General and private assemblies of joint-stock companies in the Saudi Law

Each legal entity has rules that regulate the work within its management; accordingly the general assembly of the joint-stock company is considered the link between the company's Board of Directors and its shareholders. The general assemblies of the joint-stock company are held to consider and confirm the decisions approved by the board members and to present them to the shareholders during the meeting. This highlights the importance of the effective role of the general assembly of the joint-stock company in motivating the Board of Directors elected by the shareholders. The holding of ordinary and extraordinary meetings and the quorum for issuing decisions were discussed; also through modern technology means of communication, under Royal Decree No. (R/132) dated 01/12/1443 AH; which we shall discuss in detail below.

What is the Board Meetings of JSC?

The Board of Directors of the Joint Stock Company shall meet at least four times a year at the call of its Chairman, in accordance with the circumstances set out in the Articles of Association of the Company, and the Competent Authority may amend the meeting threshold stipulated in this Article. The Board Chairman shall call the Board to hold a meeting whenever requested in writing by any member of the Board to discuss one or more topics

• The board meeting of the Joint Stock Company shall be valid only if attended by at least half of the board members; in person or by proxy, unless the Articles of Association stipulate a higher quorum. 
• Resolutions of the Joint Stock Company’s board of directors shall be adopted by majority vote of the members present or represented at the meeting. When the votes are equal, the meeting chairperson shall have the casting vote, unless the company’s Articles of Association provide otherwise. 
• The Board of Directors shall determine the venue for holding its meetings, and the same may be held using means of modern technology (virtual meetings).

Permissibility of delegation for Meeting Attendance and Validity of Board Resolutions 

The board member may not delegate any third party to attend the meeting and vote on their behalf. As an exception, any board member may delegate any other board member to act on his behalf if the same is stipulated in the company’s Articles of Association, provided that the delegated member shall not have more than one representation.

The resolution of the Joint Stock Company’s board of directors shall enter into force as of the date of its issuance, except for cases where the underlying resolution sets a different effective date or where particular circumstances occur.

The Board of Directors of the Joint Stock Company may adopt resolutions on urgent matters through presenting the same to members by circulation, unless any of the board members request – in writing – that the Board hold a meeting to consider any such resolutions. Such resolutions shall be issued with the approval of the majority of votes of board members, unless the company’s Articles of Association provide for a higher ratio or number. In addition, such resolutions shall be presented to the Board at its first subsequent meeting to be recorded in the minutes of such a meeting.

Minutes of Board Meetings

The deliberations and resolutions of the Joint Stock Company's board meetings shall be recorded in minutes to be prepared by the Secretary and co-signed by the Chairman of the meeting, the board members present and the Secretary. 

• Meeting minutes shall be recorded in a special register to be co-signed by the Chairman of the Board of Directors and the Secretary. 
• The Company may use the means of modern technology for recording the meeting deliberations, resolutions and its minutes 

Below we will discuss the shareholders’ meetings of a joint stock company (ordinary and extraordinary).

Meeting of the General Assembly of Shareholders

• The General Assembly of Shareholders shall be chaired by the chairman of the Board of Directors, the Deputy Chairman in case the chairman is absent, or any board member to be chosen by the Board in the event that the chairman and deputy chairman are both absent. Failing which, the shareholders may vote for one of the board members or third parties to chair the General Assembly.
• Each shareholder shall have the right to attend the General Assembly Meeting even if the company's Articles of Association provide otherwise. In addition, the shareholder may delegate any other person, who is not a board member, to attend the General Assembly Meeting. 
•  The General Assembly Meeting may be held and the shareholder may get involved in their deliberations and voting on their resolutions through the means of modern technology. The executive regulations of the Saudi Company Law have specified the controls for holding meetings via these means as follows:
  • Shareholder participation shall be through real-time audiovisual transmission of the general or special assembly meeting. 
  • Shareholders shall be able to actively participate in the general or special assembly meeting in a timely manner that enable them to listen to and follow presentations, express opinions, discuss and vote on decisions

