses and contracts in which the member has an interest in their Articles Sixty-Four and Sixty-Six; and the Corporate Governance Regulations issued by the Board of the Capital Market Authority which decide in their Article Twenty the responsibility of the board of directors, and in their Article Forty-Two the rules of avoiding the conflict of interest.

And these texts are read integrated: for the Law puts the general rules of the civil and criminal liability, and the implementing regulations detail them for the non-listed joint stock companies, and the regulations of the listed joint stock companies add the controls specific to the companies listed on the financial market, and the governance regulations draw the behavioral standards of the board of directors, and the provisions of the regulations do not lack the referral to the texts of the Law whenever the provisions require detail in the statutory origin.

The Duties of Care and Loyalty: The Established Basis of the Liability

Article Twenty-Six of the Companies Law (The Duties of Care and Loyalty) decides that "the manager of the company, or the member of its board of directors, must comply with the duties of care and loyalty, and in particular" seven duties: first practicing the tasks within the limits of the powers established for him; and second working for the interest of the company and enhancing its success; and third taking the decisions or voting on them independently; and fourth exerting the reasonable and expected care, attention, prudence and skill; and fifth avoiding the cases of the conflict of interest; and sixth disclosing any interest for him, direct or indirect, in the businesses and contracts concluded on account of the company; and seventh not accepting any benefit granted to him by third parties in what relates to his role in the company.

And Article Eleven of the Implementing Regulations of the Companies Law (The Duties of Care and Loyalty) details these duties for the non-listed companies: practicing the powers in accordance with the Law and its regulations to achieve the purposes for which they were granted, and working in good faith to achieve the interest of the company and taking care to enhance its success, develop it and maximize its value for the benefit of the partners or the shareholders and achieve its sustainability, and practicing the tasks objectively and impartially in managing the company and taking the decisions therein and avoiding the cases affecting the impartiality when taking the decisions or voting on them, and performing the duties and responsibilities "with the skill customary in the careful person, and with the general knowledge and experience that he possesses and those expected of whoever assumes this position", and avoiding and disclosing the cases from which a conflict of interest may arise, and not exploiting the position, the tasks and the powers in any case to obtain benefits from third parties. And Article Four of the Regulations of Listed Joint Stock Companies (The Duties of Care and Loyalty) enshrines the same duties for the listed companies in six points ending with the commitment of the member to avoid the dealings and cases in which he has or is likely to have an interest conflicting or that may conflict with the interest of the company, and the disclosure of any interest for him immediately upon his knowledge of it.

And these duties are crowned by the rule of Article Twenty of the Corporate Governance Regulations (The Responsibility of the Board of Directors) which decides that "the board of directors represents all the shareholders, and it must exert the two duties of care and loyalty in managing the company and everything that would safeguard its interests, develop them and maximize its value", and that "the responsibility for its businesses falls on the board of directors of the company even if it delegated committees, bodies or individuals in practicing some of its competencies", with a decisive rule that "the board of directors may not issue a general or indefinite delegation", so the delegation does not transfer the responsibility, and the general delegation is prohibited in origin.

The General Rule of the Civil Liability: The Joint and Several Liability and the Nullity of the Contrary Conditions

Article Twenty-Eight of the Companies Law (The Liability of the Management) decides the general rule of the civil liability in its first paragraph:

"The manager and the members of the board of directors are jointly and severally liable for compensating the company or the partners or the shareholders or third parties for the damage arising from the violation of the provisions of the Law or the memorandum of incorporation of the company or its articles of association, or from the errors, negligence or shortcoming issued by them in the performance of their businesses. And every condition providing otherwise is considered as if it did not exist" - paragraph (1) of Article (28) of the Companies Law (Umm Al-Qura)

And three principles are derived from this rule: the first is that the liability is joint and several among all the members of the board of directors towards four parties which are the company, the partners, the shareholders and third parties; and the second is that the causes of the liability are four: the violation of the provisions of the Law, and the violation of the memorandum of incorporation of the company or its articles of association, and the errors issued by them, and the negligence or shortcoming issued by them in the performance of their businesses, and these causes extend to the decisions issued by the board and the businesses implemented based on them; and the third is that the rule of the joint and several liability is a mandatory rule that may not be violated by the agreement of the parties, as "every condition providing otherwise is considered as if it did not exist", so the agreement in the articles of association of the company or in a contract with the member on exempting him from this liability or restricting it in a manner contrary to the Law is not valid.

