Disclosure, Transparency and Annual Report Requirements under the Saudi Companies Law: The Complete Legal Guide | Nova Legal

The Statutory Framework of the Disclosure and the Transparency: From the Accounting Records to the Annual Reports

The requirements of the disclosure and the transparency are organized in the Companies Law issued by Royal Decree No. (M/132) in a graded framework starting from Article Seventeen (The Accounting Records and the Financial Statements) which puts the general rule in the retention of the records and the preparation of the financial statements and their deposit, and passes by Article Eighteen (The Appointment of the Auditor of the Company, his Removal and his Resignation) and Article Nineteen (The Non-Application of the Requirement of the Appointment of an Auditor) and Article Twenty (The Obligations of the Auditor of the Company), then Article Eighty-Seven (The Competencies of the Ordinary General Assembly), Article Eighty-Eight (The Meeting of the Ordinary General Assembly) and Article One Hundred (The Issuance of the Decision by Circulation) which regulates the review of the shareholders and their discussion, then Article One Hundred and Twenty-One (The Financial Statements and a Report on the Activity of the Company) and Article One Hundred and Twenty-Two (The Provision of the Shareholders with the Financial Statements and their Deposit) which determine the deadlines of the preparation, the provision and the deposit.

And added to the statutory origin are three regulatory levels: the Implementing Regulations of the Companies Law for Listed Joint Stock Companies which decide in their Article Two that the deposit of the financial statements, the report of the board of directors and the report of the auditor is in accordance with the provisions of the disclosure contained in the Rules of the Offering of Securities and the Continuing Obligations, and regulate in their Article Three the duration of the work of the auditor and the partner supervising the audit, and organize in their Article Thirteen the convening of the meetings of the general assemblies and the participation in them by means of the modern technical means, and impose the disclosure of the remuneration of the board of directors members, the treasury shares and the profits in their Articles Twelve, Twenty and Forty-Eight; and the Corporate Governance Regulations issued by the Board of the Capital Market Authority which aim in particular at "achieving the transparency, the integrity and the justice in the financial market and its transactions and the business environment and enhancing the disclosure in it", and detail the disclosure policies and their procedures in their Article Eighty-Six, and the contents of the report of the board of directors in their Article Eighty-Seven, and the report of the audit committee in their Article Eighty-Eight, and the disclosure of the board of directors members in their Article Eighty-Nine, and the disclosure of the remuneration in their Article Ninety, and the retention of the documents in their Article Ninety-Three.

And these texts are read integrated: for the Law puts the general rules of the records, the financial statements, the auditor and the deadlines of the reports, and the Listed Joint Stock Companies Regulations add the controls specific to the companies listed on the financial market including the duration of the work of the auditor and the modern technical means, and the governance regulations draw the detailed standards of the transparency and the disclosure in the annual report, and the provisions of the regulations do not lack the referral to the statutory texts, the Rules of the Offering of Securities and the Continuing Obligations and the Listing Rules whenever the provisions require detail in the statutory origin.

The Accounting Records and the Financial Statements: The General Rule in Article Seventeen

Article Seventeen of the Companies Law (The Accounting Records and the Financial Statements) decides in its first paragraph an essential accounting duty: "the company must retain the accounting records and the supporting documents to clarify its businesses, its contracts and its financial statements in the main center of the company or in any other place determined by the manager of the company or its board of directors", and it is a general provision applying to all the companies subject to the Law, then the second paragraph decides the central rule of the preparation of the financial statements and their deposit:

"The financial statements of the company must be prepared at the end of every fiscal year in accordance with the adopted accounting standards in the Kingdom, and these statements are deposited in accordance with what the regulations determine within (six) months from the date of the end of the fiscal year" - paragraph (2) of Article (17) of the Companies Law (Umm Al-Qura)

And three principles are derived from this rule: the first is that the standard of the preparation of the financial statements is the adopted accounting standards in the Kingdom and not others, so the financial statements are not statutory unless prepared in accordance with these standards; and the second is that the preparation of the statements must be at the end of every fiscal year, and the Law defined the fiscal year in Article Sixteen as (twelve) months determined in the memorandum of incorporation of the company or its articles of association, with the permissibility of determining the first fiscal year with no less than (six) months and no more than (eighteen) months; and the third is that the deposit must occur within (six) months from the date of the end of the fiscal year in accordance with what the regulations determine, so the period is statutory and it is not permissible to exceed it.

