Shareholder rights occupy a pivotal position in the Companies Law issued by Royal Decree No. (M/132) dated 1/12/1443H corresponding to 4/7/2022AD, published in the Official Gazette (Umm Al-Qura), as the Law enshrined the rights attached to the share from obtaining the profits and disposing of the shares to attending the assemblies and voting on them, and made the election of the board of directors -which is the highest form of exercising the shareholder oversight- a calculated method detailed in the implementing regulations, at the head of which is the cumulative voting which grants the shareholders who own minority stakes a real opportunity to be represented in the board of directors, then conducted the detailed organization of these rights and the method in the Implementing Regulations of the Companies Law and the Implementing Regulations of the Companies Law for Listed Joint Stock Companies and the Corporate Governance Regulations issued by the Board of the Capital Market Authority.
And this article focuses on the shareholder rights in the joint stock company, and gives special prominence to the method of cumulative voting in the election of the board of directors: its statutory definition, the extent of its bindingness in the listed and non-listed companies, and the exceptions applicable to the companies listed on the parallel market, and the controls of the right to appoint the members of the board of directors, along with the statutory controls of the shareholders' assemblies from the call, the convening and the quorum, and the procedural rights of the shareholder in the agenda, the questions and the objection to the decisions. And we will quote all the texts and numbers literally from the official texts published in the Official Gazette (Umm Al-Qura), with precise attention to the scope of application and the degree of bindingness of each provision.
And the preliminary answer can be summarized in one sentence: the cumulative voting is considered the statutory method for the election of the board of directors of the companies listed on the financial market mandatorily, and the default method in the non-listed companies unless their articles of association provide for the ordinary voting, so that the voting power of the shareholder is multiplied by the number of the seats of the board of directors, so that he votes with it for one candidate or distributes it among the candidates without the repetition of these votes, and the ordinary general assembly convenes at least once during the six months following the end of the fiscal year with a quorum of not less than a quarter of the voting rights shares and not exceeding half, as we will detail with the numbers and the official texts in the following sections.
The Statutory Framework of the Shareholder Rights: The Companies Law (M/132) and Its Implementing Regulations
The statutory framework of the shareholder rights begins from the Companies Law issued by Royal Decree No. (M/132) dated 1/12/1443H corresponding to 4/7/2022AD, which defined in its first article the competent body as "the Ministry, except for what relates to the joint stock companies listed on the financial market, then it is the Authority", i.e. the Capital Market Authority, and it is the distribution that governs the body supervising the shareholder rights according to the nature of the company. And the Law establishes in its second article the company as "a legal entity established in accordance with the provisions of the Law, based on a memorandum of incorporation or articles of association pursuant to which two or more persons commit each of them to contribute in a project aiming at profit by providing a share of money or work or both of them together for the division of the profit or loss arising from this project".
And the shareholder rights are detailed at two regulatory levels: the Implementing Regulations of the Companies Law issued dated 25/6/1444H corresponding to 18/1/2023AD, which organize in their second chapter the affairs of the joint stock company not listed on the financial market including the election of its board of directors; and the Implementing Regulations of the Companies Law for Listed Joint Stock Companies issued by the Board of the Capital Market Authority pursuant to Resolution No. (8-127-2016) dated 16/1/1438H corresponding to 17/10/2016AD, which govern the affairs of the companies listed on the financial market. And added to them is the Corporate Governance Regulations issued by the Board of the Capital Market Authority pursuant to Resolution No. (8-16-2017) dated 16/5/1438H, which are considered -according to their second article- "mandatory for the companies listed on the main market except for the provisions indicated that they are non-binding (guidance)", and devote their second chapter to the shareholder rights.
And these texts are read integrated: for the Law puts the rights and the general rules, and the implementing regulations detail them for the non-listed joint stock companies, and the regulations of the listed joint stock companies detail them for the companies of the financial market, and the Corporate Governance Regulations put the behavioral and organizational standards for the board of directors in dealing with the shareholders, and the provisions of the regulations do not lack the referral to the texts of the Law whenever the provisions require detail in the statutory origin.