The Personal and Joint Liability: The Effect of the Opposition and the Absence on the Exemption

Paragraph (2) of Article Twenty-Eight of the Companies Law distributes the liability among the members according to a flexible rule: "the liability is either personal attaching to a manager or a member himself, or joint on all the managers or all the members of the board of directors if the decision was issued by their consensus", so if the decision was issued by all of them by consensus, the joint liability attaches to all of them, and if the decision was issued by the act of an individual alone, the personal liability is confined to its doer, and if the individual acts multiplied, the liability is distributed according to each act.

And the text addresses the effect of the opposition on the liability by a precise procedural rule: "and if the decision was issued by the majority of the opinions, the opposing managers or members are not liable once they proved their opposition explicitly in the minutes of the meeting", so it is not sufficient for the opposing member to express a verbal reservation, but it is required that he prove his opposition explicitly in the minutes of the meeting to be a place for the exemption from the liability, which makes the recording of the reservations in the minutes an essential preventive practice for the member of the board. And the text regulates the effect of the absence by a reverse rule: "and the absence from attending the meeting in which the decision is issued is not considered a reason for the exemption from the liability unless it is proven that the absent manager or member did not know of the decision or was unable to object to it after his knowledge of it", so the criterion is not the mere absence but the proof of the lack of knowledge of the decision or the inability to object after the knowledge of it, and otherwise the absent member remains liable for the decision of the board.

The Insurance Coverage for the Liability of the Board of Directors Members

Paragraph (3) of Article Twenty-Eight of the Companies Law permits the company to provide insurance coverage for its members against the liability, as "the company may provide insurance coverage for its manager or the member of its board of directors during the period of his work or membership against any liability or claim arising due to his capacity", and it is the license on which the insurance policies against the liability of the board of directors members and the executive managers are based, by covering the claims arising by virtue of the capacity of the member in managing the company, within the limits determined by the insurance contract and in accordance with the controls of the insurance market, with the personal liability of the member remaining established towards the company, the shareholders and third parties by virtue of the general rule referred to, as the insurance is not an exemption from the liability but rather a means to cover its financial burdens.

And it is observed that the text was formulated in the form of permission not obligation: so the company may provide this coverage and is not obligated to do so, which makes the liability insurance policies an optional practice adopted by the listed companies usually within the governance policies and the preservation of the shareholder rights, without diminishing the fact that "every condition providing otherwise is considered as if it did not exist" in the scope of the joint and several liability itself.

The Liability Actions: The Company's Suit, the Derivative Action and the Personal Suit

Article Twenty-Nine of the Companies Law (The Company's Suit and the Partner's or Shareholder's Suit) organizes the means of claiming the liability in four paths: the first is the suit of the company itself, which "is decided by the partners, the general assembly or the shareholders to raise this suit and appoint whoever represents the company in pursuing it", so if the company was in the liquidation phase, the liquidator undertakes the raising of the suit, and if the liquidation procedures were opened against the company in accordance with the Bankruptcy Law, the raising of the suit is by whoever legally represents it; and the second is the derivative action which "may be raised by one or more partners or shareholders representing (five percent) of the capital of the company, unless the memorandum of incorporation of the company or its articles of association provide for a lower percentage, of the liability suit established for the company in the event of the failure of the company to raise it", provided that the primary objective of the raising of the suit is the achievement of the interests of the company, and that the suit be based on a sound basis, and that the plaintiff be in good faith, and a partner or shareholder in the company at the time of the raising of the suit; and the third is a prior notification procedure, as "it is required for the raising of the suit referred to in paragraph (2) of this article; the informing of the manager of the company or the members of its board of directors -as the case may be- of the intention to raise the suit before (fourteen) days at least from the date of raising it"; and the fourth is the personal suit, as "the partner or the shareholder may raise his personal suit on the manager or the members of the board of directors if the error issued by them would cause a special damage to him".

