General Assembly Meetings in Joint Stock Companies under the Saudi Companies Law | Nova Legal

The Regulatory Framework for Shareholders' Assemblies: From Section Two in Chapter Four to the Implementing Regulations

General assembly meetings are organized in the Companies Law within a graduated framework that begins with Chapter Four (Joint Stock Company), and more specifically Chapter Three (Management of the Joint Stock Company) — Section Two (Shareholders' Assemblies), which comprises Articles 84 to 102. Article 84 (Meeting of the General Assembly of Shareholders) sets out the basic rules for its convening: "1- The meeting of the general assembly of shareholders shall be chaired by the chairman of the board of directors or his deputy in his absence, or by a person nominated by the board of directors from among its members in the absence of both, and if that is not possible, the assembly shall be chaired by a person nominated by the shareholders from among the members of the board or from outside it by means of voting. 2- Every shareholder has the right to attend the general assembly meeting, even if the company's articles of association provide otherwise, and may for that purpose delegate another person who is not a member of the board of directors. 3- The general assembly meeting may be convened and the shareholder may participate in deliberations and voting on decisions by means of modern technology."

The Implementing Regulations of the Companies Law then add a supplementary procedural regulatory layer in Chapter Two thereof (Shareholders' Assemblies): Article 23 prescribes the controls for issuing notice via modern means of technology, Article 24 prescribes the controls for the meeting and automatic voting via those means, and Article 25 prescribes the verification of the participating shareholder's identity, while Articles 26 to 30 regulate proxy rules for attending meetings, so that the texts of the Law and the texts of the implementing regulations are read as complementary: the Law establishes the general rules for the meeting, its quorum, its voting, and its competencies, and the implementing regulations detail the technical means of convening, notice, automatic voting, and proxy.

Types of Assemblies and Their Competencies: The Ordinary and Extraordinary General Assemblies

The Law divides the shareholders' assemblies in a joint stock company into an ordinary general assembly and an extraordinary general assembly. Article 87 of the Companies Law (Competencies of the Ordinary General Assembly) defines the scope of the ordinary assembly on an illustrative rather than exhaustive basis for certain matters, with a residual reference for the rest: "Without prejudice to the competencies of the extraordinary general assembly, the ordinary general assembly shall be competent in all matters relating to the company, and in particular the following: (a) The election and removal of members of the board of directors. (b) The appointment of one or more auditors for the company, in accordance with what the Law requires, and the determination of their fees, reappointment, and removal. (c) Reviewing and discussing the board of directors' report. (d) Reviewing and discussing the company's financial statements. (e) Discussing the auditor's report, if any, and taking a decision thereon. (f) Ruling on the board of directors' proposals regarding the method of distributing profits. (g) Forming the company's reserves and determining their uses," so that the ordinary general assembly is the periodic supervisory body that renews the board of directors, appoints auditors, discusses management reports and financial statements, and rules on profits and reserves.

Article 85 of the Companies Law (Competencies of the Extraordinary General Assembly) is then competent in the essential exceptional matters: "The extraordinary general assembly shall be competent in the following: 1- Amending the company's articles of association, except in respect of the following: (a) Depriving a shareholder of, or amending any of, his fundamental rights which he derives by virtue of his status as a shareholder, taking into account the nature of the rights relating to the type or class of shares held by the shareholder, and in particular the following: 1- Receiving a share of the profits decided to be distributed, whether the distribution is in cash or through the issuance of bonus shares to persons other than the company's employees and subsidiary companies. 2- Receiving a share of the company's net assets upon liquidation. 3- Attending the ordinary or extraordinary general assemblies, participating in their deliberations, and voting on their decisions. 4- Disposing of his shares, except in accordance with the provisions of the Law. 5- Requesting to inspect the company's records and documents, overseeing the actions of the board of directors, bringing liability actions against board members, and challenging the validity of the ordinary and extraordinary general assemblies' decisions. (b) Amendments that would increase the financial burdens on the shareholders, unless all shareholders approve. 2- Deciding on the continuation or dissolution of the company. 3- Approving the company's purchase of its own shares," so that the extraordinary assembly amends the articles of association and the vital decisions (continuation or dissolution) and the company's purchase of its own shares, while safeguarding the shareholder's fundamental rights from deprivation or amendment and requiring the approval of all shareholders for amendments that increase their financial burdens.

