Understanding Corporate Governance in the Saudi Context

Corporate governance is a set of rules, processes, and relationships that direct and monitor a company's performance. Its main goal is to achieve a balance between the interests of management, the board of directors, shareholders, and other stakeholders. In Saudi Arabia, governance aims to:

• Protect shareholder rights: Especially those of minority shareholders.

• Promote transparency and disclosure: To ensure investor confidence.

• Improve performance efficiency: By applying best management practices.

• Ensure compliance with laws: Such as the Saudi Companies Law and Capital Market Authority (CMA) regulations.

The Pivotal Role of a Lawyer in Corporate Governance

As a lawyer, you have a vital role that goes beyond just drafting contracts. You are a strategic advisor who ensures that the company complies with legal and regulatory requirements. .

1. Drafting and Updating Company Bylaws

• Saudi Companies Law: You must be fully familiar with the provisions of the Companies Law issued in 2015 and its amendments. This law is the primary reference governing the establishment of companies, the management of boards, and shareholder rights.

• Article 70 of the Companies Law: Addresses the responsibility of the manager or board member, which is a crucial point for a lawyer to advise on.

• Executive Regulations of the Companies Law: Contain important procedural details for implementing the law.

• Company Bylaws: A lawyer must ensure that the company's bylaws are fully compliant with the Companies Law and relevant regulations, and that they clearly define the powers of the board of directors, the tasks of various committees (such as the audit committee), and the rights of shareholders.

2. Overseeing Board and General Assembly Meetings

• Meeting Preparation: A lawyer should advise on the agenda and ensure that all procedures followed are legal, in terms of the meeting quorum and the number of votes.

• Drafting Meeting Minutes: The minutes must be accurate, comprehensive, and properly recorded to serve as a legal reference in the future.

• Ensuring Compliance with CMA Regulations: If the company is listed on the stock market, it must comply with the corporate governance requirements issued by the CMA, which include detailed rules for board and general assembly meetings.

3. Risk Management and Compliance

• Identifying Legal Risks: A lawyer must identify potential risks the company may face, such as non-compliance with labor laws, data protection laws, or anti-corruption laws.

• Developing Internal Policies: Assisting in drafting internal policies and procedures, such as an anti-corruption policy, a conflict of interest policy, and an employee relations policy, to ensure compliance with local and international laws.

• Reviewing Contracts and Agreements: Ensuring that all contracts signed by the company comply with laws and regulations and contain clear clauses to protect the company's interests.

4. Handling Shareholder Disputes and Legal Liability

• Protecting Minority Shareholder Rights: A lawyer can advise on the rights of minority shareholders, how to exercise them, and how to deal with any potential violations.

• Liability Lawsuits: A lawyer must be prepared to represent the company or provide advice in case of lawsuits filed against board members for breach of their duties (e.g., mismanagement or abuse of position).

Challenges and Development Opportunities in Corporate Governance in Saudi Arabia

• Challenges: The increasing number of legislations and regulations requires continuous updates. Also, some family-owned businesses may find it difficult to separate ownership from management.

• Development Opportunities:

  • Specialization: You can specialize in corporate governance and obtain professional certifications such as the Certified Corporate Governance Officer certificate.

  • Technology: Using technology to manage legal documents and meetings facilitates compliance and increases efficiency.

  • Collaboration: Working closely with financial auditors and management consultants to provide integrated solutions for companies.

I hope this guide is useful. Remember that your role is not only about legal compliance but also about building a transparent and trustworthy work environment that contributes to the company's growth and sustainability.