And the dual guarantee results from these paths: so the shareholder who suffered a general damage by the act of the members of the board of directors ascends to the company in his claim by the derivative action after exhausting the invitation of the company to raise it and the informing of the board before (fourteen) days at least, while the shareholder who suffered a direct special damage ascends with his independent personal suit without the need for the previous procedures, in a manner in which the Law decides in it "the raising of the liability suit" as an original right among the rights attached to the share established in Article One Hundred and Seven of the Law.

The Impediments of Hearing the Suit: The Prescription and the Non-Effect of the Discharge of the Liability

Article Thirty of the Companies Law (The Non-Hearing of the Suit) regulates the scope of hearing the liability suits on the managers and the members of the board of directors by two rules: the first is that "the consent of the partners, the general assembly or the shareholders -as the case may be- on the discharge of the liability of the manager or the members of the board of directors does not prevent the raising of the suits in accordance with Article (Twenty-Nine) of the Law", so the text explicitly decides the non-effect of the discharge of the liability decided by the general assembly on the right of the shareholders in the raising of the liability suits in accordance with Article Twenty-Nine, so the discharge of the liability becomes a mere administrative statement that does not forfeit the right in the statutory claim; and the second is the rule of the prescription associated with the exception of forgery and fraud: "except for the two cases of forgery and fraud, the liability suit is not heard after the lapse of (five) years from the date of the end of the fiscal year of the company in which the harmful act occurred, or (three) years from the end of the work of the manager or the membership of the member in the concerned board of directors, whichever is later".

And the flexible prescription means that the later period is the one that determines the ceiling of the hearing: for it is either (five) years counted from the date of the end of the fiscal year in which the harmful act occurred, or (three) years counted from the date of the end of the work of the manager or the membership of the member, so the later of them is adopted, which ensures that the member does not escape the accountability merely by leaving his position before the disclosure of the damage, with the two cases of forgery and fraud remaining outside the scope of this prescription, as the liability suit in them is heard without restriction by these periods.

The Conflict of Interest, the Disclosure and the Loans: A Special Liability of the Businesses and Contracts

The civil liability also arises on the violation of the provisions of the conflict of interest, as Article Twenty-Seven of the Companies Law (The Conflict of Interest, the Competition and the Exploitation of the Assets) prohibits that the member of the board of directors has "any direct or indirect interest in the businesses and contracts concluded on account of the company, except with a license from the partners, the general assembly or the shareholders or whoever they delegate", and prohibits his participation in any business that would compete with the company or compete with it in any branch of the activity it practices except with a license, and prohibits the exploitation of the assets of the company, its information or the investment opportunities presented to him by virtue of his capacity or presented to the company to achieve an interest for him, with exceptions determined by the text including the businesses and contracts concluded in accordance with a public competition, and the businesses and contracts aimed at meeting the personal needs if they were concluded with the same conditions and terms that the company follows with the general public and were within its usual activity, and any other businesses or contracts determined by the regulations in a manner not inconsistent with the interest of the company, and the violation of the provision of the interest results in "the claim before the competent judicial body for the nullification of the contract, and the obliging of him to pay any profit or benefit achieved for him from that", and the violation of the provision of the competition results in the claim for "the appropriate compensation".