And Article Seventeen includes supporting provisions for the consolidated statements: so if the preparation of the preliminary or annual financial statements requires the controlling company or the company which owns shares or stocks in the capital of another company to obtain information from the controlled company or the company in whose capital shares or stocks are owned, it must provide this information to the extent that enables the controlling or owning company to prepare its financial statements in accordance with the adopted accounting standards in the Kingdom, and the Authority may set the controls for the provision of these information by the joint stock companies listed on the financial market, which ensures the soundness of the consolidated financial statements at the level of the group.

The Auditor: The Appointment, the Removal, the Resignation and the Duration of the Work

Article Eighteen of the Companies Law (The Appointment of the Auditor of the Company, his Removal and his Resignation) organizes the independent control over the accounts, as its first paragraph provides that "the company shall have an auditor (or more) among the auditors licensed in the Kingdom, appointed by the partners or the general assembly or the shareholders, as the case may be, who determine his fees, the duration and the scope of his work, and it is permissible to reappoint him", and the delegation of the regulations in determining "the maximum limit of the duration of the work of the auditor, whether an individual or a company, and the partner therein supervising the audit", and it is the delegation used by Article Three of the Listed Joint Stock Companies Regulations which decided that "the ordinary general assembly appoints an auditor and determines his fees, the duration and the scope of his work", and that "the total duration of the work of the auditor must not exceed seven consecutive or separate fiscal years", and the Authority may, based on its estimation, amend this duration for any company or sector, and the duration is recalculated after the lapse of no less than three consecutive fiscal years from the date of the expiry of the last fiscal year in which he worked on auditing the accounts of the company, and likewise the partner supervising the audit work with a maximum of seven fiscal years with the recalculation of the duration after the lapse of no less than five consecutive fiscal years.

And the second paragraph of Article Eighteen organizes the removal: "it is permissible for the partners or the general assembly or the shareholders -as the case may be- to remove the auditor, without prejudice to his right in the compensation for the damage befalling him if he has a justifiable cause", and "the manager or the chairman of the board of directors must inform the competent body of the removal decision and its causes, within a period not exceeding (five) days from the date of the issuance of the decision", so the removal, although permissible, is bound by the urgent statutory informing within five days with the statement of the causes.

And the third paragraph organizes the resignation: "the auditor may resign from his mission by a written informing presented to the company, and his mission ends from the date of its presentation or at a later date he determined in the informing, without prejudice to the right of the company in the compensation for the damage befalling it if it has a justifiable cause", and the resigning auditor must present to the company and the competent body upon the presentation of the informing "a statement of the causes of his resignation", and the manager of the company or its board of directors must call the partners or the shareholders to the meeting or the general assembly to convene "to consider the causes of the resignation and appoint another auditor", so the resignation of the auditor does not leave the company without control but obliges the calling of the competent bodies immediately to fill the position.

The Obligations of the Auditor and the Exception of the Micro and Small Companies

Article Twenty of the Companies Law (The Obligations of the Auditor of the Company) details the controls of the work of the auditor, as it begins with the rule of the independence: "the auditor of the company must be characterized by the independence in accordance with what the adopted professional standards in the Kingdom determine", then prohibits the prohibited combination forms: "it is not permissible to combine between the work of the auditor and the participation in the establishment of the company whose accounts he audits or its management or the membership of its board of directors", and the auditor may not be "a partner of any of the founders of the company or its managers or the members of its board of directors, or an employee of his, or a relative of his", and he may not buy shares or stocks in the company whose accounts he audits or sell them during the period of the audit, and he may not perform a technical, administrative or advisory work in the company or for its benefit except for what the regulations determine, so the conflict of the interests of the auditor with the company impairs the objectivity of the control and affects the integrity of the financial statements.