Article 86 of the Companies Law (Issuance by the Extraordinary General Assembly of Decisions of the Ordinary General Assembly) then defines the relationship between the two assemblies: "The extraordinary general assembly — in addition to the competencies assigned to it under the provisions of the Law — may issue decisions on matters that fall within the competencies of the ordinary general assembly, in accordance with the same conditions and procedures prescribed for the ordinary general assembly," so that the competence of the extraordinary assembly extends to the competencies of the ordinary assembly itself, provided it complies with the conditions and procedures prescribed for the ordinary assembly, but not vice versa.

The Annual Ordinary General Assembly Meeting: Date and Agenda

Article 88 of the Companies Law (Ordinary General Assembly Meeting) sets out the date of the annual meeting and its agenda: "1- The ordinary general assembly shall convene annually at least once within the (six) months following the end of the company's fiscal year. Other ordinary general assemblies may be convened whenever the need arises. 2- The agenda of the ordinary general assembly at its annual meeting must include the following items: (a) Reviewing and discussing the board of directors' report for the expired fiscal year. (b) Reviewing and discussing the financial statements for the expired fiscal year. (c) Discussing the auditor's report for the expired fiscal year, if any, and taking a decision thereon. (d) Ruling on the board of directors' proposals regarding the distribution of profits, if any. 3- The requirement for convening the annual ordinary general assembly shall be satisfied by convening an extraordinary general assembly within the (six) months following the end of the company's fiscal year and including in its agenda the items set out in paragraph (2) of this Article," so that the company is obliged to convene its annual ordinary general assembly at least once within the six months following the end of its fiscal year, with an agenda that includes discussing the board of directors' report and the financial statements, the auditor's report, and ruling on the distribution of profits, and an extraordinary general assembly convened within the same period may substitute for it if its agenda includes these items.

This is complemented by the rule in Article 89 (Amendment of the Rights of Shareholder Classes) on the protection of share classes: "If a decision of the general assembly would amend the rights of a particular class of shareholders, the decision shall not be effective unless approved by those having the right to vote from among those shareholders, convened in a special meeting in accordance with the provisions prescribed for convening the extraordinary general assembly and issuing its decisions," so that a decision amending the rights of a class of shareholders does not take effect until approved by the holders of that class, convened in a special meeting in accordance with the provisions governing the convening of the extraordinary general assembly.

Notice of the Meeting: Timing, Means, and Required Contents

Article 91 of the Companies Law (Notice of the Meeting) regulates the rules of notice in detail: "1- The notice for convening the assembly must be issued at least (twenty-one) days before the date set therefor, in accordance with the controls prescribed by the implementing regulations, taking into account the following: (a) Notifying the shareholders by registered letters at their addresses entered in the shareholders' register, or publishing the notice through modern means of technology. (b) Sending a copy of the notice and the agenda to the commercial register, and a copy to the Authority if the company is listed on the market on the date of publication of the notice. 2- The notice of the meeting must include, at a minimum, the following: (a) A statement of the person entitled to attend the meeting and his right to delegate a person of his choice who is not a member of the board of directors, and a statement of the shareholder's right to discuss the items included on the meeting's agenda, to ask questions, and to exercise his right to vote. (b) The venue, date, and time of the meeting. (c) The type of assembly, whether ordinary or extraordinary. (d) The meeting's agenda, including the items on which shareholders are required to vote," so that the notice is issued at least twenty-one days in advance and reaches the shareholders by registered letters at their addresses in the shareholders' register or via modern means of technology, with a copy of the notice and the agenda reaching the commercial register and the Authority if the company is listed, and the notice setting out the rights and the agenda.

The Law exempts unlisted joint stock companies from the formal requirements of notice in a specific case, as paragraph (3) of Article 91 provides: "Shareholders of a joint stock company that is not listed on the market who represent all of the company's shares carrying voting rights may convene a general assembly without observing the procedures and periods prescribed for notice, to consider matters the decision on which falls within the competence of the general assembly," so that all shareholders, provided they are represented by all of the company's shares carrying voting rights, may convene the general assembly without being bound by the statutory timing and procedural requirements of notice.