And Article Seventy-One of the Companies Law (The Disclosure of the Interest in the Businesses and Contracts) tightens this organization for the joint stock companies: so the member of the board of directors must, "immediately upon his knowledge of any interest for him, whether direct or indirect, in the businesses and contracts concluded on account of the company, inform the board of that, and this informing is established in the minutes of the meeting of the board", and "it is not permissible for this member to participate in the voting on the decision issued in this regard in the board and the general assemblies", and the board must inform the general assembly upon its convening of those businesses and contracts and attach to the informing "a special report from the auditor of the company prepared in accordance with the auditing standards adopted in the Kingdom", and if the member fell short in the disclosure, "it is permissible for the company or for any interested party to claim before the competent judicial body the nullification of the contract or the obliging of the member to pay any profit or benefit achieved for him from that", and the liability for the resulting damages falls on the interested member and on the members of the board of directors upon their shortcoming or their negligence or if it was proven that the businesses and contracts were unfair or involve a conflict of interests and cause damage to the shareholders, with the exemption of the opposers among them whenever they proved their opposition explicitly in the minutes of the meeting, and the absence not being considered an exemption except by the proof of the lack of knowledge of the absent member or his inability to object. And Articles Sixty-Four and Sixty-Six of the Regulations of Listed Joint Stock Companies regulate the mechanism of the licensing for the listed companies, as it is permissible for the ordinary general assembly to delegate to the board the licensing of the businesses and contracts which do not exceed in their total less than (1%) of the revenues of the company in accordance with the latest audited financial statements and less than ten million Saudi riyals, and the interest is considered indirect -by way of example not limitation- if the businesses and contracts achieve benefits for the relatives of the member of the board of directors or for a company in which the member or his relatives own (five percent) or more of its total shares, and this is accompanied by the rule of Article Forty-Two of the Corporate Governance Regulations (The Avoidance of the Conflict of Interest) which obliges the member to practice his tasks with honesty and integrity and not to exploit his position, and not to participate in the deliberations and the voting on the matters in which he has an interest, and to preserve the confidentiality of the information, and prohibits on him the exploitation of or the benefit from the assets of the company, its information or its investment opportunities, even after his resignation, if he knew of them during his membership.

And the prohibition of loans is considered among the most prominent forms of the special liability, as Article Seventy-Two of the Companies Law (The Granting of Loans) provides that "it is not permissible for the joint stock company to grant a loan of any kind to any of the members of its board of directors, and it is not permissible for it to conclude any guarantee or provide any securities relating to a loan concluded by any of them with third parties", and this applies to every loan, guarantee or security provided to any of his relatives, and "every contract concluded in violation of that is considered void", and "the company has the right to claim the violator before the competent judicial body for the compensation of what may befall it of damage", with two exceptions determined by the text: the banks and the other financing companies within the limits of their purposes and with the conditions and terms they follow with the public, and the loans and the guarantees granted by the company in accordance with the programs of incentivizing its employees that were approved in accordance with the provisions of the articles of association of the company or by a decision of the general assembly, and this prohibition is met by the penalty of the violation provided in Article (Two Hundred and Sixty-Two) of the Law for every member who obtained from the company a guarantee or a loan in violation of its provisions.

The Criminal Liability: The Grave Offenses, the Less Grave Offenses and the Violations

Chapter Thirteen of the Companies Law (The Penalties) arranges the criminal penalties on three levels of gravity, opened by Article Two Hundred and Sixty (The Penalties of the Grave Offenses) which provides that "without prejudice to any penalty provided by another law, he is punished by imprisonment for a period not exceeding (three) years and by a fine not exceeding (5,000,000) five million riyals, or by one of these two penalties" three categories of the violators: first every manager or official or member of the board of directors or auditor or liquidator "who deliberately recorded false or misleading data or information in the financial statements of the company or in the reports he prepares or in the data relating to the decrease of the capital of the company or the sufficiency of its assets to pay its debts upon the liquidation, and the other reports and data presented to the partners or the general assembly or the shareholders in accordance with the provisions of the Law, or deliberately omitted the mention of a material fact in any of the foregoing with the intention of showing the financial position of the company in a manner contrary to the truth"; and second every manager or official or member of the board of directors "who uses the funds of the company or the powers he enjoys or the votes he holds by that capacity, a use he knows is against the interests of the company; to achieve personal purposes, or to favor a company or a person, or to benefit from a project or a transaction in which he has a direct or indirect interest"; and third every liquidator who uses the funds of the company or its assets or its rights with third parties a use he knows is against the interests of the company or deliberately causes damage to the partners or the shareholders or the creditors to achieve personal purposes or to prefer one creditor over another without a legitimate cause.