The Rights Attached to the Share and the Fundamental Rights Protected from Deprivation
Article One Hundred and Seven of the Companies Law (The Rights Attached to the Shares) decides the list of the rights established for the shareholder, as "the rights attached to the share are established for the shareholder, and include the right to dispose of it, and the right to attend the shareholders' assemblies, and the participation in their deliberations, and the voting on their decisions, and the right to obtain a share of the net profits decided to be distributed, and the right to elect the members of the board of directors, and the right to review the records and documents of the company in a manner that does not prejudice the confidentiality of the information, and the monitoring of the businesses of the board of directors, and the raising of the liability suit on the board members, and the challenge of the nullity of the decisions of the shareholders' assemblies, and the right to obtain a share of the assets of the company upon the liquidation, with the conditions and restrictions contained in the Law or in the articles of association of the company".
And Article Eighty-Five (The Competencies of the Extraordinary General Assembly) guarantees the immunity of these rights: for it is among the competencies of the extraordinary general assembly the amendment of the articles of association of the company, "except for what relates to the deprivation of the shareholder or the amendment of any of his fundamental rights that he derives by virtue of his capacity as a shareholder", especially five rights enumerated by the text: first obtaining a share of the profits decided to be distributed; and second obtaining a share of the net assets of the company upon the liquidation; and third attending the public or special shareholders' assemblies and participating in their deliberations and voting on their decisions; and fourth disposing of his shares except in accordance with the provisions of the Law; and fifth requesting the review of the records and documents of the company, the monitoring of the businesses of the board of directors, the raising of the liability suit on the board members, and the challenge of the nullity of the decisions of the public and special shareholders' assemblies. And the Law also requires -for considering the amendments that would "increase the financial burdens of the shareholders"- the consent of all the shareholders.
And Article Five of the Corporate Governance Regulations (The Rights Related to the Shares) transfers these rights in eleven points for the listed companies, and adds to them the right of "the pre-emptive subscription to the new shares issued against cash consideration, unless the extraordinary general assembly suspends the operation of the pre-emptive right -if it was provided for in the articles of association of the company- in accordance with Article One Hundred and Twenty-Nine of the Companies Law", and the right "to register his shares in the shareholders' register of the company", and the right "to request the review of a copy of the memorandum of incorporation of the company and its articles of association unless the company published them on its website", and the right "to nominate and elect the members of the board of directors".
The Nomination and Election of the Board of Directors: The Right of Every Shareholder to Nominate and Be Elected
The path to the board of directors begins from Article Sixty-Seven of the Companies Law (Running for the Membership of the Board of Directors) which decides that "the joint stock company is managed by a board of directors provided that the number of its members should not be less than (three)", and that "every shareholder has the right to nominate himself or another person or more of the shareholders or of others for the membership of the board of directors of the joint stock company", a right that the Corporate Governance Regulations enshrine in the item "nomination and election of the members of the board of directors" among the rights related to the share.
And Article Sixty-Eight (The Election of the Members of the Board of Directors) organizes the election process in five paragraphs: "the ordinary general assembly elects the members of the board of directors of the company, and it is required in all cases that the members of the board of directors be persons of natural capacity"; and "the regulations determine the method of the voting in the election of the members of the board of directors of the joint stock company"; and "it may be provided in the articles of association of the company the method of forming the board of directors in accordance with the controls determined by the regulations"; and the membership term is determined "provided that it does not exceed (four) years" with the permissibility of the re-election unless the articles of association provide otherwise; and the ordinary general assembly is granted the power to remove the members, as "the ordinary general assembly may remove all or some of the members of the board of directors even if the articles of association of the company provided otherwise, and in this case the ordinary general assembly must elect a new board of directors or whoever replaces the removed member".
