JEDDAH — The Capital Market Authority (CMA) urges shareholders in listed companies to exercise all their rights in general assemblies regardless of their shareholdings’ percentage in the company. Those rights are guaranteed to them by the Capital Market Law and its implementing regulations especially the Corporate Governance Regulations.
A shareholder has an important role in general assemblies by participating and voting on decisions. For that, the shareholder must be more active by preparing himself/herself and reading the board of directors’ report and the financial statements before attending the assembly. He/she must also read the agenda and study the points and information available to ask questions during the discussion in a manner that will not negatively affect the company.
CMA emphasizes that protecting investors in the capital market requires concerted efforts from participants in the market to promote shareholders’ rights by participating and attending the general assemblies and voting equally and fairly on decisions. This would increase the levels of trust in investors. The general assembly is considered the link between the shareholders of a company and its board of directors. It discusses the topics that need shareholders’ approval for the final decision. Hence, attending and participating in general assemblies reinforces the company’s position in the capital market and encourages the members of the board who are chosen and voted by the shareholders.
Voting is deemed to be a fundamental right of a shareholder, which shall not, in anyway, be denied as per Article Six of the Corporate Governance Regulations. A shareholder may, in writing, appoint any other shareholder who is not a board member and who is not an employee of the company to attend the general assembly on his behalf. Shareholders holding not less than 5 percent of the company’s shares are entitled to add one or more items to the agenda upon its preparation.
CMA – in coordination with the Saudi Stock Exchange – has allowed proxy voting in order to increase and facilitate shareholder participation in the general assembly meetings, and to enhance the adequacy and efficiency at these meetings. There is a need to apply this modern mechanism to be in line with the developments and use the latest technology, which would overcome the obstacles that might get in the way of shareholder participation or convening the assembly. Under this mechanism, a shareholder can exercise his right in voting without physically attending the assembly. In addition, this helps companies to ensure that the quorum is complete and assemblies are held. It also reduces the expenses of listed companies resulting from assemblies not held at specified times.
One of the articles that guarantee shareholders’ rights in listed companies is Article Four of the Corporate Governance Regulations which stipulates that (a) the company in its Articles of Association and by-laws shall specify the procedures and precautions that are necessary for the shareholders’ exercise of all their lawful rights; (b) all information which enable shareholders to properly exercise their rights shall be made available and such information shall be comprehensive and accurate; it must be provided and updated regularly and within the prescribed times; the company shall use the most effective means in communicating with shareholders. No discrepancy shall be exercised with respect to shareholders in relation to providing information.
Common mistakes shareholders must pay attention to at general assemblies include: lack of information in the agenda which could affect the shareholders’ decisions, the auditor of the company answering inquiries from shareholders that are not related to financial statements, and reading all the items on the meeting’s agenda without allowing any discussion.