And Article Two Hundred and Sixty-One (The Penalties of the Less Grave Offenses) punishes by imprisonment for a period not exceeding (one) year and by a fine not exceeding (1,000,000) one million riyals or by one of these two penalties categories connected with the members of the board of directors and the managers, of which the most prominent: every one who decided the distribution of profits or returns or distributed them or received them in bad faith in a manner violating the provisions of the Law or the memorandum of incorporation or the articles of association, and every manager or official or member of the board of directors or auditor "who did not call the general assembly of the partners or the shareholders -or did not take what is necessary for that as the case may be- upon his knowledge of reaching the losses the limits estimated in accordance with the provisions of Articles (One Hundred and Thirty-Two) and (One Hundred and Eighty-Two) of the Law", and they are the two articles of the losses of the joint stock company which oblige its board of directors to disclose if its losses reached (half) of the issued capital within (sixty) days from the date of its knowledge of them and to call the extraordinary general assembly to meet within (one hundred and eighty) days, and the losses of the limited liability company which oblige its manager to call the general assembly of the partners to meet within (sixty) days if the losses reached half of its capital, in addition to every one who exploited or disclosed a secret of the secrets of the company with the intention of harming it, and every one who deliberately obstructed the work of those who have the right to inspect the papers of the company, its documents, its accounts, its records and its instruments or refrained from enabling them to perform their work, and every one who obtained benefits or a guarantee or a promise thereof in return for voting in a certain direction or not participating in the voting with the aim of harming the interests of the company, as well as every one who granted or guaranteed or promised those benefits.

And Article Two Hundred and Sixty-Two (The Penalties of the Violations) punishes by a fine not exceeding (500,000) five hundred thousand riyals categories connected directly with the performance of the members of the board of directors of their duties, of which the most prominent: every one who caused the obstruction of the call of the general assembly or its convening, or prevented a partner or a shareholder from participating in one of the assemblies or from enjoying the voting rights attached to his shares in violation of the provisions of the Law, and every one who did not perform his duty in calling the general assembly to convene within the prescribed period in accordance with the provisions of the Law, and "every one who accepted his appointment as a member in the board of directors of a joint stock company or remained enjoying the membership in it in violation of the provisions prescribed in the Law, and every member of the board of directors of a company in which these violations occur and was aware of them and did not object to them in accordance with the provisions of the Law", and every member in the board of directors of a joint stock company who obtained from the company a guarantee or a loan in violation of the provisions of the Law and every member aware of them who did not object, and every one who violated his duty in preserving the accounting records and preparing the financial statements in accordance with the adopted accounting standards or depositing them, and every one who neglected in preparing the minutes of the meetings and recording them in accordance with the provisions of the Law, and every one who deliberately recorded in the documents of the company unreal data or data in violation of the provisions of the Law.

And these penalties are complemented by general mechanisms regulating their estimation: so Article Two Hundred and Sixty-Three (The Determination of the Penalty) provides for taking into account the gravity of the crime or the violation and its circumstances and its particulars and its effects, and multiplies in the case of the recidivism the penalties prescribed for the grave offenses and the less grave offenses, and every one "who committed the same crime regarding which a final judgment or decision of conviction was issued within (three) years from the date of the issuance of that judgment or decision" is considered a recidivist; and Article Two Hundred and Sixty-Four (The Alternative Penalties) arranges for the competent judicial body to take in addition to the penalties or instead of them any of: the warning of the concerned person, or the obliging of him to take the necessary steps to avoid the occurrence of the crime or the corrective steps to address its effects, or the obliging of him to stop or refrain from the work subject of the suit, or the prohibition from the membership in the board of directors of the joint stock company listed on the financial market, which is the penalty that affects the continuation of the member in his seat with a direct effect.

And the competence over the moving of the criminal suit and its consideration is regulated: so Article Two Hundred and Sixty-Five provides that "the Public Prosecution is competent over the investigation and the prosecution in the crimes provided in Articles (Two Hundred and Sixty) and (Two Hundred and Sixty-One) of the Law"; and Article Two Hundred and Sixty-Six (The Competent Judicial Body) determines that "the competent court undertakes the consideration and the adjudication of all the civil and criminal suits and the disputes arising from the application of the provisions of the Law and the regulations" except for what relates to the joint stock companies listed on the financial market which is undertaken by the "Committee for the Resolution of Securities Disputes" in the complaints against the decisions of the Authority and all the civil and criminal suits relating to them; and Article Two Hundred and Sixty-Seven (The Committee for the Consideration of the Violations) establishes by a decision of the Minister a committee "of members whose number does not fall short of three, chaired by a person with a statutory qualification" competent over the consideration of the violations of Article (Two Hundred and Sixty-Two) except for the violations relating to the listed companies which the Board of the Authority is competent to inflict their penalties, with the right of the person against whom the penalty decision was issued to complain before the competent court "within (thirty) days from the date of the notification of it"; and the employees charged with the seizure of the acts by a decision of the competent body have the capacity of the criminal seizure in proving the crimes and the violations and retaining what they see related to them of records and documents in accordance with Article Two Hundred and Sixty-Eight; and Article Two Hundred and Sixty-Nine (The Claim for the Compensation) decides the rule of the meeting of the two liabilities: "the application of the penalties provided in this chapter does not prejudice the right of any person in claiming every one who caused him damage as a result of the commission of any of the crimes and the violations provided in the Law for the compensation", so the criminal penalty does not substitute the civil compensation but meets with it.