Meetings via Modern Means of Technology: The Implementing Regulations' Controls

The Implementing Regulations of the Companies Law build on the original Article 84 of the Law, which permits convening the meeting and participating in deliberations and voting by means of modern technology, and then detail the controls for notice in Article 23 thereof (Controls for Issuing Notice via Modern Means of Technology): "The board of directors of the company may issue the notice for attending the general or special assembly through modern means of technology that allow the following: (a) The ability to prove the contents of the notice and its date and time of sending. (b) The ability to identify the sender of the notice and the person to whom it is addressed," so that the electronic notice requires a means that allows proof of the contents, the date and time of sending, and identification of the sender and the addressee.

Article 24 of the Implementing Regulations (Meeting via Modern Means of Technology) then details the controls for participation and automatic voting: "1- Shareholders may participate in ordinary or special general assembly meetings and their deliberations, and may access their agendas and related documents, through modern means of technology, in accordance with the following controls: (a) The shareholder's participation is by means of a real-time visual and audio broadcast of the ordinary or special general assembly meeting. (b) The shareholder must be able to participate effectively in the ordinary or special general assembly meeting in real time, enabling him to listen, follow the presentations, express his opinion, deliberate, and vote on decisions. 2- The company may enable shareholders to vote automatically on the items of the agenda of ordinary or special general assembly meetings even if they do not attend such meetings, in accordance with the following: (a) Automatic voting must enable shareholders to cast their votes either before or during the ordinary or special general assembly meeting, without the need to appoint a proxy to attend on their behalf. (b) Automatic voting on the items of the agenda of any ordinary or special general assembly meeting must open after the date of issuance of the notice, provided that the period during which automatic voting is available is not less than (three) days before the date of convening the assembly, and automatic voting on any item of the agenda of the ordinary or special general assembly meeting shall cease upon the completion of its discussion and voting thereon in the assembly. 3- The convening of ordinary or special general assembly meetings for shareholders through modern means of technology shall not preclude convening such meetings at the venue specified in the notice and granting shareholders the right to attend such meetings in person," so that electronic participation requires a real-time visual and audio broadcast and effective real-time participation, and automatic voting is permitted before or during the meeting without a proxy, opening after the notice is issued with a minimum of three days before the assembly, with the right to attend in person at the venue specified in the notice being preserved.

Article 29 of the Implementing Regulations (Combining Attendance and Proxy) then completes the representation rules: "1- A shareholder may delegate another person to attend the ordinary or special general assembly meeting of the company on his behalf by means of modern technology. 2- A shareholder may not combine personal attendance at the ordinary or special general assembly meeting of the company with the delegation of another person to attend by any means," so that electronic delegation for attendance is permitted, while combining the shareholder's personal attendance with the delegation of another person on his behalf by any means is prohibited, alongside the requirement imposed by Article 25 of the implementing regulations on the board of directors to put in place procedures for verifying the identity of the shareholder who votes automatically and the shareholder participating in the assembly meeting when the meeting is held via modern means of technology.

The Quorum Required for Convening the Ordinary and Extraordinary General Assemblies

Article 92 of the Companies Law (Quorum Required for Convening the Ordinary General Assembly) sets out the rules for the ordinary assembly's quorum: "1- A meeting of the ordinary general assembly shall not be validly convened unless attended by shareholders representing at least (one quarter) of the shares carrying voting rights, unless the company's articles of association provide for a higher proportion, provided that it does not exceed (one half). 2- If the quorum required for convening the ordinary general assembly pursuant to paragraph (1) of this Article is not met, a notice shall be issued for a second meeting to be held in accordance with the same procedures set out in Article (91) of the Law within (thirty) days following the date set for convening the previous meeting. However, the second meeting may be convened one hour after the expiry of the time period set for convening the first meeting, provided that the company's articles of association so permit, and that the notice for convening the first meeting includes an indication that the second meeting may be convened. In all cases, the second meeting shall be valid regardless of the number of shares carrying voting rights represented therein. 3- Decisions of the ordinary general assembly shall be issued by a majority of the voting rights represented at the meeting," so that the quorum for the ordinary general assembly is the attendance of shareholders representing at least one quarter of the shares carrying voting rights, unless the articles of association provide for a higher proportion not exceeding one half, and if the quorum is not met, a second meeting is convened within thirty days and is valid regardless of the number of shares represented, with decisions issued by a majority of the voting rights represented at the meeting.