And Article Twenty grants the auditor the full review power: "the auditor may -at any time- review the documents of the company, its accounting records and the supporting documents, and he may request the data and the clarifications which he deems necessary to obtain to verify the assets of the company and its obligations", and the manager of the company or its board of directors must enable him to perform his duty, and if the auditor encounters a difficulty he proves that in a report presented to the manager or the board of directors, and if his work was not facilitated he must request them to call the partners or the shareholders to convene to consider the matter, and it is permissible for the auditor to direct this call if the manager or the board of directors did not direct it within (thirty) days from the date of the request of the auditor.

And Article Twenty ends with the obligations of the reports and the confidentiality: the auditor must present to the partners or the general assembly in its annual meeting or the shareholders "a report on the financial statements of the company prepared in accordance with the adopted auditing standards in the Kingdom", including the position of the management of the company on enabling him to obtain the data and the clarifications he requested, and what may have appeared to him of violations of the provisions of the Law or the memorandum of incorporation or the articles of association within the limits of his competence, and his opinion on the extent of the fairness of the financial statements of the company, and the auditor must recite his report or review a summary of it in the meeting of the annual general assembly, with the prohibition of the disclosure: "the auditor may not disclose to the partners or the shareholders outside the general assembly or to third parties what he came to know of the secrets of the company due to his performance of his work".

And Article Nineteen of the Companies Law (The Non-Application of the Requirement of the Appointment of an Auditor) devoted a limited exception: "the provision relating to the mandatory appointment of the auditor does not apply to the micro and small company", except for the micro and small company whose memorandum of incorporation or articles of association provide for his appointment, and the company listed on the financial market, and the company which issues traded debt instruments or financing instruments or preferred shares or redeemable shares, and the company in which the appointment of an auditor is required in accordance with the related regulations, and the foreign company, and the company which owns another company or is a subsidiary of another company except in the case of the application of the description of the micro or small company to all those companies, and it is required for the application of this exception that the description applies to the company "during the first fiscal year of its registration in the commercial register, or during two consecutive fiscal years", with the survival of the right of "one or more partners or shareholders representing (ten percent) at least of its shares or stocks having voting rights" in requesting the appointment of an auditor in writing in accordance with the controls determined by the regulations.

The Ordinary General Assembly: The Review of the Statements and the Reports and their Discussion

Article Eighty-Seven of the Companies Law (The Competencies of the Ordinary General Assembly) decides that the ordinary general assembly is competent over all the matters relating to the company, and in particular: "b- appointing one or more auditors for the company, in accordance with what the Law requires, and determining his fees, and reappointing him, and removing him", and "c- reviewing the report of the board of directors and discussing it", and "d- reviewing the financial statements of the company and discussing them", and "e- discussing the report of the auditor -if any- and taking a decision regarding it", so the competence of the ordinary general assembly in the disclosure is not a mere passive reception of the information but a review, a discussion and the taking of a decision in the report of the auditor.

And Article Eighty-Eight of the Companies Law (The Meeting of the Ordinary General Assembly) determines the annual convening deadline: "the annual ordinary general assembly convenes at least once during the (six) months following the end of the fiscal year of the company", and its agenda in its annual meeting must include the four following items: "a- reviewing the report of the board of directors for the elapsed fiscal year and discussing it", and "b- reviewing the financial statements for the elapsed fiscal year and discussing them", and "c- discussing the report of the auditor for the elapsed fiscal year -if any- and taking a decision regarding it", and "d- deciding on the proposals of the board of directors regarding the distribution of the profits, if any", and the requirement of the convening of the annual ordinary general assembly is fulfilled by the convening of an extraordinary general assembly during the (six) months following the end of the fiscal year and the inclusion of its agenda on these items, so the annual review of the statements and the reports is an axis inseparable from the ordinary general assembly.