The Official Sources and References

This article relied on the following official statutory sources, which are the reliable source of all the texts and numbers contained in the sections above, and the review from these official links for the full texts and the latest updates is always preferred:

• The Companies Law issued by Royal Decree No. (M/132) dated 1/12/1443H - the full text in the Official Gazette (Umm Al-Qura)
• The Implementing Regulations of the Companies Law issued dated 25/6/1444H - the full text in the Official Gazette (Umm Al-Qura)
• The Implementing Regulations of the Companies Law for Listed Joint Stock Companies - the full text in the Official Gazette (Umm Al-Qura)
• The Corporate Governance Regulations - the full text in the Official Gazette (Umm Al-Qura)

Methodological note: all the numbers, the dates, the competences and the degrees of the binding force conveyed in this article were stated verbatim from the official texts mentioned above published in the Official Gazette (Umm Al-Qura), and the texts of the articles are read as stated in their statutory source without alteration, and it is advised to refer to these sources to verify any later updates to the texts and their effect on the obligations arising.

Frequently Asked Questions About the Liability of the Board of Directors Members

In the following we present answers to the most frequently asked questions among the members of the boards of directors, the shareholders and the governance practitioners about the civil and criminal liability of the board of directors members in the Saudi companies in accordance with the Companies Law and its implementing regulations:

The Conclusion: A Balanced Liability That Safeguards the Company and Preserves the Shareholder Rights

The governing rules of the liability of the board of directors members in the Saudi companies are summarized in three axes: the commitment to the seven duties of care and loyalty which precede the liability and determine the standard of the behavior of the member, so whoever committed to them fulfilled the trust and whoever violated them or erred or neglected or fell short placed himself in the position of the accountability; and the civil liability based on the joint and several liability in compensating the company, the partners, the shareholders and third parties, with the criterion of the exemption by the explicit opposition proven in the minutes of the meeting, and the commitment of the members of the board of their liability even if they delegated, and their non-escape by the consent of the assembly on the discharge of the liability, and a prescription with a flexible range of (five) years from the end of the fiscal year of the harmful act or (three) years from the end of the membership, whichever is later; and the criminal liability graded on three levels of gravity reaching imprisonment for a period not exceeding (three) years and a fine not exceeding (five) million riyals in the grave offenses, and it meets with the civil claim for the compensation without substituting it, and the Public Prosecution and the competent judicial bodies and the committees for the consideration of the violations adjudicate in it according to the type of the company and the degree of the gravity.

And the essential merit of this system is that it balances between the protection of the company and the shareholders from the bad management, and the availability of a reasonable space for the administrative decision of the member of the board working in good faith: so the member who proves his opposition explicitly in the minutes escapes the liability for the decision of the majority, and the absent member is not exempted except by the proof of his lack of knowledge or his inability to object, and the joint and several liability transforms into a personal or joint liability according to the nature of the decision, and the insurance coverage protects the careful member from the burdens of the legitimate claims without detracting from his liability. In Nova Legal for Law and Legal Consultations, we provide our specialized consultations in the affairs of the corporate governance and the liability of the boards of directors, and the review of the articles of association of the companies and the policies of the conflict of interest and the extent of their alignment with the provisions of the Companies Law and its implementing regulations, and the defense of the members of the boards of directors or the representation of the companies and the shareholders in the civil and criminal liability suits, and the arrangement of the insurance coverages for the policies of the directors' liability insurance, and we are pleased to accompany you towards a rational governance that preserves the company and safeguards the rights of its shareholders.