And Article Eight of the Corporate Governance Regulations (The Election of the Members of the Board of Directors) adds the transparency of the announcement for the listed companies: "the company announces on the electronic website of the market information about the candidates for the membership of the board of directors when publishing or directing the invitation for the convening of the general assembly, provided that this information includes a description of the experiences, qualifications, skills, jobs and previous and current memberships of the candidates", with a decisive rule that "the voting in the general assembly is limited to the candidates for the membership of the board of directors whose information the company announced", which makes the candidacy for the listed companies restricted to the condition of the prior announcement on the electronic website of the market.
The Cumulative Voting: The Statutory Definition and the Mechanism of Operation
The item related to the cumulative voting of Article One of the Implementing Regulations of the Companies Law (The Definitions) defines the cumulative voting as "a voting method for choosing the members of the board of directors that grants the shareholder who owns shares having voting rights a voting power by the number of those shares, so that it enables him to vote with them for one candidate or divide them among whomever he chooses of the candidates without the repetition of these votes", and Article One of the Listed Joint Stock Companies Regulations defines it with the same meaning as "a voting method for choosing the members of the board of directors that grants the holder of the shares having voting rights a voting power by the number of those shares; so that it enables him to vote with them for one candidate or divide them among whomever he chooses of the candidates without the repetition of these votes".
And the mechanism of operation becomes clear from the definition with three characteristics: the first is that the voting power of the shareholder is multiplied by the number of the seats of the board of directors subject of the election, so the shareholder who owns a thousand shares having voting rights in a company whose board of five members is being elected owns five thousand votes, unlike the ordinary voting which grants him only a thousand votes; and the second is that he may vote with them all for one candidate gathering his votes for him, or divide them among whomever he chooses of the candidates; and the third is that these votes are not repeated, so the shares are counted once when calculating the voting power, and the one share is not used more than once in the one election, as confirmed by the Listed Joint Stock Companies Regulations. And by this mechanism the shareholder who owns a percentage of (twenty percent) of the voting rights shares in a board composed of five members can guarantee the election of his representative in it if he votes with all his votes for one candidate, which cannot be achieved in the ordinary voting.
The Cumulative Voting in the Listed Companies: The Bindingness and the Exception of the Parallel Market
Article Five of the Implementing Regulations of the Companies Law for Listed Joint Stock Companies (The Appointment of the Members of the Board of Directors) decides a decisive provision of the mandatory nature of the cumulative voting in the election of the board of directors of the listed company, with a single exception concerning the companies listed on the parallel market:
"The cumulative voting must be used in the election of the board of directors, so that it is not permissible to use the voting right of the share more than once. And by way of exception to that, the company listed on the parallel market may use another voting method in the election of the members of the board of directors in the event that its articles of association provide for that" - paragraph (a) of Article (5) of the Implementing Regulations of the Companies Law for Listed Joint Stock Companies (Umm Al-Qura)
And paragraph (b) of the same Article Five organizes the controls of the right of appointment in the board of directors, as it permits that the articles of association of the company provide for "the right of one or more shareholders to appoint one or more members in the board of directors" subject to six controls: first that the articles of association of the company state "the name of the shareholder who enjoys the right of appointment, the number of the seats allocated to him, and the mechanism of dealing with the vacancy of the position of the member or the members appointed in accordance with paragraph (b) of this article"; and second that the number of the seats allocated to any shareholder in the articles of association of the company does not exceed "the number that he can elect in the general assembly through the voting rights he owns", and in all cases that the total number of the seats filled through the appointment does not exceed "half of the number of the seats of the board of directors or three seats whichever is less"; and third that the appointed member satisfies "the conditions and standards of the membership approved by the general assembly of the company"; and fourth that the shareholder who enjoys the right of appointment does not use "his voting rights on the basis of which he appointed in the election of the rest of the members of the board of directors"; and fifth any other controls determined by the articles of association of the company; and sixth any other controls determined by the Authority.
