SAUDI ARABIA Law and Practice Contributed by: Zain Satardien, Chadi Hourani and Hayel Hourani, Hourani & Partners
4. Corporate Governance and Disclosure/Reporting 4.1 Corporate Governance Framework Saudi Arabia has recently established a robust cor - porate governance framework aiming to align with international best practices. The regulatory frame - work governing corporate governance is multifaceted, encompassing statutory laws, sector-specific guide - lines, and adherence to Sharia principles. Corporate Governance Under the Saudi Arabian Companies Law One of the most significant changes introduced by the new Companies Law has been the codification of the fiduciary duties of company managers and their accountability for any breach of those duties. A whole standalone chapter in the law is dedicated to this, aimed at encouraging healthy corporate governance practices more closely aligned to international stand - ards. Board of Directors’ Responsibility Under the Companies Law The Companies Law outlines detailed responsibilities and requirements for the board of directors in com - panies. It mandates that JSCs have a board of direc - tors consisting of at least three members, and that the board have a balanced mix of executive, non-execu - tive, and independent directors. The Companies Law and its Implementing Regulations codify the fiduci - ary responsibilities of managers and board members, ensuring they act in the company’s best interest. They are required to act objectively, with impartiality and diligence, ensuring the company’s growth, continuity, and maximisation of value for shareholders. Manag - ers and directors must avoid conflicts of interest, dis - close potential conflicts transparently, and refrain from exploiting their position for personal gain. See 4.2 Relationship Between Companies and Minority Investors for further discussions. Transparency and Disclosure Requirements Listed companies are required to publish financial statements that comply with International Financial Reporting Standards (IFRS). These statements must be audited and made available on the Tadawul web -
submit their notification at least 90 calendar days prior to the completion of the transaction. This time - frame may not be extended unless the GAC explic - itly requires additional information or documentation. The suspensory nature of this regime prohibits par - ties from completing the transaction until approval is granted to avoid associated penalties. Exemptions and Special Circumstances Certain transactions are exempt from merger control notification requirements under the Competition Law. Anti-Competitive Practices The Competition Law prohibits a wide array of anti- competitive behaviours that harm consumer welfare or market efficiency, including: • price-fixing; • collusion; • market allocation; • abuse of dominance; and • exclusionary conduct obstructing market access. Penalties for Non-Compliance The GAC imposes penalties for violations of merg - er control obligations. These include fines of up to 10% of the total annual sales value or SAR10 million when sales cannot be determined. Alternatively, the GAC may impose fines of up to three times the profit derived from the violation. Violators may also face annulment of their transactions, mandatory divestiture or other corrective orders. Additional Approvals Additionally, certain industries require specific regula - tory review and approval due to their strategic impor - tance. For example, transactions in the telecom - munications sector are subject to oversight by the Communications, Space, and Technology Commis - sion (CSTC), which governs matters related to public telecommunications networks, satellite communica - tions, and related infrastructure. Similarly, transactions in the energy and utilities sector may require approval from entities such as the Electricity and Co-Generation Regulatory Authority (ECRA), ensuring compliance with national policies and security considerations.
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