Functions of Ordinary & Extraordinary General Assembly 

Functions of & Extraordinary General Assembly 

Article (85) of the Saudi Company Law stipulates that the Extraordinary General Assembly shall have the right to amend the company's Articles of Association, except for the following matters:

1. Depriving any shareholders of, or amending any of their, basic rights acquired as a result of their capacity as shareholders, taking into account the nature of the rights relating to the type or class of shares held by the shareholder, especially the following:
2. To receive a share in the profits decided to be distributed, whether such distribution is made as cash payment or through the issue of bonus shares to non-employees of the company and its subsidiaries; 
3. To receive a share in the company's net assets upon liquidation; 
4. To attend, get involved in the deliberations of, and vote on the resolutions of the General Assembly Meetings; 
5. To dispose of their own shares only in accordance with the provisions of the Law;
6. To request access to the Joint Stock Company's books and documents, monitor the activities of the Board of Directors, file a liability lawsuit against the board members, and challenge the validity of resolutions of General and Special General Meetings.
7. The amendments that are likely to increase the financial burdens of shareholders, unless all shareholders agree on the same;
8. To decide the continuation or dissolution of the company; and
9. To approve the company's buyback of its own shares

The Extraordinary General Assembly may – in addition to the powers vested therein in accordance with the Law - issue resolutions on the matters basically falling within the scope of competence of the Ordinary General Assembly, under the same terms and conditions prescribed for the Ordinary General Assembly.

Functions of Ordinary General Assembly 

Article (85) of the Saudi Company Law stipulates that the Ordinary General Assembly shall have the following functions:

Except for the powers exclusively vested in the Extraordinary General Assembly, the Ordinary General Assembly shall have the authority over all matters in connection with the company, particularly the following: 

1. To elect and remove the board members;
2. To appoint, determine the remuneration of, re-appoint and remove the auditor/s of the company in accordance with the Law; 
3. To review and discuss the board of directors' report; 
4. To review and discuss the company's financial statements; 
5. To discuss the auditor's report – if any – and make a decision thereon;
6. Decide on the proposals of the Board of Directors on the method of dividend distribution; and
7. To allocate the company's reserves and determine their uses

Ordinary General Assembly Meeting

1. The annual ordinary general assembly shall be held at least once within the six months following the end of the company’s fiscal year. 
2. Other ordinary general Assembly meetings may also be convoked whenever needed. 
3. The agenda of the annual ordinary general assembly meeting shall include the following items: 
   • Reviewing and discussing the report of the Board of Directors for the recent fiscal year; 
   • Examining and discussing the financial statements for the recent fiscal year; 
   • Discussing the auditor’s report for the recent fiscal year – if any - and making a decision thereon; and
   • D. Deciding on the proposals of the Board of Directors on the distribution of dividends.

If the Extraordinary General Assembly Meeting is held within six months following the end of the company’s fiscal year, it may discuss the abovementioned items.

Amendment of Rights of Shareholder Categories 

If the resolution of the General Assembly would involve amendment of the rights of a certain category of shareholders, the resolution in question shall not be effective unless it is ratified by those shareholders who have the right to vote and who meet in a special assembly of their own in accordance with the provisions governing the convention of the Extraordinary General Assembly Meeting and issuance of its resolutions.

Voting in General and Special Assemblies: 

• General and special assembly meetings shall be held at the call of the Board of Directors, in accordance with the conditions set out in the company’s Articles of Association. 
• The Board of Directors shall convoke the Ordinary General Assembly within 30 days following the date of being requested by the auditor or one or more shareholders representing at least 10% of the voting shares of the company. 
• The auditor may convoke the Ordinary General Assembly if the board fails to call the meeting within 30 days of the date of being requested by the auditor; provided that the request indicates the items on which the shareholders are required to vote.

