SAUDI ARABIA Law and Practice Contributed by: Zain Satardien, Chadi Hourani and Hayel Hourani, Hourani & Partners
laws; the board must provide shareholders with complete, clear, accurate, and non-misleading information at appropriate times, ensuring the information is regularly updated); • the right to monitor the company’s performance and the activities of its board of directors (the board is responsible for fostering effective commu - nication with shareholders, aligning the company’s strategic objectives and interests with shareholder input); • the chairman and CEO must inform board mem - bers of shareholders’ opinions and facilitate dis - cussions regarding these views; • the right to hold board members accountable, initi - ate liability lawsuits against them, and appeal for nullification of resolutions made by the general or special shareholders assemblies; • pre-emptive rights to subscribe to new shares issued for cash unless otherwise stipulated in the company’s by-laws or suspended by the extraordi - nary general assembly; • the right to have their names recorded in the com - pany’s shareholders register; • the right to request a copy of the company’s arti - cles of association and by-laws unless these docu - ments are published on the company’s website; and • the right to nominate and elect members of the board of directors. Whether public or private companies, minority share - holders generally have the following protections as well. • Under the Saudi Arabian Companies Law, SHAs are permitted and may be incorporated into the articles of association or by-laws of a company. The articles or by-laws can specify that SHAs pre - vail in cases of conflict, although enforceability is subject to compliance with Saudi Arabian law. • Minority shareholders have the right to participate in general assemblies, vote on significant deci - sions, and elect board members. • Shareholders holding at least 5% of the company’s capital may also convene an extraordinary general assembly. • JSCs may recognise drag-along and tag-along rights, enabling minority shareholders to participate
or exit in major transactions involving the majority shareholders. • JSCs can issue multiple classes of shares with varying rights and privileges. • Shareholders generally have pre-emptive rights to subscribe to newly issued shares, preventing dilu - tion of their equity unless otherwise agreed. • Shareholders have the right to inspect company records and obtain critical financial and operational data to monitor company performance. • Minority shareholders may challenge related-party transactions, conflicts of interest, breaches of fiduciary duties, and other forms of managerial misconduct. Derivative actions may be brought in the company’s name for breaches affecting the company’s interests. 4.3 Disclosure and Reporting Obligations For a general discussion on FDI obligations please see 1.1 Legal System and 1.2 Regulatory Framework for FDI . Additionally, both foreign investors and Saudi Arabian entities involved in FDI are subject to disclosure and reporting obligations at various stages of the invest - ment life cycle, encompassing acquisition, holding, and disposal. Certain disclosure requirements are summarised below. • Foreign investors acquiring a controlling interest in a Saudi Arabian entity must disclose their holdings to the MISA. • Foreign investors must submit periodic reports to the MISA, including information such as the finan - cial performance of the investment, updates on business activities, and compliance with national and sector-specific regulations. • Foreign investors disposing of their ownership stakes must notify the MISA and relevant authori - ties such as the ZATCA in advance. • Real-time reporting of material events impacting shareholding structures or corporate governance is required. • FDI transactions must comply with Saudi Arabia’s Anti-Money Laundering Regulations, ensuring that investments are not linked to illicit activities.
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