And Article One Hundred of the Companies Law (The Issuance of the Decision by Circulation) regulates the exception of the review by circulation, as it is permissible to provide in the articles of association of the company that the chairman of the board of directors of the non-listed joint stock company may propose the issuance of the decision of the general assembly by circulation without the need for its convening, "nevertheless, it is required for the issuance of the decisions of the general assembly relating to the election of the members of the board of directors of the company and their removal, and the appointment of the auditor of the company -if any- and his removal, and it is also required for the review of the financial statements of the elapsed fiscal year and their discussion; the convening of the general assembly in accordance with the related provisions", so it is not valid to take the decision by circulation in the essential disclosure matters such as the appointment of the auditor and the review of the financial statements, but the general assembly must actually convene.

The Financial Statements and the Report of the Board of Directors: The Deadlines, the Signing and the Deposit

Article One Hundred and Twenty-One of the Companies Law (The Financial Statements and a Report on the Activity of the Company) details the duty of the board of directors at the end of every fiscal year: "the board of directors must, at the end of every fiscal year of the company, prepare the financial statements of the company and a report on its activity and its financial position for the elapsed fiscal year, and this report includes the proposed method of the distribution of the profits", and the board must "place these documents at the disposal of the auditor, if any, before the deadline determined for the convening of the annual ordinary general assembly (by forty-five) days at least", so the auditor is granted a period of no less than forty-five days to audit the statements and the report before the general assembly.

And the statutory signing is required in the documents: "the chairman of the board of directors of the company and its chief executive, and its financial manager if any, must sign the documents referred to in paragraph (1) of this article, and copies of them are deposited in the main center of the company at the disposal of the shareholders", so the triple signing by the chairman of the board of directors, the chief executive and the financial manager makes the responsibility for the soundness of the documents decided on the three management bodies together, and places copies of them within the reach of the shareholders in the main center of the company.

And Article One Hundred and Twenty-Two of the Companies Law (The Provision of the Shareholders with the Financial Statements and their Deposit) determines the deadline of the provision: "the chairman of the board of directors must provide the shareholders with the financial statements of the company and the report of the board of directors, after signing them, and the report of the auditor if any, unless they are published in any of the modern technical means, before the deadline determined for the convening of the annual ordinary general assembly (by twenty-one) days at least", and he must also "deposit these documents in accordance with what the regulations determine", so the deadlines progress: (forty-five) days for the auditor then (twenty-one) days for the shareholders before the annual ordinary general assembly, with the permissibility of contenting with the publication in the modern technical means instead of the material provision.

The Disclosure Policies and the Provision of the Information to the Shareholders

Article Eighty-Six of the Corporate Governance Regulations (The Disclosure Policies and their Procedures) details the duty of the board of directors in setting written policies for the disclosure and its procedures and its supervisory systems in accordance with the disclosure requirements contained in the Companies Law, the Capital Market Law and their implementing regulations, taking into account: that the policies include "appropriate disclosure methods enabling the shareholders and the stakeholders to review the financial and non-financial information relating to the company, its performance and the ownership of the shares and to be acquainted with the position of the company in an integrated manner", and that the disclosure to the shareholders and the investors be "without discrimination, and in a clear, correct and non-misleading manner, and at the appropriate time and in a regular and accurate manner; to enable the shareholders and the stakeholders to exercise their rights to the fullest extent", and that the website of the company include "all the information required to be disclosed, and any other data or information published through the other disclosure means", and the preparation of reporting systems determining the information that must be disclosed and the method of classifying it in terms of its nature or the periodicity of its disclosure, and the periodic review of the disclosure policies and the verification of their consistency with the best practices and with the provisions of the Capital Market Law and its implementing regulations.

And Article Fourteen of the Corporate Governance Regulations (The Agenda of the General Assembly) begins the right of review from the preparation of the agenda, as it requires the board of directors to single out every topic of the topics included in the agenda of the general assembly in an independent item, and not to combine between the different topics materially under one item, and not to place the businesses and contracts in which any of the members of the board has a direct or indirect interest within one item for the purpose of obtaining the vote of the shareholders on the item as a whole, then decides the rule of the provision of the information: "it must be made available to the shareholders through the website of the company and the website of the market -upon publishing the invitation for the convening of the general assembly- the obtaining of the information relating to the items of the agenda of the general assembly, and in particular the report of the board of directors, the auditor, the financial statements and the report of the audit committee; to enable them to take a considered decision regarding them", and the company must update those information in the case of amending the agenda of the general assembly.

