Saudi Arabia Approves New Corporate Governance Regulations

by Dechert LLP

Dechert LLP

The Capital Market Authority (the CMA) of the Kingdom of Saudi Arabia (the Kingdom) has approved new corporate governance regulations for joint stock companies listed on the Saudi exchange (Tadawul) (the Regulations)1. Replacing the 2006 version, the Regulations provide shareholders and board members with improved rights, greater clarity and more transparency as to their respective roles and responsibilities. 

Why now?

The publication of the Regulations is driven by the continued effort to attract additional foreign investment into the Kingdom and to harmonize the CMA’s own rules with those of the newly revised Companies Law2, as overseen by the Ministry of Commerce and Investment. By enhancing the regulatory oversight of listed companies, the CMA seeks to bring its standards in line with those of other leading global exchanges. But the publication’s timing is of critical importance. Preparations are currently underway for the listing of Saudi Aramco’s shares on Tadawul pursuant to a planned IPO3. This is one of several measures the Kingdom is pursuing in line with its Saudi Vision 2030, a royal decreed initiative to help diversify the country away from its heavy reliance on declining oil revenue.


The Regulations replace the previous set that were in effect since 2003 (and modified in 2006). Published in mid-February this year, they formally come into effect on 22 April 2017. Some of the provisions however, such as those requiring corporate governance policies to be drafted and published, will only come into force on 31 December 2017.  

Objectives of these Regulations

Pursuant to Article 3, the main objectives of the Regulations can be summarized as: 

  • enhancing shareholder rights;

  • clarifying board, committee and executive management roles and responsibilities, including their decision making mechanisms; 

  • achieving greater openness, competitiveness, transparency and disclosure; 

  • avoiding and disclosing conflicts of interest; 

  • improving accountability and control over employees; 

  • protecting shareholder rights; 

  • overseeing corporate actions; and 

  • raising the professional standards of listed joint stock companies.

Summary of the Key Provisions

Shareholder Rights

Key rights are set out in Articles 4 to 15 of the Regulations and include: fair and equal treatment among shareholders, non-discrimination among shareholders of the same class, fair distributions, equal rights related to access of corporate information and communications, rights to attend and vote in general assemblies and board and audit member selections. There are now also clear mechanisms for the distribution of dividends and insolvency payouts.

Board of Directors

Detailed rules and principles governing board of directors (which also include that of the chairman, independent directors and the secretary of the board) (together, the Board) are set out Articles 16 to 41 of the Regulations and cover matters including: board formation, composition, appointment, conditions of membership, termination, responsibilities, main functions, independence, distribution of competencies and duties (including vis-à-vis those in executive management positions), agenda setting, meeting procedures, auditing, and training. Furthermore, the Regulations enshrine the fiduciary duties to adhere to the principles of truthfulness, honesty and loyalty.

Conflicts of Interest

The Regulations also cover the Board’s avoidance, assessment and disclosure of (and dealings with) conflict of interest situations4. There is a need to establish policies and procedures in relation to related party transactions, conflicts scenarios (with or for the company or its competitors), conflicted persons, accepting gifts, and complying with the authorization, renewal and termination of the board and its members, as per the Companies Law.


Provisions dealing with the formation, composition, membership, powers, procedures, responsibilities, policies, meetings and announcements of committees for remuneration, risk management, audit, corporate governance and nomination are set out in Articles 83 to 88 of the Regulations. 

Audit and Internal Control

Also outlined are the requirements as to the composition, appointment, roles and responsibilities of internal and external auditors5. Listed companies should have internal control systems in place, along with audit plans and regular published reports. Listed companies must also maintain policies on effective corporate governance, and have an internal corporate governance committee regularly review compliance.


Boards of listed companies are now required to produce policies on their dealings with various stakeholders, including employees and incentives given to them6. These drafted policies should describe how to protect their respective rights, deal with complaints, confidentiality of information, professional conduct, social contributions, treatment of employees, and dealing with non-compliance with these policies and procedures. Employee incentive schemes and payouts must be documented. Separate policies governing professional and ethical corporate standards, social responsibilities and social initiatives are also to be made available. 

General Disclosures and Transparency

There is a general requirement to disclose and make available up-to-date and accurate information to the company’s various stakeholders7. The board must maintain policies on information disclosure, and provide a regular board report along with that of the audit committee’s report and regularly maintain information on the company’s website. Remuneration of board members and the executive management must be disclosed pursuant to a standard template, as set out in the Regulations. All records of the company must be maintained for a period of ten years, or longer if, any potential claims are pending. 

Impact of Changes

The impact of the Regulations is likely to be significant, especially when compared with the old corporate governance regime. However, the obligations and responsibilities to which listed companies in the Kingdom will be subject to once the Regulations come into force is barely (if at all) more onerous than those applicable to such entities in other more traditional listing jurisdictions.This should serve, in equal parts, to give comfort to international investors and to encourage sponsors to support the local listings regime, both of which will be equally necessary in order for the domestic market to grow as intended.


1) The Corporate Governance Regulations (the Regulations), as issued by the board of the CMA pursuant to its resolution number (8-16-2017) dated 16/5/1438H (corresponding to 13/2/2017G) are intended to comply with the revised Companies Law, as issued by Royal Decree No M/3 dated 28/1/1437H (corresponding to 10/11/2015G).

2) The Companies Law (1437H/2015G), published in the Saudi Gazette (Um Al-Qura) on 4 December 2015, and effective from 02 May 2016.

3) See “UPDATE 2-Saudi Aramco IPO unlikely to require rule changes says regulatorReuters, December 6, 2016. 

4) Part 3 (Articles 42 – 49) of the Regulations.

5) Part 5 and 6 (Articles 73 – 82) of the Regulations.

6) Part 7 and 8 (Articles 83 -88) of the Regulations.

7) Part 9 and 11 (Articles 89 -93 and 96) of the Regulations.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Written by:

Dechert LLP

Dechert LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.