And the rule of Article Forty of the same regulations (The Right of Voting in the General Assemblies) concerning the preferred shares completes that: "the preferred shares may not give the shareholders the right to vote in the general assemblies, except if the company failed in paying the percentage specified for the owners of those shares of the net profits of the company after deducting the reserves -if any- for three consecutive years", and by way of exception to that "the preferred shares give the shareholders the right to vote in the general assembly if the reduction of the capital of the company, or its liquidation, or the sale of its assets resulted from the decision of the general assembly", and "for every preferred share there is one vote in the meeting of the general assembly".
The Cumulative Voting in the Non-Listed Companies: The Rule and the Permissibility of Departing to the Ordinary Voting
Article Fourteen of the Implementing Regulations of the Companies Law (The Election of the Members of the Board of Directors) contained in the second chapter dedicated to the joint stock company not listed on the financial market decides: "the members of the board of directors of the company are elected by the ordinary general assembly by the cumulative voting. However, they may be elected by the ordinary voting if the articles of association of the company provide for that", and its second paragraph makes permissive the reservation of the seats by the appointment: "without prejudice to the provisions of the Law, it may be provided in the articles of association of the company the right of the shareholder whose ownership percentage in its shares having voting rights reaches the percentage determined by the articles of association of the company in reserving membership seats in the board to appoint whoever he nominates. And the shareholder owner of this right may not participate with the other shareholders in the election of the rest of the members of the board of directors".
And the precise correspondence between the provisions of the two regulations is observed: for the cumulative voting in the listed companies is a binding obligation that may not be departed from except in the company listed on the parallel market if its articles of association provide for another voting method, while it is in the non-listed companies the rule from which the articles of association of the company may depart to the ordinary voting; and in contrast, the Implementing Regulations of the Companies Law permitted for the non-listed companies the reservation of the seats by the appointment without a general quorum ceiling in their text, while the Listed Joint Stock Companies Regulations restricted the appointment seats to the ceiling of "half of the number of the seats of the board of directors or three seats whichever is less", with the control "that the number of the seats allocated to any shareholder in the articles of association of the company does not exceed the number that he can elect in the general assembly through the voting rights he owns".
The Ordinary General Assembly: The Annual Convening, the Agenda and the Quorum
Article Eighty-Eight of the Companies Law (The Meeting of the Ordinary General Assembly) organizes the annual convening: "the annual ordinary general assembly convenes at least once during the (six) months following the end of the fiscal year of the company. And other ordinary general assemblies may be called whenever the need arises for that", and the agenda of the annual assembly must include four items: reviewing the report of the board of directors for the elapsed fiscal year and discussing it, and reviewing the financial statements for the elapsed fiscal year and discussing them, and discussing the report of the auditor for the elapsed fiscal year and taking a decision regarding it, and deciding on the proposals of the board of directors regarding the distribution of the profits if any. And the Law also permits the fulfillment of the requirement of the annual convening "by the convening of an extraordinary general assembly during the (six) months following the end of the fiscal year of the company and the inclusion of its agenda of the items" themselves.
And Article Ninety-Two (The Quorum Required for Holding the Meeting of the Ordinary General Assembly) determines the numerical rule: "the meeting of the ordinary general assembly is not valid unless attended by shareholders representing (a quarter) of the shares of the company having voting rights at least, unless the articles of association of the company provide for a higher percentage, provided that it does not exceed (half)", and if the quorum is not available "the invitation is directed to a second meeting held with the same conditions provided in Article (Ninety-One) of the Law within the (thirty) days following the date specified for the convening of the previous meeting", provided that the second meeting is valid "whatever the number of the shares having voting rights represented therein", and the decisions of the ordinary general assembly are issued "by the approval of the majority of the voting rights represented in the meeting".
