Saudi market regulator passes new Corporate Government Regulations

Saudi market regulator passes new Corporate Government Regulations

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Capital Market Authority

RIYADH — The Saudi Capital Market Authority has approved the new Corporate Government Regulations, the Saudi stock market regulator said Wednesday.

The new regulations have paid heed to setting effective governance arrangements for the joint stock companies listed in the Saudi Stock Exchange to ensure the clarity of the relationship between shareholders and the company’s board from one side, and between the board and the executive management team on the other side. The regulations also took care of the shareholders’ rights in these companies, such as the right of fair and equal treatment of shareholders without discrimination and the right of accessing the information transparently to enable them to fully exercise their statutory rights. Moreover, the Regulations cover the rights of stake holders in these companies.

The Regulations have set detailed provisions on the composition of Board of Directors and committees in terms of competencies, responsibilities, meetings, members’ rights and duties. These provisions emphasize the principle of active participation in decision-making within the Board of Directors as they deal with the issues of conflicts of interest between board members and the company, and adopt honesty, truthfulness and care as a foundation and methodology for these boards.

The Regulations also included detailed provisions regarding companies’ external auditors and internal control procedures compelling Boards of Directors to disclose all information the shareholders and dealers need to build their investment strategies or perform any transaction with the company in a fair and systematic manner for all parties.

CMA indicated in its statements that it, and the Ministry of Commerce and Investment (MCI), took into consideration the best international practices compatible with the Saudi Exchange while preparing these Regulations. It also stated that in line with its keenness in communicating and consulting with the public investors and the private and government entities regarding draft regulatory regulations before their issuance, it published, in coordination with the Ministry, the draft regulations in the second quarter of 2016 for public consultation. The CMA and the Ministry received about 700 comments and proposals from more than 50 entities. Additionally, many workshops were conducted to introduce the draft regulations and duties and responsibilities of board members; and were attended by a number of chairmen, board members and executive management members of listed companies to get their opinions on the draft regulations in continuation of workshops conducted by CMA to representatives of listed companies to promote the importance of governance and its most prominent aspects. The CMA and the MCI has addressed the comments and opinions of the public and related parties on the draft regulations. CMA hailed the attention paid to the draft regulation by public investors and private and government entities, and it valued the received remarks and opinions.

CMA highlights the mandatory nature of most articles of these Regulations; and that guiding provisions for listed companies are referred to in the Regulations, noting that the new Regulations will take effect on April 22, 2017, except for the provisions set forth in the CMA announcement of the Corporate Governance Regulations which (will) enter into force on Dec. 31, 2017.

CMA stresses on taking the necessary remedial procedures by listed companies as per the abovementioned provisions before they enter into force on Dec. 31, 2017; and that the boards of listed companies, whose financial year ends on on Dec. 31, 2017 and afterwards, shall fulfill all requirements set forth in Article 90 of the Corporate Governance Regulations when preparing and approving the board report to be approved by the general assembly on on Dec. 31, 2017 and afterwards.

The Regulations contribute to interacting with the set of national legislations under which companies operate and integrate to fulfill their objectives with efficiency and integrity. The benefits of Corporate Governance are not confined to companies, rather they directly outreach the national economy for the role played by governance-based companies’ growth and continuity in boosting the economy and increasing the GDP in line with the Saudi Vision 2030. These Regulations were prepared in cooperation between the CMA and the Ministry; and come as part of the continuous coordination between them under the singed memorandum of cooperation to harmonize policies and procedures adopted for the implementation of the Companies Law to ensure integration and harmony in achieving the sough objectives; and in completion of the legislations issued by CMA in light of the new Companies Law such as the Regulatory Rules and Procedures issued pursuant to the Companies Law relating to joint stock companies listed in the Saudi Stock Exchange that regulates the remunerations of board members in these companies, the Holding of general and special assembly meetings of shareholders and their participation therein through contemporary technology, buy-back, sale and pledge of shares, pledge of company’s shares, Issuance, buy-back and conversion of preferred shares by the company, dividend distribution to shareholders of the company, Issuance and sale of pre-emptive rights resulting from capital increase, and proxy procedures for attending general and special assemblies. — SG

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