Based on a decision by the competent authority, the Ordinary General Assembly may be convoked in the following cases: 

• If the time limit set for the convention of the Ordinary General Assembly (six months following the end of the fiscal year) has expired without the same being convened;
• If there is evidence that the provisions of the law or of the company’s Articles of Association have been violated, or that a defect has occurred in the company’s management, including the circumstance where the number of members of board becomes less than the minimum quorum required for the validity of its convention; or
• If the Board fails to convoke the Ordinary General Assembly within 30 days following the date of being requested by the auditor or shareholder/s representing at least 10% of the company’s voting shares.
• The competent authority may take the necessary measures for holding the Ordinary General Assembly meeting, and may chair such a meeting in the event that the chairmanship mechanism described above cannot be applied (Chairman of Board/ Deputy Chairman/Board Member/ Third Party) .

The Call for General Assembly Meeting

The call for general assembly meeting shall be sent at least 21 days prior to the scheduled meeting date, according to the specified regulations, taking into consideration the following: 

• The shareholders shall be informed by registered letters at their official addresses recorded in the shareholders’ register, or the call for meeting shall be announced through the means of modern technology; provided that:

• The possibility of documenting the content of the invitation and the transmission date and time thereof; 
• The possibility of determining the identity of the sender and receiver thereof. 

• A copy of the call for meeting and agenda shall be sent to the commercial registration office, and a copy shall be sent to the CMA if the company is listed on the financial market at the date of announcing the call. 
• The call for general assembly meeting shall include the following: 

• Details of the person legally entitled to attend the general assembly meeting and their right to delegate any third party from outside the members of board, as well as emphasizing the shareholder’s right to discuss the topics listed on the General Assembly Meeting’s agenda and to pose questions and how to exercise the right to vote;
• The venue, date and time of the meeting; 
• In the event that the invitation is sent via modern means of technology, the meeting shall be held at the place specified in the invitation, with shareholders being granted the right to attend those meetings in person.
• The type of the general assembly meeting; i.e. general or special; and
• The meeting agenda, including the items on which shareholders are required to vote

• Shareholders of a joint stock company that is not listed on the financial market, representing all the voting shares of the company, may hold a general assembly meeting regardless of the circumstances and time limits prescribed for making the call for the meeting, so as to consider the matters on which the decision-making process shall fall within the scope of competence of the general assembly

Voting on Decisions in Ordinary or Special Assembly Meetings 

• In case of holding the meeting via electronic means of communication, the Saudi Executive Regulations of Company Law stipulate that:
• The company may allow shareholders to vote electronically on general or special assembly agenda items, even if they did not attend said meetings, in accordance with the following:

• Electronic voting shall allow shareholders to cast their votes, whether before or during the general or special assembly meeting, without the need to appoint a proxy to attend on their behalf. 
• Electronic voting on the agenda items of general or special assembly meetings shall commence after the date of sending the invitation, provided that the period set for electronic voting shall not be less than three days prior to the date of the assembly. Electronic voting on any item on the agenda shall cease when discussions and voting on the item are concluded at the general or special assembly.

• If a general or special assembly is held using technology, the company’s board of directors shall set the necessary procedures to verify the identity of the shareholder who voted or participated electronically, and the right thereof to vote on any of the meeting’s items.
• The attendance and votes of shareholders participating in a general or special assembly through means of technology and electronic voting shall be counted towards the quorum required for the validity of the assembly meeting and the issuance of decisions.

The Quorum for Ordinary & Extraordinary General Assembly Meeting 

Quorum for Ordinary General Assembly Meeting 

Article (92) of the Saudi Company Law set the quorum for Ordinary General Assembly meeting as follows:

• The meeting shall be valid only if it is attended by shareholders representing at least one quarter of the company’s voting shares, unless the company’s Articles of Association provide for a higher ratio not exceeding half of the company’s voting shares.
• If such quorum is not reached, a second meeting shall be convoked to be held within 30 days following the scheduled date of the earlier meeting. However, the second meeting may be held an hour after the end of the scheduled time of the first meeting, provided that both the company’s Articles of Association so permit and the call for the first meeting includes an indication to the possibility of holding the second meeting. In all cases, the second meeting shall be valid regardless of the number of voting shares represented thereat. 
• Resolutions of the Ordinary General Assembly shall be issued with the approval of the majority of voting shares represented at the meeting.

