The endowment trustee (Nadhir) in Saudi Arabia is the central figure in managing and developing endowment assets and fulfilling the objectives of founders (waqifs). The trustee bears primary responsibility for preserving the endowed asset (corpus), investing its proceeds, and distributing them to beneficiaries in accordance with Sharia law and applicable regulations. With the major legislative developments the endowment sector has witnessed in the Kingdom—through the issuance of the new Endowment System and the establishment of the General Authority for Awqaf—the procedures for appointing and removing an endowment trustee have become clearer and more organized than ever. This comprehensive guide provides a detailed explanation of everything related to the endowment trustee (Nadhir) in Saudi Arabia, from appointment procedures and qualification requirements to removal cases and accountability, as well as rights, duties, and regulatory responsibilities.
The importance of understanding the regulatory procedures for appointment and removal of endowment trustees comes against the backdrop of the government's clear direction toward developing the endowment sector and making it an effective driver of the national economy and a key contributor to developmental work. With the increasing number of officially registered endowments and growing awareness of the importance of professional management of endowment assets, there is an urgent need for qualified trustees capable of fulfilling their responsibilities with efficiency and transparency. This guide provides a comprehensive roadmap for every current or prospective endowment trustee, and for every founder seeking to appoint a trusted and capable person to manage their endowment after their passing.
This article covers: the concept of trusteeship under the Saudi system, regulatory conditions for appointing a trustee, step-by-step appointment procedures, cases of trustee removal and related procedures, trustee rights and duties, regulatory and Sharia responsibilities, and answers to the most frequently asked questions on this vital topic.
The Concept of Endowment Trusteeship in the Saudi System
Endowment trusteeship (Al-Nithara) is a legal and Sharia guardianship over endowment assets and their management, by which the endowment trustee assumes responsibility for supervising, protecting, and developing the endowed property, and disbursing its proceeds to entitled beneficiaries according to the founder's conditions, Islamic law, and applicable regulations. Trusteeship is a great trust and a religious and worldly responsibility, involving the right of God in preserving endowment wealth, the right of the founder in implementing their conditions, and the right of beneficiaries in receiving endowment proceeds.
Saudi regulations have precisely organized the provisions of endowment trusteeship, whether in the new Endowment System issued by Royal Decree No. M/120 dated 20/12/1441 AH, or in the implementing regulations issued by the General Authority for Awqaf. These regulations specify the trustee's qualifications, appointment and removal procedures, powers, obligations, rights, and civil and criminal liability, achieving significant regulatory control over this noble task and protecting the rights of all related parties.
It is important to distinguish between two main types of trusteeship: trusteeship based on appointment by the founder in the endowment deed, and trusteeship based on assignment by a judicial or administrative authority in the absence of a designated trustee or when the trusteeship position becomes vacant. In the first case, the trustee has been chosen by the founder for their person or qualities, and the founder has the freedom to determine the conditions of trusteeship within the bounds of Sharia and the law. In the second case, the competent authority (General Authority for Awqaf or the competent court) appoints the trustee according to specific controls.
Regulatory Conditions for Appointing an Endowment Trustee in Saudi Arabia
Saudi law specifies a set of conditions that must be met by anyone assuming endowment trusteeship to ensure their capacity to fulfill this great task optimally. These conditions can be classified into general and special conditions:
General Conditions
- Legal capacity: The trustee must have full legal and Sharia capacity, be of age, sound mind, and prudent, and not be under any legal guardianship for any reason.
- Trustworthiness and integrity: The trustee must be known for honesty, integrity, and good reputation, and must not have been convicted of any crime involving honor, trust, or financial integrity.
- Competence and ability: The trustee must possess the ability to manage and develop endowment assets, either directly or by engaging a specialized team. This includes basic financial and legal knowledge necessary for managing endowment assets.
- No conflict of interest: The trustee must not be in a position that creates a conflict of interest with the endowment or its beneficiaries, such as being indebted to the endowment or being a party in a dispute with it.
- Saudi nationality: For endowments located within the Kingdom, the trustee must be Saudi unless the endowment deed provides otherwise or the General Authority for Awqaf approves the appointment of a non-Saudi in special cases.
Special Conditions
The founder may add special conditions in the endowment deed for those who will assume trusteeship of their endowment, such as stipulating that the trustee be from their descendants or from a specific category of people, or stipulating multiple trustees or appointment by a specific official body. These conditions are binding as long as they do not conflict with Sharia law or public policy. These conditions must be clear and specific in the endowment deed to avoid future disputes over the trustee's appointment or interpretation of trusteeship conditions. The founder also has the right to establish a mechanism for appointing the trustee after them, such as stipulating that the eldest son assumes trusteeship or that trusteeship transfers to a specific charitable organization after the first trustee's death.
