Riyadh: The Capital Market Authority (CMA) has approved amendments to the Implementing Regulation of the Companies Law for listed joint stock companies. This move is part of an effort to enhance the regulatory framework governing the removal of board members and the mechanism for determining and distributing profits in listed companies.
According to Saudi Press Agency, the amendments aim to establish clear controls for the removal of board members by the General Assembly. This step is intended to strengthen corporate governance by enabling shareholders to exercise their rights, monitor board performance, enhance transparency, and improve investor protection, thereby supporting capital market stability. The changes also introduce greater flexibility in regulatory requirements related to distributable profits, aligning them with best practices.
The updated framework outlines procedures for requests submitted by shareholders to remove board members through the Ordinary General Assembly. It includes the obligations of boards upon receiving such requests. Under the new amendments, shareholders holding at least 10% of voting shares may request the removal of all board members after a minimum of six months from the start of the board's term. They may also request the removal of one or more members if a member is found unable to perform their duties in accordance with applicable regulations.
Board members are now required to immediately notify the board if a final judicial ruling is issued against them in a breach-of-trust case or if a decision by a competent authority affects their ability to perform their duties. Upon becoming aware of such rulings or decisions, the board must recommend to the General Assembly the removal of the member, even if the member fails to disclose the matter.
The amendments further stipulate that if the removal of all or some board members results in the board falling below the minimum quorum required for valid meetings under the Companies Law or the company's bylaws, the General Assembly's resolution must state that the removal will only take effect after the election of a new board or a replacement member. The board is required to take necessary steps to convene the General Assembly to elect a new board or replacement within no more than 75 days from the approval of the removal request.
The approval reflects CMA's ongoing efforts to enhance governance standards, strengthen investor confidence, and support the efficiency and stability of the Saudi capital market.