And that is met by the quorum of Article Ninety-Three (The Quorum Required for Holding the Meeting of the Extraordinary General Assembly): the meeting is not valid unless "attended by shareholders representing (half) of the shares of the company having voting rights at least, unless the articles of association of the company provide for a higher percentage, provided that it does not exceed (two thirds)", and the second meeting is valid by the attendance of "shareholders representing (a quarter) of the shares of the company having voting rights at least", and the third meeting is valid "whatever the number of the shares having voting rights represented therein", and the decisions of the extraordinary general assembly are issued "by the approval of (two thirds) of the voting rights represented in the meeting", except if the decision was related "to the increase or decrease of the capital or the extension of the term of the company or its dissolution before the expiry of the term specified in its articles of association or its merger with another company or its division into two or more companies, then it is not valid unless issued by the approval of (three quarters) of the voting rights represented in the meeting".
The Call to the Assembly: The Dates, the Mechanisms and the Authorized Bodies
Article Ninety of the Companies Law (The Public and Special Assemblies) begins with a general rule: "the public and special assemblies convene upon a call from the board of directors, in accordance with the conditions provided in the articles of association of the company", then opens three additional paths for the call: the first upon the request of the auditor or one or more shareholders representing "(ten percent) of the shares of the company having voting rights at least", as "the board of directors must call the ordinary general assembly to convene within (thirty) days from the date of the request of the auditor or one or more shareholders representing (ten percent) of the shares of the company having voting rights at least"; and the second upon the initiative of the auditor himself, as "the auditor may call the ordinary general assembly to convene if the board did not direct the call within (thirty) days from the date of the request of the auditor"; and the third by a decision of the competent body (the Ministry of Commerce or the Capital Market Authority) in three cases enumerated by the text: the expiry of the period specified for the convening of the ordinary general assembly contained in paragraph (1) of Article (Eighty-Eight) without its convening, or the establishment of violations of the provisions of the Law or the articles of association or the occurrence of a defect in the management of the company including the decrease of the number of the members of the board of directors below the minimum required for the validity of its convening, or the failure of the board to direct the call within the specified period from the date of the request of the auditor or the shareholders, and for the competent body "to take the necessary procedures for holding the ordinary general assembly, and it may preside over the meeting of that assembly in the event of the impossibility of its presidency".
And Article Ninety-One (The Call to the Meeting of the Assembly) regulates the deadline and the data: "the invitation to convene the assembly is directed before its specified date (twenty-one) days at least in accordance with the controls determined by the regulations", taking into account "informing the shareholders by registered letters at their addresses contained in the shareholders' register, or announcing the invitation through the means of modern technology", and sending "a copy of the invitation and the agenda to the commercial register, and a copy to the Authority if the company was listed on the financial market at the date of announcing the invitation", and the invitation to the meeting of the assembly must include at least four elements: a statement of the person entitled to attend the meeting and his right to delegate whoever he chooses of the non-members of the board of directors, and a statement of the right of the shareholder to discuss the topics included in the agenda and to direct the questions and the method of exercising the right of voting; and the place of holding the meeting, its date and time; and the type of the assembly whether public or special; and the agenda of the meeting including the items required to be voted on by the shareholders. And the third paragraph permits the shareholders in the non-listed joint stock company who represent all the shares of the company having voting rights "to hold a public assembly without observing the conditions and periods prescribed for the call, to consider the matters whose decision-making is among the competencies of the general assembly".
The Procedural and Judicial Guarantees of the Shareholder Rights
Article Ninety-Six of the Companies Law (The Agenda of the General Assembly) guarantees the effective participation of the shareholder in three rules: the first is that "the board of directors must, when preparing the agenda of the general assembly, take into account the topics that the shareholders wish to include, and one or more shareholders representing (ten percent) of the shares of the company having voting rights at least have the right to add one or more topics to the agenda when preparing it, and for the competent body to amend this percentage"; and the second is that each topic is dedicated in a separate item and the different topics are not combined materially under one item; and the third is that "every shareholder has the right to discuss the topics included in the agenda of the general assembly and to direct the questions regarding them to the members of the board of directors and the auditor", with a decisive protection: "every text in the articles of association of the company that deprives the shareholder of this right is considered null and void", and if one of the shareholders saw that the response to his question was insufficient "he refers to the general assembly, and its decision in this regard is effective".