And Article Fifteen of the Corporate Governance Regulations (The Management of the Shareholders' Assembly) completes the disclosure controls: so the shareholders must be enabled to review the minutes of the meeting of the general assembly, and the company must provide the Authority with a copy of it "within ten days from the date of the convening of the meeting", and the company must "announce to the public and notify the Authority and the market -in accordance with the controls determined by the Authority- of the results of the general assembly immediately upon its end", and the shareholders are granted the right to discuss the topics included in the agenda of the general assembly and direct the questions regarding them to the members of the board of directors and the auditor, and they must be answered to the extent that does not expose the interest of the company to the damage.

And Article Thirteen of the Listed Joint Stock Companies Regulations (The Controls of Convening the Assembly by Means of the Modern Technical Means) organizes the provision of the information virtually: "it is permissible for the shareholders to participate in the meetings of the general and special assemblies and their deliberations, and for the shareholders to review the agendas of those meetings and the related documents, by means of the modern technical means", in accordance with controls including that the participation be by means of an instantaneous visual and audio transmission of the assembly, and by a direct communication between the company and the shareholders allowing the effective and instantaneous participation and the listening and following the presentations and the expression of the opinion and the discussion and the voting on the decisions, with the provision of the automated voting for the shareholders on the items of the meeting agendas even if they did not attend.

The Annual Report of the Board of Directors: The Contents and the Disclosure of the Remuneration

Article Eighty-Seven of the Corporate Governance Regulations (The Report of the Board of Directors) draws the widest framework for the annual report, as the report of the board of directors must include "a presentation of its operations during the last fiscal year, and all the factors affecting the businesses of the company", and it must include a number of detailed items, of which the most prominent: what was applied of the provisions of the governance regulations and what was not applied and the reasons for that, and the names of the members of the board of directors and the members of the committees and the executive management and their current and previous positions and their qualifications and experiences, and the formation of the board of directors and the classification of its members as follows: "executive member of the board of directors - non-executive member of the board of directors - independent member of the board of directors", and a brief description of the competencies of the committees and their tasks with the mention of the names of the committees and their chairmen and their members and the number of their meetings and their convening dates and the attendance data, and the means on which the board relied in evaluating its performance and the performance of its committees and its members and the external body which carried out the evaluation, and the disclosure of the remuneration of the members of the board of directors and the executive management in accordance with Article Ninety, and "any penalty or punishment or precautionary measure or precautionary restriction imposed on the company by the Authority or by any supervisory, regulatory or judicial body, with a statement of the causes of the violation and the body imposing it and the methods of addressing it", and the results of the annual audit of the effectiveness of the internal control procedures in addition to the opinion of the audit committee on the extent of the adequacy of the internal control system, and the recommendation of the audit committee to appoint an internal auditor, and the recommendations of the audit committee which have a conflict between them and the decisions of the board of directors or which the board refused to adopt regarding the appointment of the auditor and his removal and the determination of his fees, and the information relating to any loans on the company and a statement of the total indebtedness, and the number of the meetings of the board of directors held during the fiscal year and their convening dates and the attendance record of each meeting clarifying the names of the attendees, and the number of the requests of the company for the register of the shareholders and their dates and their causes, and a description of any transaction between the company and a related party, and information relating to any businesses or contracts in which the company is a party and in which there is an interest for one of the members of the board of directors or the senior executives or for any person related to any of them, and a statement of any arrangements or agreement by virtue of which one of the members of the board of directors or one of the senior executives waived any remuneration, and a statement of any arrangements or agreement by virtue of which one of the shareholders of the company waived any rights in the profits.