Quorum for Extraordinary General Assembly Meeting 

Article (92) of the Saudi Company Law set the quorum for extraordinary General Assembly meeting as follows:

• The extraordinary general assembly meeting shall be valid only if attended by shareholders representing at least half of the company’s voting shares, unless the company’s Articles of Association provide for a higher ratio not exceeding two-thirds.
• If the quorum required for the meeting of the extraordinary general is not reached, a second meeting shall be convoked to be held; however, the second meeting may be held an hour after the end of the scheduled time of the first meeting, provided that the call for the first meeting includes an indication to the possibility of holding the second meeting. In all cases, the second meeting shall be valid if attended by shareholders representing at least one quarter of the company’s voting shares.
• If the quorum required for the second meeting is not reached, a call for a third meeting shall be sent to be held, and the third meeting shall be valid regardless of the number of voting shares represented thereat.
• Resolutions of the Extraordinary General Assembly shall be issued with the approval of two-thirds of the voting rights represented at the meeting, unless the underlying resolution is related to the increase or reduction of the capital, the extension of the company’s term, the company’s dissolution before the expiry of the term specified in its Articles of Association, the company’s merger with any other company or the company’s split-up into two or more company, as in the latter case, the resolution shall be valid only if issued with the approval of three-fourths of the voting shares represented at the meeting.
• The board of directors shall register with the commercial registration office the resolutions of the Extraordinary General Assembly determined by the regulations, within 15 days following the date of their issuance

Entry into Force of General Assembly’s Resolution 

• The resolution of the general assembly of the joint stock company shall enter into force as of the date of its issuance, except for the cases where the Law, the company’s Articles of Association or the underlying resolution sets a different date for its entry into force or where particular conditions are fulfilled.

Voting at the Shareholders’ General Meetings 

•  The company's Articles of Association shall indicate the method of voting at the shareholders’ general meetings. Members of Board may not vote on the resolutions of the general assembly relating to business transactions and contracts in which they have a direct or indirect interest or that entail a conflict of interest.

Agenda of General Assembly Meeting 

• The Board of Directors shall take into consideration the topics the shareholders wish to include, upon preparing the agenda of the General Assembly Meeting. One or more shareholders representing at least 10% of the company’s voting shares may add one or more topics to the agenda, and the competent authority is entitled to amend such a ratio.
• The Board of Directors shall include each item on the agenda independently, and it is not permissible to combine fundamentally different topics under one item, or to place the business or contracts in which any member of the Board of Directors has a direct or indirect interest under one item for the purpose of voting on the entire item.
• Each shareholder shall have the right to discuss the topics listed on the agenda of the General Assembly and to pose questions in respect thereof to the members of the Board of Directors or to the auditor to the extent that the company's interest is not compromised. Any provision in the company's Articles of Association that deprives the shareholder of this right shall be null and void. 

Minutes of General Assembly Meeting 

• Minutes of the General Assembly Meeting shall be drawn up showing the number of shareholders attending in person or represented, the number of shares held by them and the number of votes to which they are entitled, the resolutions issued and the number of affirmative or dissenting votes, and an in-depth summary of the discussions made at the meeting. Following each meeting, the minutes shall be regularly recorded in a special register to be signed by the Chairperson, the Secretary of the Meeting and vote collectors. The competent authority may impose controls on administering the minutes of the General Assembly’ meetings, and specify the missions of its secretaries and vote collectors.
• In case of Joint Stock One Person Company, or if all of the company shares are transferred to a single person, the latter shall have the powers and authorities of the general assemblies of shareholders, and his decisions shall be issued in writing without needing to convoke the general assembly. Such decisions shall be recorded in the designated register.
• Without prejudice to the rights of bona fide, any shareholder may submit to the competent Judicial Authority a request to invalidate the resolution of the shareholders’ general assembly that is issued in violation of the Saudi Company Law or the company’s Articles of Association, if the objecting shareholder has either objected to the same during the meeting or failed to attend the meeting based on an acceptable excuse. The invalidity lawsuit shall not be heard after the lapse of 90 days following the issuance date of the underlying resolution; provided that the Plaintiff is a company shareholder at the time of filing the lawsuit and throughout all its litigation procedures.