Article 93 of the Companies Law (Quorum Required for Convening the Extraordinary General Assembly) then details the rules for the extraordinary assembly: "1- A meeting of the extraordinary general assembly shall not be validly convened unless attended by shareholders representing at least (half) of the shares carrying voting rights, unless the company's articles of association provide for a higher proportion, provided that it does not exceed (two thirds). 2- If the quorum required for convening the extraordinary general assembly pursuant to paragraph (1) of this Article is not met, a notice shall be issued for a second meeting to be held in accordance with the same procedures set out in Article (91) of the Law. However, the second meeting may be convened one hour after the expiry of the time period set for convening the first meeting, provided that the notice for convening the first meeting includes an indication that the second meeting may be convened. In all cases, the second meeting shall be valid if attended by shareholders representing at least (one quarter) of the shares carrying voting rights. 3- If the quorum required for convening the second meeting is not met, a notice shall be issued for a third meeting to be held in accordance with the same procedures set out in Article (91) of the Law, and the third meeting shall be valid regardless of the number of shares carrying voting rights represented therein. 4- Decisions of the extraordinary general assembly shall be issued by (two-thirds) of the voting rights represented at the meeting, unless the decision relates to increasing or reducing the company's capital, extending the company's term, dissolving it before the expiry of the term set out in its articles of association, merging it with another company, or dividing it into two or more companies, in which case it shall not be valid unless issued by (three-quarters) of the voting rights represented at the meeting. 5- The board of directors must register with the commercial register the decisions of the extraordinary general assembly specified by the implementing regulations within (fifteen) days from the date of their issuance."

Thus, the quorum for the extraordinary general assembly is the attendance of shareholders representing at least half of the shares carrying voting rights, unless the articles of association provide for a higher proportion not exceeding two thirds, then declining to one quarter of the shares at the second meeting and to any number at the third meeting, with decisions issued by two-thirds of the voting rights represented at the meeting, rising to three-quarters for decisions to increase or reduce the capital, extend the company's term, dissolve it before the expiry of its term, merge it, or divide it, with extraordinary assembly decisions to be registered with the commercial register within fifteen days from the date of their issuance.

Voting in the Shareholders' Assembly, Conflicts of Interest, the Agenda, and Questions

Article 95 of the Companies Law (Voting in the Shareholders' Assembly) sets out the basic rule on voting and prohibits conflicts of interest: "1- The method of voting in the shareholders' assembly shall be set out in the company's articles of association. 2- Board members may not participate in voting on assembly decisions relating to transactions and contracts in which they have a direct or indirect interest or which involve a conflict of interest," so that the method of voting is set out in the articles of association, and board members are barred from participating in voting on decisions relating to transactions and contracts in which they have a direct or indirect interest or which involve a conflict of interest.

This is complemented by the regulation of the assembly's agenda in Article 96 of the Companies Law (Agenda of the General Assembly): "1- When preparing the general assembly's agenda, the board of directors must take into account the topics that shareholders wish to include, and one or more shareholders representing (ten percent) or more of the shares carrying voting rights shall have the right to add one or more topics to the agenda when it is being prepared, and the competent authority may amend this proportion. 2- The board of directors must set out each topic on the general assembly's agenda as a separate item, and must not combine materially different topics under a single item, and must not place transactions and contracts in which any board member has a direct or indirect interest under a single item for the purpose of voting on the item as a whole. 3- Every shareholder has the right to discuss the topics on the general assembly's agenda and to ask questions thereon to the board members and auditors. Any provision in the company's articles of association that deprives the shareholder of this right is void. The board of directors or the auditors must answer shareholders' questions to the extent that does not expose the company's interests to harm. If a shareholder considers that the answer to his question is insufficient, he may refer the matter to the general assembly, and its decision in this regard shall be binding," so that one or more shareholders representing ten percent or more of the shares carrying voting rights may add topics to the agenda when it is being prepared, with each topic to be set out as a separate item and not combined with materially different topics, alongside every shareholder's right to discuss and ask questions, any provision in the articles of association depriving him of which is void.