And Article Ninety of the Corporate Governance Regulations (The Disclosure of the Remuneration) emphasizes the obligation of the board of directors to disclose "the remuneration policy and how the remuneration of the members of the board and the executive management in the company is determined", and the disclosure "with accuracy, transparency and detail in the report of the board of directors of the remuneration granted to the members of the board of directors and the executive management directly or indirectly, without concealment or misleading, whether amounts, benefits or privileges, whatever their nature and name", and if the privileges were shares in the company, the value entered for the shares is the market value at the date of the entitlement, with the clarification of the relationship between the granted remuneration and the applicable remuneration policy and the statement of any material deviation from this policy, and the statement of the necessary details regarding the remuneration and the compensations paid to each of: the members of the board of directors, and "five of the senior executives who received the highest remuneration from the company provided that the chief executive and the financial manager are among them", and the members of the committees, and the disclosure is in the report of the board of directors and in accordance with the attached tables.

And these controls are accompanied by specialized disclosure mechanisms in the Listed Joint Stock Companies Regulations: so Article Twelve (The Disclosure of the Remuneration of the Board of Directors Members) provides that "the board of directors must disclose in its annual report the details of the policies relating to the remuneration and the mechanisms of its determination and the amounts and the financial and in-kind benefits paid to each member of the members of the board of directors in return for any executive, technical, administrative or advisory works or positions", and Article Eleven (The Payment of the Remuneration Based on Incorrect or Misleading Information) decides that "if it appeared to the audit committee or the Authority that the remuneration paid to any of the members of the board of directors is based on incorrect or misleading information presented to the general assembly or included in the annual report of the board of directors, then he must return it to the company, and the company has the right to claim its return from him", and Article Twenty (The Disclosure of the Treasury Shares) obliges that the annual report of the board of directors include "details of the treasury shares retained by the company and the details of the uses of these shares", and Article Forty-Eight (The Disclosure of the Profits in the Report of the Board of Directors) obliges the board to include in its annual report presented to the general assembly "the ratios of the profits distributed to the shareholders during the different periods of the fiscal year in addition to the ratio of the profits proposed to be distributed at the end of the fiscal year and the total of these profits", with the obligation of the company to make the immediate disclosure to the Authority and the public, immediately and without delay, upon taking the decision of the distribution of the interim profits.

And Article Eighty-Nine of the Corporate Governance Regulations (The Disclosure of the Board of Directors Members) organizes the register of the disclosures: "the board of directors must organize the disclosure operations of each of its members and the members of the executive management", by setting "a special register for the disclosures of the members of the board of directors and the executive management and updating it periodically, in accordance with the disclosures required by virtue of the Companies Law and the Capital Market Law and their implementing regulations", and "making the review of the register available to the shareholders of the company without a financial consideration", so the right of reviewing the disclosures of the members is a decided right for the shareholders of the company without any consideration.

The Audit Committee and its Report and the Retention of the Documents

Article Fifty-Two of the Corporate Governance Regulations (The Competencies of the Committee and its Powers and its Responsibilities) decides that "the audit committee is competent over monitoring the businesses of the company and verifying the soundness and the integrity of the reports, the financial statements and the internal control systems therein", and its tasks include in particular regarding the financial reports: "studying the preliminary and annual financial statements of the company before presenting them to the board of directors and expressing its opinion and recommendation regarding them; to ensure their integrity, fairness and transparency", and expressing the technical opinion based on the request of the board of directors on whether the report of the board of directors and the financial statements of the company are "fair, balanced and understandable and include the information which enables the shareholders and the investors to evaluate the financial position of the company, its performance, its business model and its strategy", and studying any important or unusual matters included in the financial reports, and verifying the accounting estimates in the material matters contained in the financial reports, and studying the accounting policies followed in the company and expressing the opinion and the recommendation to the board of directors regarding them, and regarding the auditor: the recommendation to the board of directors to nominate the auditors and remove them and determine their fees and evaluate their performance after verifying their independence and reviewing the scope of their work and the conditions of contracting with them, and verifying the independence, the objectivity and the fairness of the auditor and the extent of the effectiveness of the audit works, and studying the report of the auditor and his observations on the financial statements.