Issuance of Resolution by Circulation 

• The company’s articles of association may stipulate that the Chairman of Board in a joint-stock company that is not listed on the financial market may propose issuing general assembly resolutions by presenting them to shareholders by circulation, without the need for the general assembly to convene, unless any of the shareholders requests – in writing – that a meeting of the general assembly be held for discussing the proposed resolution. The validity of the resolution by circulation requires that the relevant documents be sent to all shareholders, stating the method of approval and the date on which it shall be issued.
• As an exception to this, the General Assembly shall convene to issue decisions in the event of discussing items related to the election and dismissal of members of the Board of Directors, the appointment and dismissal of the auditor, or reviewing and discussing the financial statements for the recent fiscal year.

Quorum for Issuance of Resolution by Circulation 

Resolutions of the Ordinary General Assembly of joint stock companies that are not listed on the financial market shall be issued with the approval of one or more shareholders representing 75% of voting rights, unless the company’s Articles of Association provide for a higher ratio. The resolutions shall be recorded in the meeting minutes, and kept in the special register.

Delegation of Authority to Attend Assemblies

Is it permissible to delegate in attending General Assembly Meeting?

Article (27) of the Saudi Executive Regulations of Company Law stipulates that shareholders may attend the General Assembly by proxy. 

• A shareholder may authorize – in writing – another person from among shareholders or third parties to attend general or special assembly meetings on their behalf and vote on agenda items, using the proxy form attached to the meeting invitation issued by the company, or by virtue of a power of attorney that expressly stipulates the right of the proxy to attend the general or special assembly meeting and vote on the agenda items thereof.
• Unless otherwise stipulated in the proxy form or power of attorney, the latter shall be valid for the general or special assembly meeting that follows its issuance or any subsequent meeting to which the first meeting was postponed.

Attendance and Delegation 

• A shareholder may authorize another person to attend a general or special assembly meeting on their behalf through any means of technology
• A shareholder may not attend the company's general or special assembly meeting and concurrently authorize another person to attend by any means.
• The shareholder or proxy thereof shall provide the company with a copy of the proxy form or power of attorney at least two days prior to the assembly meeting date, and the attendant shall present the proxy form or power of attorney before the meeting. The company shall accept proxy forms or powers of attorney if provided therewith before the end of the procedures for registering shareholders in general or special assemblies.
• The chairman of Board shall provide the Ministry with the board’s report on the company’s activity at least 21 days prior to the date set for the general assembly meeting.

May a Shareholder request inspection of the Company? 

• One or more shareholders representing at least 5% of the company’s capital may submit an application to the competent Judicial Authority to inspect the company, if the actions of the board members or of the company auditor raise any doubts.
• The competent Judicial Authority may order that the inspection be conducted at the applicant’s expense after a hearing is held and where the board members or the auditor is called to hear their statements. It may also, if necessary, order that the applicant provide a security if the company so requests.
• If the complaint is proved to be true, Judicial Authority may take that precautionary measures and instruct the General Assembly to execute the necessary resolutions. Furthermore, it may remove the board members or the auditor, appoint an appropriate number of experienced and competent calibers to supervise the management of the company, and instruct the General Assembly to convene and elect a new Board of Directors. The competent Judicial Authority shall also determine the limits of their powers and the term of their office.

Distribution of Dividends 

• The Board of Directors of the joint stock company is committed to distributing dividends to shareholders within a period not exceeding 15 days from the date of the profits being due as per the general assembly or the Board of Directors’ decision to distribute dividends.

Conclusion

 The Saudi Royal Commission has discussed all the necessary controls for general and special assemblies (Ordinary and Extraordinary) of joint stock companies, in a way that ensures transparency in discussing company decisions, and ensuring trust between shareholders and the Board of Directors.

As a legal institution with legal expertise in the Saudi system and its provisions, we always work hard to facilitate regulations related to making amendments through the ordinary or extraordinary general assembly, or decision-making related to the management of joint stock companies within the Kingdom of Saudi Arabia for Arab and foreign investors. Therefore, Sadany and Khalifa Legal Consulting is always pleased to be your partner in success and continuous development.

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