Procedures for Appointing an Endowment Trustee in Saudi Arabia
Procedures for appointing an endowment trustee in Saudi Arabia vary depending on the method of appointment and whether the endowment is new or existing, and whether the trustee is appointed by the founder or by a judicial or administrative authority. Below are the main procedures for each case:
Appointment by the Founder in the Endowment Deed
This is the most common case. The founder, when creating their endowment, appoints a trustee in the endowment deed and specifies their powers, duties, and fees. The endowment deed must be notarized by a notary public or certified by the General Authority for Awqaf. The trustee appointed by the founder has full authority over the endowment within the limits set by the founder and cannot be removed except in cases specified by law. Procedures include: drafting the endowment deed in a legally compliant manner including the trusteeship clause, notarizing the endowment at the notary office or General Authority for Awqaf, delivering a copy of the endowment deed to the trustee, and registering the trustee in the trustees register at the General Authority for Awqaf. This registration is a critical step to ensure official recognition of the trustee and enable them to exercise their powers formally.
Appointment by the General Authority for Awqaf
In the absence of a designated trustee, or when the trusteeship position becomes vacant due to death, removal, or resignation, the General Authority for Awqaf appoints a trustee through the following procedures: submission of a request to the Authority by interested parties (beneficiaries, the founder if still alive, or any relevant entity), the Authority's review of the request and verification that the trusteeship position is vacant, selection of a trustee from among qualified candidates registered in the Authority's approved trustees register, issuance of the appointment decision including the trustee's powers, duties, and fees, notification of the appointed trustee and delivery of a copy of the endowment deed and asset inventory, and publication of the appointment decision in the trustees register. The Authority requires that the appointed trustee possess the experience and competence to manage endowment assets or engage those who do. The Authority also prefers appointing corporate trustees—specialized companies and institutions—to ensure continuity and professional management.
Appointment by the Competent Court
In cases of dispute over trusteeship or when urgent removal of a trustee and appointment of a replacement is needed, the competent court (Personal Status Court or General Court) appoints a temporary or permanent trustee. Judicial appointment procedures include: filing a lawsuit before the competent court by interested parties, the court's examination of evidence related to trusteeship, issuance of a ruling appointing a temporary trustee to preserve endowment assets pending resolution of the dispute, or appointment of a permanent trustee with specified powers and fees. Court decisions on trusteeship matters are appealable according to standard judicial procedures. Judicial appointment ensures impartial trusteeship and systematic resolution of disputes, protecting the rights of all parties.
| Appointment Method | Competent Authority | Duration | Powers | Removability |
|---|---|---|---|---|
| Founder Appointment | Founder in endowment deed | As determined by founder (usually life or fixed term) | Full within deed limits | Very limited (by court order) |
| Authority Appointment | General Authority for Awqaf | Usually 3-5 years, renewable | Per Authority decision | By Authority or court decision |
| Judicial Appointment | Competent court | As specified in court ruling | Per court ruling | By court order |
Rights and Duties of the Endowment Trustee
The position of endowment trusteeship entails a set of rights and duties precisely organized by Saudi law. Understanding these rights and duties is essential for every trustee to perform their tasks efficiently and avoid legal accountability.
Duties of the Endowment Trustee
- Preserving the endowed property: Maintaining the endowment corpus, protecting it, and taking all necessary measures to safeguard it from damage, deterioration, or encroachment. This includes insuring endowed properties, performing periodic maintenance, and monitoring any encroachments or violations related to the endowed property and taking legal action to stop them.
- Investing and developing proceeds: Working to invest surplus endowment funds in safe, Sharia-compliant investments that generate appropriate returns, contributing to increasing endowment proceeds and achieving the founder's developmental objectives. Investment must align with the founder's conditions, Sharia law, and applicable regulations.
- Distributing proceeds to beneficiaries: Distributing endowment proceeds to the beneficiaries specified in the endowment deed according to the ratios and priorities set by the founder and within the specified timelines. The trustee must maintain accurate records of all disbursement operations and supporting documentation.
- Maintaining books and records: Keeping regular accounting records showing all revenues, expenses, assets, and liabilities related to the endowment, and preparing periodic reports on the endowment's status and investment performance.
- Submitting periodic reports: Submitting periodic reports (at least annually) to the General Authority for Awqaf and beneficiaries on the endowment's status, including financial and administrative conditions and key achievements and challenges.
- Complying with endowment deed provisions: Implementing the founder's conditions as specified in the endowment deed with precision and integrity, and not departing from or exceeding them except within the bounds permitted by Sharia and law.