Decisions by Circulation, Minutes, the Register, and the Effective Date of the Decision

Article 100 of the Companies Law (Issuance of Decisions by Circulation) enables unlisted joint stock companies to issue their assembly's decisions without convening: "The articles of association may provide that the chairman of the board of directors of a joint stock company that is not listed on the market shall propose the issuance of a general assembly decision by submitting it to the shareholders by circulation, without the need to convene the assembly, unless any of the shareholders requests in writing that the general assembly be convened to deliberate thereon. However, the issuance of general assembly decisions relating to the election and removal of the company's board members, and the appointment and removal of the company's auditor, if any, and the review and discussion of the financial statements for the expired fiscal year, require the convening of the general assembly in accordance with the relevant provisions. For the validity of the proposed decision issued pursuant to paragraph (1) of this Article, the company must send it together with the related documents to all shareholders, specifying the procedure the shareholder must follow to approve it and the date by which it must be issued."

Article 101 after 100 of the Companies Law (Quorum Required for Issuing Decisions by Circulation) then specifies the required majorities: "1- Decisions of the general assembly by circulation in joint stock companies that are not listed on the market shall be issued in accordance with the following mechanism: (a) In respect of a decision that falls within the competence of the ordinary general assembly: it shall be issued with the approval of one or more shareholders representing a majority of the voting rights, unless the company's articles of association provide for a higher proportion. (b) In respect of a decision that falls within the competence of the extraordinary general assembly: it shall be issued with the approval of one or more shareholders representing (seventy-five percent) or more of the voting rights, unless the company's articles of association provide for a higher proportion. 2- Decisions of the general assembly issued by circulation pursuant to paragraph (1) of this Article shall be recorded in minutes and entered in the special register referred to in Article (97) of the Law," so that decisions by circulation are permissible by a provision in the articles of association and a proposal by the chairman of the board of directors of an unlisted company, unless any shareholder requests in writing that the assembly be convened, with the ordinary assembly's decisions by circulation requiring a majority of the voting rights and the extraordinary assembly's decisions requiring seventy-five percent or more of the voting rights.

The Law then determines in Article 97 (Minutes of the Assembly Meeting) the rules for documentation: "Minutes shall be prepared for the assembly meeting, setting out the number of shareholders present in person or by proxy, the number of shares held by them in person or by proxy, the number of votes attached thereto, the decisions taken, the number of votes in favour and against, and a comprehensive summary of the discussions that took place at the meeting. The minutes shall be entered on a regular basis after each meeting in a special register signed by the chairman of the assembly, its secretary, and the tellers," so that statutory documentation of meetings is achieved through the minutes and the special register, and the effective date of the decision is determined in Article 94 (Effective Date of the General Assembly's Decision): "A decision of the general assembly of a joint stock company shall take effect from the date of its issuance, except in cases where the Law, the company's articles of association, or the decision itself provides for its taking effect at a later time or upon the fulfilment of certain conditions."

Statutory Protection of the Shareholder: Challenging the Decision and Requesting an Inspection of the Company

The system of general assembly meetings is completed by two judicial protection mechanisms for the shareholder, the first of which is challenging the decisions in Article 99 of the Companies Law (Challenge to a Decision of the Shareholders' Assembly): "Without prejudice to the rights of third parties acting in good faith, any shareholder may apply to the competent judicial authority for the annulment of a decision of the shareholders' assembly issued in breach of the provisions of the Law or the company's articles of association, provided that he objected thereto during the meeting or was absent therefrom for a valid excuse. The action for annulment shall not be heard after the expiry of (ninety) days from the date of issuance of the decision. It is a condition for bringing the action referred to in paragraph (1) of this Article that the plaintiff be a shareholder in the company at the time of bringing the action and throughout all its proceedings," so that any shareholder may request the annulment of a decision of the shareholders' assembly issued in breach of the provisions of the Law or the company's articles of association, provided he objected thereto during the meeting or was absent for a valid excuse, the action for annulment not being heard after the expiry of ninety days from the date of issuance of the decision, and it being a condition that the plaintiff be a shareholder in the company at the time of bringing the action and throughout all its proceedings.