And the judicial guarantees are based on three paths: first the challenge of the nullity of the decisions, as Article Ninety-Nine (The Objection to the Decision of the Shareholders' Assembly) provides that "any shareholder may apply to the competent judicial body with a request to invalidate the decision of the shareholders' assembly issued in violation of the provisions of the Law or the articles of association of the company, if he objected to it during the meeting, or was absent from it with an acceptable excuse", and the nullity suit is not heard "after the expiry of (ninety) days from the date of issuing the decision", and it is required that the plaintiff be a shareholder "in the company during the filing of the suit and during all its procedures"; and second the liability suit on the members of the board of directors, as Article Twenty-Nine permits "one or more partners or shareholders representing (five percent) of the capital of the company, unless the memorandum of incorporation of the company or its articles of association provide for a lower percentage, to raise the liability suit established for the company in the event of the failure of the company to raise it", with the requirement of "informing the manager of the company or the members of its board of directors -as the case may be- of the intention to raise the suit before (fourteen) days at least from the date of raising it"; and third the request for the inspection of the company, as Article One Hundred and Two (The Request for the Inspection of the Company) provides for the right of "one or more shareholders representing (five percent) at least of the capital of the company" to submit a request to the competent judicial body for the inspection of the company "if it appears from the acts of the members of the board of directors or the auditor in the affairs of the company what calls for suspicion", and for the judicial body if the validity of the complaint is established to order "what it deems of precautionary procedures", and to call the general assembly to take the necessary decisions, and to remove the members of the board of directors and the auditor and appoint whoever assumes the supervision of the management of the company and calls the general assembly to convene for the election of a new board of directors.
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 above sections, and it is always preferred to review from these official links to view the complete texts and the latest updates:
- 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)
A methodological note: all the numbers, dates, competencies and degrees of bindingness quoted in this article were taken literally from the official texts mentioned above published in the Official Gazette (Umm Al-Qura), and the texts of the articles are read as contained in their statutory source without modification, and it is recommended to refer to these sources to verify any subsequent updates on the texts and their impact on the resulting obligations.
Frequently Asked Questions about the Shareholder Rights and the Cumulative Voting
We provide in the following answers to the most common questions among the shareholders and the governance practitioners about the shareholder rights and the cumulative voting in the Saudi companies in accordance with the Companies Law and its implementing regulations:
What is the cumulative voting in the election of the board of directors of the companies?
It is "a voting method for choosing the members of the board of directors that grants the shareholder who owns shares having voting rights a voting power by the number of those shares, so that it enables him to vote with them for one candidate or divide them among whomever he chooses of the candidates without the repetition of these votes", in accordance with the definition of the Implementing Regulations of the Companies Law, and by it the votes of the shareholder are multiplied by the number of the seats to be elected, so the minority owner can guarantee his representation in the board of directors if he directs all his votes to his candidate.
Is the cumulative voting mandatory in the election of the board of directors?
Yes, it is mandatory in the companies listed on the financial market, as the Listed Joint Stock Companies Regulations oblige its use in the election of the board of directors so that it is not permissible to use the voting right of the share more than once, with a single exception for the companies listed on the parallel market for which it is permissible to use another voting method if their articles of association provide for that; as for the non-listed companies, it is the rule, and it may be departed from to the ordinary voting if the articles of association of the company provide for that in accordance with Article Fourteen of the Implementing Regulations of the Companies Law.
What is the quorum required for the validity of the convening of the ordinary general assembly?