Rights of the Endowment Trustee
- Receiving fees: The trustee is entitled to receive fees for managing the endowment, determined according to one of the following: what the founder specified in the endowment deed, what is agreed with the General Authority for Awqaf, or what is assessed by the competent court. Trustee fees are typically estimated as a percentage of the annual endowment proceeds (ranging from 5% to 15% depending on the endowment's size and nature of management required).
- Reimbursement of expenses: The trustee is entitled to recover all necessary and reasonable expenses incurred from personal funds in managing and preserving the endowment, such as notarization fees, emergency maintenance costs, and fees for legal and financial advisors.
- Engaging third parties: The trustee has the right to engage employees, advisors, and contractors to perform administrative, investment, and legal tasks, with the endowment bearing these costs within reasonable limits.
- Requesting discharge: The trustee has the right to request discharge from trusteeship duties at any time, provided that relevant authorities (the Authority or court) are notified in advance and all endowment assets and records are delivered to the new trustee in an organized and complete manner.
Grounds and Procedures for Removing an Endowment Trustee
Saudi law specifies the cases in which removal of an endowment trustee is permitted or required, protecting the endowment and beneficiaries from any negligence or violation. The grounds for removal range from breach of regulatory duties to loss of eligibility and competence.
Grounds for Removal of an Endowment Trustee
- Gross breach of duties: Such as negligence in preserving the endowed property, failure to maintain it leading to damage, refusal to distribute proceeds to beneficiaries without legal justification, or investing in prohibited activities or those contrary to the founder's conditions.
- Breach of trust: Dealing with endowment funds for personal benefit, embezzling proceeds or part thereof, or exploiting the trusteeship position for personal gain at the expense of the endowment and beneficiaries.
- Loss of capacity: Such as the trustee suffering a mental condition rendering them unable to manage, being declared bankrupt, or being finally convicted of a crime involving honor, trust, or financial integrity.
- Continuing conflict of interest: The trustee entering a situation of permanent conflict between personal interest and the endowment's interest, such as becoming the exclusive beneficiary of the endowment or a party in a dispute with it.
- Trustee resignation or request for discharge: If the trustee submits a discharge request for legitimate reasons such as illness, extended travel, or inability to perform duties.
- Death of the trustee: Trusteeship automatically terminates upon the trustee's death. Their heirs must notify the General Authority for Awqaf within thirty days of the death date and deliver endowment assets to the new trustee or to the Authority pending appointment of a replacement.
Procedures for Removing an Endowment Trustee
Procedures for removing an endowment trustee are subject to the following regulatory controls: if the trustee was appointed by the founder, removal is only possible by court judgment based on a lawsuit filed by interested parties (beneficiaries, the General Authority for Awqaf, or any entity with an interest), establishing one of the legally prescribed grounds for removal. If the trustee was appointed by the General Authority for Awqaf, the Authority may remove them by a reasoned decision after warning, hearing their statements, and investigating their defenses. In all cases, the removal decision must include appointment of a replacement trustee or assignment of a temporary entity to manage the endowment pending appointment of a new trustee. The removal decision is recorded in the trustees register at the General Authority for Awqaf and notified to all relevant parties. The removed trustee has the right to appeal the removal decision before the competent court within sixty days of notification.
It is important to emphasize that removal procedures must observe the principle of two-tier litigation and be characterized by transparency and objectivity. Arbitrary or unjustified removal is legally invalid, and the issuing entity bears liability for any damage caused to the trustee or the endowment as a result of such unlawful removal.
Legal Liability of the Endowment Trustee
The scope of endowment trustee liability under Saudi law encompasses three types: civil, criminal, and disciplinary. This liability aims to ensure the highest levels of protection for endowment assets and achieve maximum accountability and transparency in endowment management.
Civil liability: Arises when the trustee, through fault, negligence, or omission, causes damage to the endowment or beneficiaries. The trustee is obligated to compensate the endowment for any losses resulting from breach of regulatory duties, whether due to negligence in preservation or maintenance, poor investment of endowment proceeds, or unauthorized disposal of endowment assets. The trustee is not liable for losses resulting from normal market fluctuations or force majeure beyond their control, provided they have met the standard of due care and exercised reasonable effort in endowment management.
Criminal liability: Penalties for misuse of endowment funds can extend to imprisonment. The new Endowment System prescribes penalties including imprisonment and fines for embezzlement of endowment funds, unauthorized disposal thereof, or forgery of endowment-related records and documents. Penalties are doubled if the act results in depriving beneficiaries of their rights or exposing the endowed property to damage or destruction.