Article 102 after 100 of the Companies Law (Request for an Inspection of the Company) then establishes the mechanism for judicial oversight of the company's management: "1- One or more shareholders representing (five percent) or more of the company's capital shall have the right to apply to the competent judicial authority for an inspection of the company, if the actions of the board members or auditors in the company's affairs give rise to suspicion. 2- The competent judicial authority may order the inspection to be carried out at the expense of the applicant, after a hearing at which the board members or auditors are notified to state their case, and may, if it deems it necessary, require the applicant to furnish a guarantee if the company so requests. 3- If the competent judicial authority finds the complaint to be well founded, it may order such conservatory measures as it deems appropriate, and may convene the general assembly to take the necessary decisions, and may remove the board members and auditors, and appoint a person with the requisite expertise and qualifications, in such number as it deems appropriate, to supervise the management of the company, and may convene the general assembly to elect a new board of directors," so that one or more shareholders representing five percent or more of the company's capital are granted the right to request an inspection of the company before the competent judicial authority when suspicion arises regarding the actions of the board members or auditors, with the competent judicial authority having the power to order the inspection, to take conservatory measures, to remove board members and auditors, to appoint a person to supervise management, and to convene the general assembly to elect a new board of directors.

Official Sources and References

This article relies on the following official statutory sources, which are the authoritative reference for all texts and figures set out in the sections above, and it is always preferable to review these official links to consult the full texts and the latest updates:

• Companies Law issued by Royal Decree No. (M/132) dated 1/12/1443H — Full text in the Official Gazette (Umm Al-Qura)
• Implementing Regulations of the Companies Law issued on 25/6/1444H — Full text in the Official Gazette (Umm Al-Qura)
• New Companies Law — Ministry of Commerce (summary of the regulation and its practical applications)
• Corporate Governance Regulations for Unlisted Joint Stock Companies — Ministry of Commerce (applicable to unlisted joint stock companies)

Methodological note: All figures, deadlines, competencies, and degrees of enforceability transmitted in this article have been taken verbatim from the official texts cited above and published in the Official Gazette (Umm Al-Qura), and the texts of the Articles are read as they appear in their statutory source without alteration. It is recommended to consult these sources to verify any subsequent updates to the texts and their effect on the resulting obligations.

Frequently Asked Questions on General Assembly Meetings in Joint Stock Companies

We set out below the answers most commonly discussed among shareholders, boards of directors, and governance practitioners regarding general assembly meetings in joint stock companies under the Companies Law and the implementing regulations:

Conclusion: A Disciplined General Assembly That Combines Oversight and Procedural Flexibility

The governing rules for general assembly meetings in joint stock companies under the Saudi Companies Law can be summarized along three axes: division of competencies, based on two types of assemblies — an ordinary assembly competent in all matters relating to the company, in particular the election of board members, the appointment of auditors, and ruling on profits and reserves, and an extraordinary assembly competent to amend the articles of association, decide on continuation or dissolution, and approve the company's purchase of its own shares, with the ordinary assembly convening annually at least once within the six months following the end of the fiscal year; quorum and majority discipline, based on the convening of the ordinary assembly with the attendance of shareholders representing at least one quarter of the voting rights and the issuance of its decisions by a majority of the voting rights represented, and the convening of the extraordinary assembly with the attendance of those representing at least half of those shares and the issuance of its decisions by two-thirds of the voting rights represented, rising to three-quarters for decisions to increase or reduce the capital, extend the company's term, dissolve it before the expiry of its term, merge it, or divide it; and modern procedural flexibility, based on the permissibility of convening the meeting and participating in deliberations and voting by means of modern technology in accordance with the implementing regulations' controls, which detail real-time visual and audio broadcasting and automatic voting, and on the issuance of assembly decisions by circulation in unlisted joint stock companies in the cases and subject to the restrictions set out in the Law, alongside documentation in the minutes and the special register and the protection of the shareholder by challenging the decision within ninety days and requesting an inspection of the company. At Nova Legal for Legal Consultancy, we provide our specialized advisory services for the regulation of general assembly meetings in joint stock companies, the drafting of companies' articles of association in accordance with the rules of notice, quorum, and voting, the preparation of meeting procedures via modern means of technology and automatic voting, and the issuance of decisions by circulation and the handling of judicial challenges thereto, in compliance with the provisions of the Companies Law, and we are pleased to accompany you towards a disciplined general assembly that combines oversight and procedural flexibility.