And Article Eighty-Eight of the Corporate Governance Regulations (The Report of the Audit Committee) organizes the disclosure of the committee: "the report of the audit committee must include the details of its performance of its competencies and its tasks provided in this regulation, provided that it includes its recommendations and its opinion on the extent of the adequacy of the internal and financial control systems and the risk management in the company", and "the board of directors must deposit sufficient copies of the report of the audit committee in the main center of the company and it is published on the website of the company and the website of the market upon publishing the invitation for the convening of the general assembly; to enable whoever wishes of the shareholders to obtain a copy of it", and the summary of the report is recited during the convening of the general assembly, so the report of the committee is connected with the general disclosure to the shareholders before the general assembly as is the case with the report of the board of directors, the report of the auditor and the financial statements.

And Article Ninety-Three of the Corporate Governance Regulations (The Retention of the Documents) regulates the documentary obligation: "the company must retain all the minutes, the documents, the reports and the other documents required to be retained by virtue of this regulation in the main headquarters of the company for a period of no less than ten years, and that includes the report of the board of directors and the report of the audit committee", and without prejudice to this period, the company must, in the case of an existing judicial suit or a threatened suit or a claim or any existing investigation procedures relating to those documents, retain them until the end of that judicial suit or claim or the investigation procedures, and Article Ninety-Four of the Corporate Governance Regulations retains for the Authority the right to request the company to provide it with any additional information or data it deems necessary to verify the extent of the commitment to the provisions of the regulation.

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 deadlines, 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 Disclosure, the Transparency and the Annual Reports

In the following we present answers to the most frequently asked questions among the boards of directors, the shareholders and the governance practitioners about the disclosure, the transparency and the annual report requirements in the Saudi companies in accordance with the Companies Law and its implementing regulations:

The Conclusion: An Institutional Transparency That Builds the Trust of the Shareholders and the Market

The governing rules of the disclosure, the transparency and the annual report requirements in the Saudi companies are summarized in three axes: the preparation and the documentation based on the retention of the accounting records and the supporting documents and the preparation of financial statements at the end of every fiscal year in accordance with the adopted accounting standards in the Kingdom and their deposit within (six) months from the date of the end of the fiscal year; and the control and the provision based on an independent auditor among the auditors licensed in the Kingdom committed to the independence and presenting his report in the general assembly, and an audit committee studying the financial statements before presenting them to the board of directors, and enabling the shareholders to review the report of the board of directors, the auditor, the financial statements and the report of the audit committee through the website of the company and the website of the market upon publishing the invitation of the assembly, with providing them with the statements and the report before the assembly by twenty-one days at least; and the penalty and the accountability arranged on the false or misleading data in the financial statements by imprisonment for a period not exceeding three years and by a fine not exceeding five million riyals or by one of these two penalties, and on the violation of the accounting records or the preparation of the statements in accordance with the adopted standards or their deposit by a fine not exceeding five hundred thousand riyals.

And the essential merit of this system is that it balances between the clarity of the deadlines and the degrees of the binding force on the one hand, and the flexibility of the application on the other hand: so the financial statements are subject to a unified standard which is the adopted accounting standards in the Kingdom, and the deadlines of the provision begin with forty-five days for the auditor then twenty-one days for the shareholders before the annual ordinary general assembly, and the modern technical means facilitate the review, the participation and the voting in the general assemblies without impairing the essence of the transparency, and the written disclosure policies and their periodic review ensure that the disclosure to the shareholders and the investors is without discrimination and in a clear, correct and non-misleading manner and at the appropriate time. In Nova Legal for Law and Legal Consultations, we provide our specialized consultations in the affairs of the corporate governance and the review of the disclosure policies and the preparation of the reports of the board of directors and the extent of their alignment with the provisions of the Companies Law and its implementing regulations and the Corporate Governance Regulations, and accompany the companies in the commitment to the requirements of the financial statements, the auditors and the general assemblies, and we are pleased to accompany you towards an institutional transparency that builds the trust of the shareholders and the market.