Disciplinary liability: Trustees are subject to disciplinary accountability by the General Authority for Awqaf for breach of regulatory duties that does not rise to the level of a criminal offense. Disciplinary penalties include: warning, administrative fine, temporary prohibition from practicing trusteeship, or permanent removal from the trustees register. The Authority exercises its disciplinary powers according to regulatory procedures guaranteeing the trustee's right to defend themselves and submit requests and defenses before the penalty is imposed.
To avoid these liabilities, trustees are advised to engage specialized legal advisors in endowment matters to ensure full compliance with relevant laws and regulations. Nova Legal for Law and Legal Consulting provides specialized advisory services to trustees in all matters related to endowment management, regulatory compliance, and protection of endowment assets.
Institutional Trusteeship and the Role of Companies in Endowment Management
Recent years have witnessed a growing trend toward institutional trusteeship in Saudi Arabia, where specialized companies and institutions manage endowments instead of individuals. The General Authority for Awqaf encourages this trend due to its many advantages: institutional continuity unaffected by the trustee's death or changing circumstances, professional management and investment through specialized personnel, application of institutional governance and transparency standards, and the ability to handle large and diverse endowments requiring multi-disciplinary management.
Endowment management companies are subject to licensing and supervision by the General Authority for Awqaf and must meet capital adequacy, institutional governance, and periodic disclosure requirements. They must also have an internal Sharia supervisory board ensuring all investments and management comply with Sharia controls. The law allows the founder to appoint a specialized company as trustee from the outset, and the Authority or court may appoint an endowment management company when the trusteeship position becomes vacant, especially for large endowments requiring specialized professional management. The transition from individual trusteeship to institutional trusteeship represents a natural evolution for the endowment sector in the Kingdom, aligning with global best practices in endowment asset management and maximizing developmental returns for society.
Frequently Asked Questions About Endowment Trustees in Saudi Arabia
Below are answers to the most common questions about endowment trustees in Saudi Arabia, their appointment and removal procedures, rights, and duties:
Who has the right to appoint an endowment trustee in Saudi Arabia?
The founder has the right to appoint a trustee in the endowment deed at the time of creation. If no trustee is appointed or the position becomes vacant, the General Authority for Awqaf appoints a trustee. The competent court may also appoint a trustee in cases of dispute or when removal of the current trustee and appointment of a replacement is needed.
What are the procedures for appointing an endowment trustee in Saudi Arabia?
Procedures vary by appointment method. Founder appointment involves naming the trustee in the endowment deed notarized at a notary office. Authority appointment involves submitting a request and selecting a trustee from the approved trustees register. Judicial appointment involves filing a lawsuit and obtaining a court ruling. In all cases, the trustee must be registered in the trustees register at the General Authority for Awqaf.
Can an endowment trustee be removed? What are the grounds for removal?
Yes, an endowment trustee can be removed for: gross breach of duties such as negligence in preserving the endowed property or refusal to distribute proceeds, breach of trust such as embezzlement, loss of legal capacity, continuing conflict of interest, or upon the trustee's own request for discharge. Removal of a trustee appointed by the founder requires a court judgment.
What are the endowment trustee's financial rights?
The trustee is entitled to fees determined by the founder, the Authority, or the court, typically ranging from 5% to 15% of annual endowment proceeds. The trustee is also entitled to reimbursement of all necessary expenses incurred from personal funds in managing and preserving the endowment.
What is the legal liability of the endowment trustee?
Trustee liability includes: civil liability (compensating the endowment for losses caused by fault or negligence), criminal liability (imprisonment and fines for embezzlement or forgery), and disciplinary liability (warning, administrative fine, or removal from the trustees register).
Conclusion: Toward Professional Endowment Trusteeship
The endowment trustee (Nadhir) in Saudi Arabia is a fundamental pillar in the system of developing the endowment sector and achieving its developmental objectives. With the new regulations and advanced regulatory framework provided by the General Authority for Awqaf, trusteeship has become an organized institutional profession subject to precise standards of transparency, accountability, and professionalism. It is no longer sufficient for the trustee to be merely trustworthy; they must also be capable of managing endowment assets efficiently and proficiently, engaging specialized legal and financial expertise to maximize returns for the endowment and its beneficiaries.
We invite all current and prospective trustees to stay informed of the regulations and instructions issued by the General Authority for Awqaf, benefit from the training and qualification programs it offers, and engage specialized legal advisors to ensure full compliance with regulatory requirements. At Nova Legal for Law and Legal Consulting, we provide specialized advisory services to trustees in all endowment-related matters, from drafting endowment deeds and registration procedures to handling disputes and regulatory compliance requirements. We look forward to accompanying you on your journey toward professional endowment trusteeship that fulfills founders' objectives and serves the community.