The attendance of shareholders representing a quarter of the shares of the company having voting rights at least, unless the articles of association of the company provide for a higher percentage provided that it does not exceed half, and if the quorum is not available, an invitation is directed to a second meeting within the thirty days following which is valid whatever the number of the shares represented therein, and the decisions of the ordinary general assembly are issued by the approval of the majority of the voting rights represented in the meeting, in accordance with Article Ninety-Two of the Companies Law.
When must the annual ordinary general assembly be held?
It convenes at least once during the six months following the end of the fiscal year of the company, and other ordinary general assemblies may be called whenever the need arises, and the agenda of the annual meeting must include reviewing the report of the board of directors and the financial statements for the elapsed fiscal year and discussing them, and discussing the report of the auditor and taking a decision regarding it, and deciding on the proposals of the board of directors regarding the distribution of the profits, in accordance with Article Eighty-Eight of the Companies Law.
Can the shareholder add a topic to the agenda of the general assembly or direct questions?
Yes. One or more shareholders representing ten percent of the shares of the company having voting rights at least have the right to add one or more topics to the agenda when preparing it, and every shareholder has the right to discuss the topics included in the agenda and to direct the questions to the board of directors and the auditor, and every text in the articles of association of the company that deprives the shareholder of this right is considered null and void, and if the shareholder saw that the response to his question was insufficient, he refers to the general assembly and its decision is effective, in accordance with Article Ninety-Six of the Companies Law.
What are the rights that the shareholder may not be deprived of?
They are the fundamental rights that the shareholder derives by virtue of his capacity as a shareholder, which the extraordinary general assembly may not amend even when amending the articles of association of the company, namely: obtaining a share of the profits decided to be distributed, and obtaining a share of the net assets of the company upon the liquidation, and attending the public or special shareholders' assemblies and participating in their deliberations and voting on their decisions, and disposing of his shares, and requesting the review of the records and documents of the company and the monitoring of the businesses of the board of directors and the raising of the liability suit and the challenge of the nullity of the decisions of the assemblies, in accordance with Article Eighty-Five of the Companies Law, along with the right to elect the members of the board of directors provided in Article One Hundred and Seven.
Conclusion: The Shareholder an Effective Partner in the Management of the Company
The governing rules of the shareholder rights in the Saudi companies are summarized in three axes: the rights established for the share from obtaining the profits and the liquidation share and attending the assemblies and voting on them and disposing of the shares and the review and the monitoring and the raising of the suits, protected by a textual immunity in Article Eighty-Five of the Companies Law that makes the amendment of the articles of association of the company in the hand of the extraordinary general assembly with the fundamental rights remaining resistant to the deprivation; and the election which is conducted by the cumulative voting mandatorily in the listed companies and as a rule in the non-listed, which guarantees the representation of the minority in the board of directors and prevents the control of the majority over all the seats; and the procedural guarantees from the call to convene within thirty days upon the request of the shareholders representing ten percent, and the notification before twenty-one days, and the quorum of a quarter of the voting rights shares for the ordinary assembly, and the right to add the topics and direct the questions, and the challenge of the nullity of the decisions within ninety days.
And the essential advantage of this system is that it makes the shareholder an effective partner in the management of the company rather than a spectator over it: as he owns the keys of the call to the assembly and the inclusion of the topics on its agenda, and a cumulative mechanism that guarantees him his representation in the board of directors even if his stake was a minority, and judicial means for the objection, the accountability and the inspection of the businesses of the management. At Nova Legal for Law and Legal Consultations, we provide our specialized consultations in the affairs of the corporate governance and the shareholder rights, and reviewing the articles of association of the companies and the extent of their conformity with the provisions of the Companies Law and its implementing regulations, and representing the shareholders before the general assemblies and the judicial bodies in the suits of the nullity of the decisions, the liability and the inspection, and following up the procedures of the cumulative voting and the election of the boards of directors, and we are pleased to accompany you towards sound governance preserving the rights of all the shareholders.