SAUDI ARABIA Law and Practice Contributed by: Dana Halwani and Leanne Farsi, Derayah LLPC
• the Zakat, Tax and Customs Authority (ZAT - CA); and • the General Authority for Competition (if applicable). The company may also need to obtain additional approvals from other relevant authorities regulat - ing its activities, depending on the business it will be carrying out. The time to complete these post-incorporation procedures varies widely depending on what registrations with govern - ment authorities are required. 3.3 Ongoing Reporting and Disclosure Obligations Any amendments to the articles of association of a company must be submitted to the MOC for review and approval. This includes any change in shareholding, any increase or decrease in the capital of the company, or any change to the activities of the company. Furthermore, the names of the general manager or members of the board of directors are included in the com - mercial registration certificate of a company, so any change in management must be reported to the MOC for amendment of the commercial registration certificate. Companies are required to upload their financial statements in respect of each financial year to the MOC, through the online portal Qawaem. 3.4 Management Structures JSCs are managed by a board of directors, con - sisting of not fewer than three members, which has the widest powers to manage the company towards achieving its objectives, subject to the limitations set down by the shareholders’ gener - al assembly. The board members may be share - holders, 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 com - pany’s by-laws or the shareholders specify the mode of management of the company. LLCs have more flexibility than JSCs to put a management structure in place that suits the company’s shareholders. An LLC can be man - aged by one or more managers, who can be shareholders or other persons. The sharehold - ers can appoint a board of managers if there are multiple managers. The manager(s) can be appointed via the articles of association or via separate contracts. The company’s articles of association or resolutions of the sharehold - ers determine the mode of management of the company. 3.5 Directors’, Officers’ and Shareholders’ Liability As per Article 28 of the 2022 Companies Regu - lation, “the manager and members of the board of directors shall be responsible by way of joint liability to compensate the company or partners or shareholders or third parties for damage aris - ing 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 per - formance 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 Regula - tion provides that the managers or the board of directors of the company must, before the com - pany, the general assembly or the shareholders, pass a resolution to dissolve the company and
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