H.E. the Minister of Commerce and Industry Expressed his High Appreciation after the Cabinet Approval
H.E. the Minister of Commerce and Industry Dr. Tawfiq Bin Fawzan Al Rabiah expressed his sincere gratefulness and deep appreciation to the Custodian of the Two Holy Mosques King Salman bin Abdul Aziz, His Royal Highness the Crown Prince Mohammed bin Nayef bin Abdul Aziz and His Royal Highness the Deputy Crown Prince Mohammed bin Salman bin Abdul Aziz (May Allah Bless them all) on the occasion of approving the new Corporate Law by the Council of Ministers, during its meeting held on Monday 27.01,1437 AH.
H.E. The Minister pointed out that this law comes as one of the most prominent economic regulations for development, issued by the State to provide a regulatory environment, to act as incubator that stimulates initiatives and investment. This is to enhance the role and value of companies and to develop their activities and contributions in supporting the National Economy.
H.E. the Minister said that the new Corporate Law will reduce the procedures cost, and would encourage the initiatives in business activity, so as to promote the Kingdom`s leading role and its competitive advantages, and to encourage entrepreneurs investment, as well as the small and medium enterprises.
H.E. the Minister explained that the new system would provide the appropriate legal framework for fair and sound practices of corporate governance principles, dedicating the institutional concepts, and supporting the growth and continuity of economic entities, besides improving the performance of enterprises and the integrity of business transactions. All that through the application of sound and fair standards of transparency and disclosure, in addition to the role of shareholders assemblies and the boards of directors in shaping the corporate strategies and their responsibilities on the activities of companies.
H.E. the Minister pointed out that the new corporate law states the roles and competences of the supervisory and regulatory parties over the companies. Therefore, the new system stated the jurisdiction of the Ministry of Commerce and Industry in respect of all companies, except for the joint stock companies listed on the Saudi Stock Market, where the supervision and control would be under the Capital Market Authority.
In this context, H.E. Dr. Fahd Abu Haimid, Undersecretary for Rules and Regulations explained that the new corporate law stated a set of principles and concepts that are consistent with the best comparative practices, which aim to bring about a qualitative leap for the commercial and investment sector, besides building sustainable economic entities, in which the elements of institutional work are available, and this would benefit the business community. Thus, the new system facilitates the requirements of establishing a new joint stock company, where the minimum capital would be five hundred thousand riyals, instead of two millions, also it allows to be established of two partners instead of five. H. E. explained that the new system permits the establishment of a single person company, this is to promote the institutional work, and in order to achieve sustainability and growth for companies.
The new system has taken a special care for the principles of corporate governance to ensure fair treatment for all partners, and to strengthen and protect the rights of the clients, where the new system prohibits the combination of a Chairman of the Board of Directors post and any other executive position in the company, also it requires forming a review committee, to be specialized in monitoring the company's works, it obliges as well following the cumulative voting method during the election of the Board of Directors.
H.E. said that the New Corporate Law has taken special care of the private family business, appreciating its role in the commercial sector and its positive contribution for the National Economy, adding that the new system has laid the legal basis that enables the joint stock company to issue debt credits or negotiable financing instruments, according to the Capital Market System.
Dr. Abu Haimid said that in view of what the new system contains of general rules and principles, and what is required for their implementation, thus it has authorized the Minister of Commerce and Industry and the Capital Market Authority to issue the necessary regulations and decisions for the implementation of the provisions of this new system.
For his part, H.E. Dr. Tarek Al Na`eim, Undersecretary of the Interior Trade stressed that the New Corporate Law will support the private sector and increase its contribution to achieve the economic development, and that it facilitates the procedures for establishing the companies, and makes them more flexible by allowing the announcement of founding contracts and the basic rules through MCI website, besides laying the Legal framework for the holding companies.
Dr. Na`eim explained that the new system allows holding General Assemblies meetings for the shareholders, and the shareholder would participate in the deliberations and voting on decisions by means of modern technology. The new system is so keen on activating the role of shareholders General Assemblies and promoting the participation of most shareholders. The new system permits also holding the second meeting of the assembly after one hour of the end of the first meeting, according to the regulations set by the system, this is for speeding up the work of the assemblies and to avoid any delay in the company's performance.
H.E. Dr. Na`eim said that the new system is keen to avoid any negative effects that may arise from the resignation of the chairman or members of the board of directors in the joint stock companies, which may lead to the disruption or disturbance in the company`s activity or do harm to the shareholders` interests, where the new system states that the Minister of Commerce and Industry or the chairman of the Capital Market Authority would give instruction to form a temporary committee, of well experienced and competent persons, to supervise and manage the company, and to call on the general assembly for a meeting to elect a new board of directors for the company, in case the Chairman and members of the board of directors submit their resignations, or in case the general assembly could not elect a new board of directors.
H.E. also said that the new system activates the role of partners in the limited liability companies, as far as taking decisions is concerned, it also obliges the corporate managers to record the losses, exceeding half of the capital, in the Commercial Registration.
For more information and details about the New Corporate Law, please have a look on the following link: Click here