SAUDI ARABIA Law and Practice Contributed by: Dana Halwani and Leanne Farsi, Derayah LLPC
the MOC for amendment of the commercial registra - tion certificate. Companies are required to upload their financial state - ments in respect of each financial year to the MOC,
of the company must, before the company, the gen - eral assembly or the shareholders, pass a resolution to dissolve the company and prepare a declaration stating that they have investigated the financial posi - tion of the company, confirming that the assets of the company are sufficient to discharge its debts at the end of the liquidation period proposed, and that the company is not in default under the Bankruptcy Regu - lation (Royal Decree No M/50 of 28 Jumada Awwal 1439 Hejra corresponding to 14 February 2018) as amended by Royal Decree No M/89 of 9 Rajab 1441 Hejra corresponding to 4 March 2020. This declara - tion must be presented within 30 days from the date of its separation to the partners, the general assembly or the shareholders for the passing of a resolution to dissolve the company. Article 242 (2) provides that in a situation where the partners, the general assembly or the shareholders pass a resolution to dissolve the company, when it is apparent from the declaration that the assets of the company are not sufficient to discharge its debts or that the company is in default under the Bankruptcy Regulation, they shall be liable by way of joint liability for any debt outstanding against the company. Therefore, if a company continues trading while insol - vent, eventually the shareholders may be held person - ally liable for the company’s debts, which can only be evaded by either infusing new capital or making an application for a procedure under the Bankruptcy Regulation. Under the Bankruptcy Regulation, a com - pany’s manager, member of its board of directors or board of managers, or any of its officers or any other person participating in the establishment or manage - ment thereof, or an analogous person, risks imprison - ment of up to five years and/or a fine of up to SAR5 million, by “continuing to carry on the activity of the debtor in the absence of the possibility of avoiding liquidation”. 4. Employment Law 4.1 Nature of Applicable Regulations Main Statutes The main Saudi statutes governing relations between employers and employees are:
through the online portal Qawaem. 3.4 Management Structures
JSCs are managed by a board of directors, consisting of not fewer than three members, which has the wid - est powers to manage the company towards achiev - ing its objectives, subject to the limitations set down by the shareholders’ general assembly. The board members may be shareholders, or other persons, and are elected by the shareholders in the ordinary general assembly. The first board can be appointed by resolution of the founders or in the JSC’s by-laws. The company’s by-laws or the shareholders specify the mode of management of the company. LLCs have more flexibility than JSCs to put a man - agement structure in place that suits the company’s shareholders. An LLC can be managed by one or more managers, who can be shareholders or other persons. The shareholders can appoint a board of managers if there are multiple managers. 3.5 Directors’, Officers’ and Shareholders’ Liability As per Article 28 of the 2022 Companies Regulation, “the manager and members of the board of direc - tors shall be responsible by way of joint liability to compensate the company or partners or sharehold - ers or third parties for damage arising by reason of a violation of the provisions of the Regulation or of the company’s articles of association or by-laws, or by reason of any error, neglect or default on their part in the performance of their work; any condition providing otherwise shall be void ab initio”. A manager or member of the board of directors who fails to call a shareholders’ meeting upon being made aware of the losses of the company reaching 50% may be imprisoned for up to a year and/or fined up to SAR1 million. Article 242 (1) of the 2022 Companies Regulation provides that the managers or the board of directors
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